TheMReport

50 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Contracts Decline for Third Month Monthly closings and dropping contracts may indicate sales are slowing down. P ending homes have slumped for the third consecutive month and, according to a recent National Association of Real - tors (NAR) report, it's due to the housing shortage. NAR's Pending Home Sales Index, a forward-looking indicator based on contract signings, showed drops in signings from 109.4 in April to 108.5 in May, which is 1.7 percent lower than 2016. This is the second-straight annual decline and the most recent since November and December of last year. According to NAR Chief Economist Lawrence Yun, the extremely low inventory levels somewhat sidetracked the housing market this spring. "Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales," Yun said. "Buyer interest is solid, but there is just not enough supply to satisfy demand. Prospective buyers are being sidelined by both limited choices and home prices that are climbing too fast." Brad Walker, CEO of Income&, an online platform that gives ac - credited investors the opportunity to buy high-quality, fractionalized mortgages, said the report pres - ents contradictory data. "Declining consumer sentiment about the economy overall may be contributing to these declines," Walker said. "However, it is hard to separate this effect from the fact that supply continues to be constrained, which has forced up prices. These price increases are felt especially in entry-level housing priced at $100,000, which indeed has been the major contributor to the falloff in pending home sales. Above the $100,000 mark, pend - ing housing sales have jumped significantly, which does not indicate a long-term slump. It also may indicate that the recent pivot by builders away from multifamily homes and toward single-family housing was a smart move." Homes under $100,000 were down 7.2 percent in closings last month compared to last year and up only 2 percent for homes between $100,000 and $250,000. Higher price brackets between $750,000 and $1 million showed sales expanding all the way to 26 percent, while homes over $1 mil - lion are experiencing 29.1 percent increases. NAR released its quarterly Housing Opportunities and Market Experience (HOME) sur - vey earlier this summer, showing that fewer renters think it's a good time to buy a home. Respondents overall were less confident about the economy and their financial situation than earlier this year. "The lack of listings in the af - fordable price range are creating lopsided conditions in many areas where investors and repeat buyers with larger down payments are making up a bulk of the sales activity," Yun said. "Meanwhile, many prospective first-time buy - ers can't catch a break. Prices are going up, and there's intense competition for the homes they're financially able to purchase." According to NAR, existing homes are forecast to be around 5.63 million this year, which is a 3.2 percent increase from 2016's 5.45 million. Median existing- home prices are also expected to increase about 5 percent. "A much higher share of homeowners compared to a year ago think now is a good time to sell, but until they do, sales will likely stay flat and low inventory will keep price growth moving swiftly," Yun said. The West Wins States in the Western U.S. can expect double- digit price appreciations over the coming year. C ertain markets in the West will continue to appreciate at double- digit rates over the next year, while markets in the Northeast show the least promising forecast, according to Veros Real Estate Solutions' Q2 VeroFORECAST report, which measures predicted home appre - ciation on a yearly scale. Seattle, Washington, is pre- dicted to experience the highest home price appreciation, with an estimated 11.1 percent increase. The Denver metro is a close sec - ond, with 10.3 percent increase home appreciation. Seattle boasts an unemploy - ment rate of 3.7 percent, com- pared to the national average of 4.3 percent, and Denver's rate is as low as 2.1 percent. These are both major contributing factors to the rapid rate of home appre - ciation. However, home apprecia- tion does have its downside for would-be homeowners in that inventory is tight. It is estimated that Seattle has about a one- month supply of homes available at the current closing rate, and Denver doesn't look much better, at a 1.1-months' supply. "As job growth continues to drive migration to the top mar - kets, we will continue to see tight home supplies, causing a height- ened housing demand which, as we know, will cause home afford- ability to suffer in these areas," said Eric Fox, VP of Statistical and Economic Modeling at Veros. Of the top 25 markets showing signs of increased home ap - preciation, 18 metros are located in western states, including Colorado, Washington, Oregon, Arizona, Utah, and Idaho. Only five reside in Florida. Previously hot markets, such as Austin, Texas, are expected to cool. Austin once showed double-digit appreciation but is now only expected to appreciate at a rate of around 6 percent. Conversely, the Northeast shows the largest cluster of depreciating home values— with New Jersey, New York, Connecticut, Pennsylvania, Ohio, and West Virginia among the worst of the lot. The bottom 15 markets all show negative ap - preciation, while 15 to 25 show less than a 1 percent appreciation rate. VeroFORECAST attributes the low and negative apprecia - tion values to consistent popula- tion decline.

• Cover