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Existing home sales hit 18-month low

  • Existing-home sales at a 4.62M seasonally adjusted pace in January fell 5.1% from December and hit an 18-month low, according to the NAR.
  • Surprising no one by blaming the weather, the NAR's Larry Yun reminds not to ignore the headwinds of tight credit, limited inventory, higher prices, and higher interest rates.
  • The median existing-home sales price of $188,900 rose 10.7% from a year ago. Distressed sales accounted for 15% of January action vs. 24% a year ago.
  • Inventory: Up 2.2% to 1.9M homes, or a 4.9-month supply at the current sales pace. A supply of 6-6.5 months is considered a rough balance between buyers and sellers.
  • Full report
Comments (12)
  • bbro
    , contributor
    Comments (9741) | Send Message
     
    Mortgage payment as % of median family income...14%
    21 Feb, 10:23 AM Reply Like
  • GaltMachine
    , contributor
    Comments (1140) | Send Message
     
    bbro,

     

    That's part of the picture but the bigger issue is the total cost of owning has been going up a lot over the past year so the direction/trend of sales appears to be impacted by this. Affordability does affect total overall sales.

     

    Diana Olick covers it here:

     

    http://cnb.cx/1nTyddM
    Cost of owning a home is spiking in 2014
    Text Size
    Published: Thursday, 20 Feb 2014 | 10:24 AM ET
    By: Diana Olick | CNBC Real Estate Reporter

     

    In an analysis of housing affordability, RealtyTrac found that the estimated monthly house payment for a median-priced, three-bedroom home purchased at the end of 2013 was a whopping 21 percent higher than it was at the end of 2012 in more than 300 U.S. counties. That includes mortgage, insurance, taxes, maintenance and the subtracted income tax benefit.

     

    (Read more: Spring thaw may not heat up this housing market)

     

    The rise is the result of higher home prices and higher mortgage rates. RealtyTrac used a 30-year fixed-rate mortgage with an interest rate of 4.46 percent and a 20 percent down payment. That is versus a 3.35 percent interest rate the previous year.

     

    Some metro regions, especially in California and parts of Michigan, saw monthly house payments rise about 50 percent from a year ago.

     

    (Read more: Home builder sentiment index logs sharpest drop ever)

     

    "Home prices were boosted by cash buyers in 2013, and as the cash buyers move out of the market in 2014, the buyers left are not going to be able to afford the home prices as readily in some of these markets," added Blomquist.
    21 Feb, 10:48 AM Reply Like
  • bbro
    , contributor
    Comments (9741) | Send Message
     
    In the same report...

     

    "Despite the increase in financing costs, the analysis found that the estimated monthly house payment for a median-priced three bedroom home in the fourth quarter was lower than average fair market rent for a three bedroom home in 91 percent of the counties analyzed (296 out of 325). RealtyTrac used the fair market rents set by the U.S. Department of Housing and Urban Development for 2014."
    21 Feb, 10:58 AM Reply Like
  • Lakeaffect
    , contributor
    Comments (1032) | Send Message
     
    BBro, I interpreted Galt's comment as saying that you can't just look at the mortgage payment these days, as there are ancillary costs that appear to have accelerated. Obviously a renter doesn't have to worry about maintenance and repairs on the property he is occupying, therefore his monthly rent would naturally be greater than simply the mortgage payment on a similar house.

     

    It is unclear whether the 14% you're quoting includes only principal and interest (PI) or also includes property taxes and insurance (TI).

     

    Back in the '70's, prior to the proliferation of Fannie and Freddie and MBS derivatives, the rule of thumb was that the bank wouldn't issue a mortgage if the monthly PITI payments exceeded something like 25-30% of gross income. I suspect that number is higher now. So, if your 14% metric is an accurate measure of % of gross income, then there is a huge upside potential still sitting out there in the real estate market, implying something like a double from here.

     

    Somehow, I don't see that happening, so perhaps your 14% and my 25%-30% are comparing apples and oranges.
    21 Feb, 11:39 AM Reply Like
  • bbro
    , contributor
    Comments (9741) | Send Message
     
    14% is the PI portion...and yes it is just one part of the picture...
    21 Feb, 11:41 AM Reply Like
  • wylie6
    , contributor
    Comment (1) | Send Message
     
    Would that be a percentage of gross income, or net after taxes and deductions?
    21 Feb, 11:52 AM Reply Like
  • norteamericano
    , contributor
    Comments (45) | Send Message
     
    It was brutally cold in my area with lots of snow.
    Would like to think that my home appreciated +10% y/y
    21 Feb, 10:24 AM Reply Like
  • OptionManiac
    , contributor
    Comments (3337) | Send Message
     
    Yeah, I have two homes in my neighborhood for sale - one didn't even bother to shovel his sidewalk.

     

    Looks like lack of inventory is to blame - along with the weather.
    21 Feb, 10:39 AM Reply Like
  • Lakeaffect
    , contributor
    Comments (1032) | Send Message
     
    I'll need that 10% in order to offset the utility bills that were incurred in this cold snap.! LOL.
    21 Feb, 03:57 PM Reply Like
  • kata
    , contributor
    Comments (572) | Send Message
     
    I understand the new tax rules for additional Medicare taxes on capital gains, approx. 4%, when one sells a home may be impinging on the net cash available to replace that home. Also, the rules for reverse mortgages, so generous when first intro'd a number of years ago, have just been changed for the second time and this time they are prohibitive with the availability of cash reduced, the ability to receive a lump sum reduced and particularly the amount of insurance that is required and the way it quickly multiplies like the old negative amortization schemes and eats the equity in the home.

     

    All may reduce the demand for new or replacement homes. In any case, I don't know how many homes these changes may or may not have impacted but suppressing demand in any way by making the buying or selling or a home more difficult at this time in the economy was just self defeating, don't you think?
    21 Feb, 12:03 PM Reply Like
  • convoluted
    , contributor
    Comments (1943) | Send Message
     
    As to taxes and insurance, it's entirely possible that one could make a reasonably large down payment on say a $150,000 property, and have taxes and insurance actually double the amount of the monthly payment.
    As to kata's comments, the reverse mortgage changes, which are not specified in national advertising, have essentially neutered the product. I actually took a look at the product, and found that it's limited to $615,000 (maximum property value), and that the mortgage insurance premium paid to the federal government is nothing short of usurious. The initial idea was to assist seniors-but the government has found a way to screw over the unwary. The national companies pushing the product hire people like Fred Thompson, Henry Winkler and Robert Wagner to participate in either false advertising or use of words and phrases that are calculated to mislead the elderly. As kata indicates above, the program incorporates a negative amortization center piece. The ideal program would contemplate a true equity-sharing arrangement, where a clearly defined structure allows seniors and their heirs to better understand the inner workings.
    So what was the solution to part of the housing problem-especially for seniors-has, as kata indicates, become a self-defeating debacle.
    But, as Gerald Ford noted, if the government got in the beer business, a six-pack would cost $50 bucks and taste like piss.
    21 Feb, 12:51 PM Reply Like
  • june1234
    , contributor
    Comments (2628) | Send Message
     
    Meanwhile with all eyes focused on housing ,car sales etc the S&P is up a tad this yr while the commodity index is up 12%
    21 Feb, 03:55 PM Reply Like
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