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"Real Estate Numbers" for 2013

“Real Estate Numbers” for 2013

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New home sales rose more than expected in April, indicating the housing market may be heating up.

Sales of recently built single-family homes jumped 6.4% from March to a seasonally adjusted annual rate of 433,000, the Commerce Department said Friday.

It was the first increase since January and larger than analysts predicted. Economists polled by Bloomberg News had called for a 425,000 April rate.

The data come one day after sales of previously owned homes climbed 1.3% in April. Those dual increases signal some underlying strength in a housing recovery that has cooled recently.

Buyers have struggled to afford a home after prices jumped last year. And severe weather across much of the country earlier this year also depressed sales.

New home sales are still 4.2% below April 2013 levels.

But mortgage rates have stabilized after jumping last year and remain at historically low levels.That could entice more buyers into the market.

The sales increase from March came largely from the Midwest, where buyers scooped up new homes at a 47.4% faster rate in April.

New home sales rose 3.1% in the South, while remaining flat in the West, a major home building region. Sales dropped 26.7% in the Northeast.

Long ago they were the punching bags of American real estate, accused of rank incompetence, wrecking home sales and failing to pick up on signs of the housing turnaround.

That was then. Today appraisers are suddenly getting much more favorable reviews.

But wait a minute: Have appraisals actually improved in accuracy in any measurable way over the last several years? Nobody really knows. There are no nationally published statistical audits that gauge appraisal accuracy. But one major industry group regularly surveys its members’ sentiments on appraisals, and lately things have been looking up.

When the National Assn. of Realtors conducted polls sampling its million-plus members in the spring and summer of 2010, more than 40% of respondents reported having problems with appraisals.

Within the realty field, criticism of appraisers was rampant and scathing. Appraisers allegedly too often:

•Used rock-bottom-priced foreclosures and short sales as “comparables” for valuing houses that had no financial distress. Those low appraisals blew up perfectly good sales or forced angry sellers to renegotiate prices with buyers.

•Traveled long distances beyond their areas of geographic competence and inevitably were out of touch with local conditions.

•Paid scant attention to evidence that local home prices were on the increase, such as pending contracts, and numbers of properties that sold for above list or that experienced multiple bids.

Worst of all, critics charged, poorly trained appraisers who had flooded the industry during the boom years now were getting the bulk of the valuation assignments from appraisal management companies — primarily because they would work for cut-rate fees.

In the latest monthly survey, NAR pollsters found that 24% of members reported having significant issues with appraisal results. Granted, that’s still nearly a quarter of all agents in the sample. But it’s down significantly from where it was a few years ago.

What to make of this? Have there been changes in the appraisal industry itself that might explain the better reviews out of former critics? Appraisers I interviewed in various parts of the country agree on one key fact: The dramatic decrease in foreclosures and short sales during the last 18 months has cut the number of houses with depressed prices that appraisers can choose — or justify — as comparables for any given sale.

In places such as Las Vegas, Phoenix and California’s Central Valley, where distressed properties once accounted for large percentages of all sales in the wake of the housing bust, today they are far fewer. Gary Crabtree, an appraiser in Bakersfield, says such sales now “only comprise about an 11% share” of transactions. As a result, “there are plenty of arm’s-length” sales for appraisers to use as “comps.”

Pat Turner, an appraiser in the Richmond, Va., area, said the sheer number of appraisers has plunged in recent years “and a lot of the less-competent, poorly trained [appraisers] have left” the business in the wake of the recession. One industry group, the Appraisal Institute, estimated the number of appraisers is declining 3% a year. The steady shrinkage of the industry, Turner believes, could be contributing to perceptions that appraisals are more accurate today.

Gary Kassan, a Los Angeles-area realty agent with Pinnacle Estate Properties, disagrees.

“My personal belief is not so much that the incompetent appraisers are gone,” he said in an email, “but rather that they have better comps to work with.” With prices on the rise, “they have more latitude and are more comfortable stretching the comps to bring the appraisal in at sales price.”

Whoa. Stretching the comps, eh? Appraisers insist that’s not the way it works — they’ve got to justify every conclusion in their valuation reports and are subject to reviews by lenders and underwriters.

But Jayne Allen, an appraiser in Charlottesville, Va., says realty agents’ views on what constitutes a “good” valuation and what’s a deal-killer are keyed to whether the appraisal supports the contract price.

“At this point,” she said, “I do not believe that … appraisers [are] providing ‘better’ valuations.” Rather it’s that more appraisals are validating the number on the contract, thanks in large part to the sharp decline in distressed sales sitting on the market as potential comparables.

Bottom line for you as a seller or buyer: Though there are no guarantees that an appraiser will confirm the price on your sales contract, the odds are better this spring that your deal won’t fall apart because the appraiser came in with a low-ball valuation tied to distressed comps.

Real-estate agents, better take out that red pen.

An analysis of listings priced at $1 million and up shows that “perfect” listings—written in full sentences without spelling or grammatical errors—sell three days faster and are 10% more likely to sell for more than their list price than listings overall.

On the flip side, listings riddled with technical errors—misspellings, incorrect homonyms, incomplete sentences, among others—log the most median days on the market before selling and have the lowest percentage of homes that sell over list price. The analysis, conducted by Redfin, a national real-estate brokerage, and Grammarly, an online proofreading application, examined spelling errors and other grammatical red flags in 106,850 luxury listings in 52 metro areas in 2013.

 

For an industry without a universal stylebook, real-estate agents vary greatly in their listing descriptions. While some brokerages have created internal guidelines, much of the actual writing is still left up to the discretion of listing agents.

“It’s ubiquitous in this business. Bad grammar, misspellings, stray commas, missing periods—it’s all part of listing descriptions,” says Mickey Conlon, associate real-estate broker with Core in New York.

Good spelling and grammar may indicate the agent is attentive to other details as well, like pricing the home correctly and weighing offers, says Karen Krupsaw, vice president of real-estate operations at Redfin.

  • Most commonly misspelled words in listings: throughout, separate, oversized
  • Riverside, Calif., has the highest rate of listings with misspellings (57% of listings)Source: Redfin and Grammarly

“You can get a sense of what the transaction will be like based on the listing description. If it’s exceptionally sloppy, then it’s a warning sign of a potentially sloppy transaction,” Mr. Conlon says.

Aside from errors, the analysis also looked at style preferences in listings. One of the most common: phrases written in all-capital letters. These listings saw the least success in terms of sale price, with only 5.6% of homes selling above list price. The practice is most common in Las Vegas, where 28.5% of listings were written in all capital letters in 2013, compared with 8.4% of listings nationwide.

Las Vegas had the highest rate of for-sale listings in all-capital letters, even though the practice led to smaller comparative gains in sale price, according to Redfin and Grammarly. Zuma Press

Common abbreviations, like “bdrm” for “bedroom,” and short phrases fared well by comparison.

Amy Williams, a broker with Century 21 Real Estate Consultants in Charlotte, N.C., says abbreviations are necessary in multiple-listing services with low character limits. “That’s why we see people resort to abbreviations, to fit everything in,” says Ms. Williams, adding that her MLS caps listing descriptions at 500 characters.

Last year, Francine Chalmé Meyberg, an agent with Berkshire Hathaway HomeServices California Properties in Encino, Calif., had a $1.499 million listing for a five-bedroom home in Bell Canyon. In addition to the home’s many features, the listing boasted a kitchen “updated w/ redone cab. & recs. lit., & opens to the the bk. area & lg. fam. rm. w/ fipl. & access to the majestic outside.” Her cramming paid off. She sold the property within months of listing for $1.425 million.

Home prices as measured by S&P Dow Jones performed more or less as expected in February, with annual growth rates continuing to slow.

The S&P/Case-Shiller Home Price Indices, considered one of the preeminent measures among home price indicators, shows prices among 20 of the nation’s biggest markets grew 0.8 percent on a seasonally adjusted basis in February, matching January’s rate of growth. Unadjusted, the index was unchanged month-over-month, though even that was an improvement over a 0.1 percent drop to start the year.

The narrower 10-city composite index outperformed January’s results, ticking up 0.9 percent adjusted and staying flat unadjusted.

“Prices remained steady from January to February for the two Composite indices,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, adding, however, that “annual rates cooled the most we’ve seen in some time.”

On a year-over-year basis, the 20-city index gained 12.9 percent in February, while the 10-city composite climbed 13.1 percent.

Thirteen cities saw lower annual rates in February, including Las Vegas, with a growth rate of 23.1 percent versus 24.9 percent in January. In addition, 13 cities posted declines on a monthly basis, with mostly markets along the West Coast seeing growth.

Even with the West leading in gains, the region remains deflated compared to its peaks, and Denver and Dallas remain the only cities to climb to new price peaks since the crash.

The Case-Shiller Indices are the third price metric for February to be released in the last week. The first, put out by the Federal Housing Finance Agency, showed a 6.9 percent gain in house prices over the year, while Black Knight Financial Services’ own Home Price Index showed a 7.6 percent increase.

Despite reports of continued—albeit slower—price increases, Blitzer notes “other housing statistics are weak.”

“Sales of both new and existing homes are flat to down. The recovery in housing starts, now less than one million units at annual rates, is faltering,” he said.

Some blame rising interest rates for bringing down sales rates, while others point to difficulties in qualifying for loans and concerns about consumer confidence. Whatever the cause, Blitzer says, “[t]he result is less demand and fewer homes being built.”

“Five years into the recovery from the recession, the economy will need to look to gains in consumer spending and business investment more than housing. Long overdue activity in residential construction would be welcome, but is certainly not assured,” he concluded.

A survey of real estate agents released Monday finds a growing number of homeowners have turned to all-cash financing in order to avoid the red tape that comes with mortgage lending.

According to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, an estimated 26.2 percent of home purchases by current homeowners in March relied solely on cash, up from a 12-month low of 22.8 percent recorded last August. Figures are based on a three-month moving average.

While cash sales are usually associated with investors looking to profit from their purchases, Campbell Surveys says they’ve become more popular with average American homebuyers hoping to avoid closing delays and gain an advantage over their competition.

According to the company’s report, 30 percent of March home purchases financed with a loan going to either Fannie Mae or Freddie Mac and with a down payment of at least 20 percent were delayed, predominantly due to issues related to underwriting, documentation, or appraisals.

Even for all-cash purchases, a fair amount—24 percent—of transactions experienced delays last month. At the same time, however, the closing time on cash transactions remains at least 10 days shorter on average, even compared to a mortgage that isn’t delayed.

Even with the recent trend, Tom Popik, research director at Campbell Surveys, expects home purchase mortgages to bounce back this spring, noting that the declining share of mortgage financing “is part of a seasonal trend that has reversed in April in each of the past three years.”

The National Housing Trend Report for March was just released by Realtor.com, and it offers some great news for spring home buyers. The market is much healthier this year, with growth in inventory and days on the market. With modest price increases present, the overall outlook is good.

The stats from Realtor.com showed a 9.5 percent growth over March of last year, with 1,841,844 units at a median price of $199,900, which was also 5.3 percent higher. Last year showed an imbalance, with a shorter supply and a heavy increase in home prices.

“Bidding wars in many markets last year frequently elevated offer prices beyond the reach of first-time buyers who could scarcely save for the down payment,” offered Steve Berkowitz, CEO of Move. “While inventory is still low, the continuing annual lift in the number of homes on the market that we’ve seen over the first months of 2014 is an indicator that buying conditions this year may be notably improved from the frenzied pace of last spring.”

More homes on the market is always a good sign for first-time buyers and those looking to move up. There is less competition and makes it that much harder to get a home.

Despite this good news, home sales are still relatively slow overall due to the current health of the housing market.

The National Association of Realtors (NAR) Pending Home Sales Index for February 2014 showed a 10.5 percent decline, compared to the same period in 2013, the eighth-straight month of decline for pending sales. With contract signings stable over the last few months, though, buyer traffic looks to be making a comeback.