Housing Market Update

Reports from ATTOM Data Solutions, Redfin, Zillow, RE/MAX and Ellie Mae.

ATTOM: Median Home Prices Still Unaffordable for Average U.S. Wage Earners

ATTOM Data Solutions, Irvine, Calif., released its fourth-quarter U.S. Home Affordability Report, which shows that median home prices were unaffordable for average wage earners in 344 of 486, or 71 percent of the U.S. counties analyzed, down from 73 percent in third quarter and 75 percent from a year earlier.

“Home prices rose across the country by 9 percent year-over-year in the fourth quarter of 2019, and the typical home remained a financial stretch for average wage earners,” said Todd Teta, chief product officer with ATTOM Data Solutions. “However, homes were actually a bit more affordable because of declining mortgage rates combined with rising pay to overcome the continued price run-up.”

The largest populated counties where a median-priced home in the fourth quarter was not affordable for average wage earners included Los Angeles County; Maricopa County (Phoenix), Ariz.; San Diego County; Orange County, Calif.; and Miami-Dade County, Fla.

Among the 486 counties analyzed in the report, 311 (64 percent) required at least 30 percent of their annualized weekly wages to buy a home in the fourth quarter. One hundred and seventy-five counties in the report (36 percent) required less than 30 percent of their annualized weekly wages to buy a home in the fourth quarter.

Redfin: iBuyers Purchased More Than 10% of Homes in 8 Neighborhoods This Year

Redfin, Seattle, said iBuyers have purchased more than 10% of homes sold so far this year in a handful of neighborhoods, cities and towns, mostly clustered in North Carolina and Arizona.

Eight neighborhoods–in Phoenix, Charlotte, Fort Worth, and Raleigh–had iBuyer purchase rates of 10% or more through October. iBuyers purchased 13.7% of the homes sold so far in 2019 in the Phoenix neighborhood of Pecan Creek, making it the most active neighborhood in the country for iBuyers this year.

“The fact that iBuyers have reached over 10% market share in some places could be an indication of how big iBuying could get nationwide once the business model is perfected,” said Redfin chief economist Daryl Fairweather. “However, it’s possible that iBuyers are only doing so well in certain neighborhoods because the homes there are largely homogenous–modest, entry-level homes all built around the same time, typically with two or three bedrooms. These factors make it easier to use automated tools to value homes well and resell them quickly. As iBuyers begin to expand in more expensive markets beyond the small foothold they currently have, we’ll get a clearer picture of whether they are capable of reaching a high level of market share nationwide.”

Zillow: Relaxed Zoning Could Create Millions of New Single-Family Homes

Zillow, Seattle, said allowing for even modest amounts of new density in the nation’s overwhelmingly single-family neighborhoods could lead to millions of new homes nationwide, helping alleviate the housing affordability crisis.

Zillow said if the Los Angeles area, for example, continues to add housing largely as it has over the past two decades it could grow its housing stock by an estimated 14.5% over the next two decades. But if one in 10 single-family lots were redeveloped or otherwise allowed to accommodate a second home, the area’s housing stock could grow by 21% over the same period – or nearly 387,000 additional homes.

Building at the status quo over the next two decades is expected to produce about 10 million new homes across the 17 large metros analyzed nationwide, a more than 20% boost over the almost 50 million homes these markets currently have. Allowing for two units on just 10% of single-family lots would add an additional 3.3 million homes on top of that 10 million, a boost of almost 27% over current levels.

“The challenge of solving big metros’ housing affordability crisis is the scale of what’s needed,” said Zillow Director of Economic Research Skylar Olsen. “If it was just a few more affordable apartment buildings it wouldn’t be a problem, but we need a lot of additional supply to put the pace of long term price and rent growth in line with income and wage growth. Asking a few neighborhoods to absorb that change on their own is asking for a community to accept a totally different neighborhood in the future– a neighborhood different from the one they bought into and grew to love. So the questions become, if we could share the influx of new housing across the full metro, could we add enough and would anyone really notice?”

RE/MAX: Tight Inventory Accelerates Sales, Pushes Up Median Sales Price

RE/MAX, Denver, said a fifth straight month of shrinking inventory year-over-year triggered several November records in the 11-year history of its National Housing Report: fewest days on market at 49, fewest months’ Supply of Inventory at 3.3 and the highest median sales price at $257,000.

In the 54 metro areas covered by the report, November home sales overall averaged 1.0% below November 2018 following significant year-over-year increases in September and October. Thus far, four months of 2019 posted year-over-year sales increases and seven, including November, have seen declines. Three of the monthly declines, however, were less than 2% below 2018 sales levels.

As inventory dropped 13.3% from November 2018, it took an average of 49 days to sell a home last month, compared to 51 days a year ago. The 3.3 months of inventory represented a sharp drop from 4.4 months a year ago.

“We continue to see favorable economic conditions and solid demand, but buyers coming into the market are being met with a progressively constrained supply of homes for sale,” said RE/MAX CEO Adam Contos. “This has helped accelerate the pace of sales and push up prices, two factors that favor sellers. As we approach 2020, it seems likely that inventory will be the market’s main throttle next year – if more homes come on the market, sales should benefit; if that doesn’t happen, sales may be challenged. Buyers are out there and ready to go; we just need more listings to meet the demand.”

Ellie Mae: Interest Rates Starting to Rise Again

Ellie Mae, Pleasanton, Calif., released its November Origination Insight Report, showing interest rates rose slightly for the first time in 2019, increasing to 3.97 percent, up from 3.94 percent in October.

The report noted the percentage of adjustable-rate mortgages also increased for the first time in 2019, rising from 5.0 percent in October to 5.3 percent in November. The percentage of refinances dropped back below 50 percent, falling from 51 percent in October to 49 percent in November.

Time to close all loans rose slightly to 45 days in November, up from 44 days in October. The time to close refinances increased to 43 days, up from 42 days the month prior and the time to close purchases held at 47 days for the second consecutive month. Closing rates on all loans rose to the highest percentage in 2019 at 78.6 percent. Closing rates on refinances increased to 77.1 percent while closing rates on purchase loans held at 80.6 for the second month.