RE/MAX Says Home Sales Remain Flat

The July 2011 RE/MAX National Housing Report, which surveyed 53 U.S. metropolitan areas, shows signs of a continuing, but uneven, recovery in the housing market. After rising for two straight months, Home Sales fell 12.7 percent in July when compared with sales in June, following a traditional summer trend. However, for the first time in six months, Home Sales were higher than one year ago, up an impressive 13.1 percent from July 2010. Strict lending standards, bad appraisals and concern about the economy all contributed to lower-than-normal sales in July. 

Many lenders are already using the lower GSE and FHA loan limits set to take effect on September 30. Home Prices were even and inventory levels continued to fall for a thirteenth straight month.

“The fact that July home sales were higher than a year ago, and by such a significant amount, gives us reason for great optimism,” said Margaret Kelly, CEO of RE/MAX, LLC. “And now that prices have risen for four of the past five months, the housing market is beginning to show definite signs of

recovery.”

In the last 12 months, only January and July had Home Sales higher than the previous year. January was up fractionally and July was up a solid 13.1 percent from July, 2010. Both investors and traditional home

buyers became more skittish about the economy in July, perhaps due to the Debt Ceiling debate. 

Traditionally, June sales are the highest of the year, with a slight drop in July. Overall, sales were 12.7 percent lower in July than in June. However, 45 metro areas experienced more sales than in July of last

year including: Des Moines, IA +49.9 percent, Omaha, NE +46.8 percent, Milwaukee, WI

+37.7 percent, Providence, RI +32.4 percent and Wichita, KS +29 percent.

The July 2011 RE/MAX National Housing Report shows that Home Prices in July were just 0.18 percent lower than in June, while the year-over-year decrease of 4.6 percent is the smallest the survey has recorded in 6 months. On a monthly basis, prices have now risen for four of the past five months.

There were 11 metro areas that recorded higher prices in July than in the same month last year, most notably: Detroit +14.3 percent, Birmingham, AL +9.8 percent, Des Moines, IA +7.7 percent, Orlando, FL +5.5 percent and Pittsburgh, PA +4.4 percent.

The average Days on Market for homes sold in July was 88, down just two days from the June level. July marks the first month since September, 2010 that the Days on Market figure has been below 90. 

The July average is identical to September, 2010, when the average Days on Market was also 88. Days on Market is the average number of days from listing to receipt of a signed contract. Perhaps due to fewer foreclosure properties coming on the market, the 53 metro areas surveyed in the July, 2011 RE/MAX National Housing Report had an average Months Supply of Inventory of 7.2, which is up slightly from the 6.9 mark registered in June, but down significantly from the 9.3 mark seen in July

2010. 

Overall inventory continued a 13-month trend to lower levels. Inventories were 5.3 percent lower in July from June, and down 17.1 percent from July, 2010. The Florida markets continue to see the largest annual drop in inventory: Miami, FL -52.5 percent, Tampa, FL -37.3 percent, Phoenix, AZ -35.6 percent, Los Angeles, CA -32.4 percent and Chicago, IL -26.9 percent.

Commercial/Multifamily Mortgage Lending Up 107 Percent from Last Year

Second quarter 2011 commercial and multifamily mortgage loan originations were 107 percent higher than during the same period last year and 52 percent higher than the revised figures for the first quarter of 2011, according to the Mortgage Bankers Association’s (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations.

“Commercial/multifamily mortgage borrowing and lending continues to rise from the depths of 2009 and 2010,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “Greater stability in property fundamentals and prices, and an improving sales market, are providing greater clarity for borrowers and lenders alike. Property values and interest rates – coupled with job growth, consumer spending, household growth and other macro-economic trends that drive demand for commercial real estate – will be keys to how property owners seek and qualify for mortgage financing going forward.”

Second Quarter 2011 Originations 107 Percent Higher than Second Quarter 2010

The 107 percent overall increase in commercial/multifamily lending activity during the second quarter of 2011 was driven by increases in originations for all property types. When compared to the second quarter of 2010, the increase included a 141 percent increase in loans for health care properties, a 125 percent increase in loans for hotel properties, a 116 percent increase in loans for retail properties, a 114 percent increase in loans for multifamily properties, a 54 percent increase in office property loans, and a 34 percent increase in industrial property loans.

Among investor types, loans for conduits for CMBS saw an increase of 638 percent compared to last year’s second quarter. There was also a 150 percent increase in loans for commercial bank portfolios, an 87 percent increase in loans for life insurance companies, and a 58 percent increase in loans for Government Sponsored Enterprises (or GSEs – Fannie Mae and Freddie Mac).

Second Quarter 2011 Originations 52 Percent Higher than First Quarter 2011

Second quarter 2011 commercial/multifamily mortgage originations were 52 percent higher than revised originations in the first quarter of 2011. Compared to the first quarter, second quarter originations for health care properties saw a 161 percent increase. There was an 87 percent increase for hotel properties, a 73 percent increase for retail properties, a 47 percent increase for multifamily properties, a 31 percent increase for office properties, and a six percent increase for industrial properties.

Among investor types, loans for conduits for CMBS saw an increase in loan volume of 210 percent compared to the first quarter, loans for commercial bank portfolios saw an increase in loan volume of 41 percent compared to the first quarter, originations for life insurance companies increased 37 percent from the first quarter to the second quarter of 2011, and loans for GSEs increased by 20 percent during the same time span.

More News On the Souring Taste for Homeownership

Two more items have appeared in the expanding parade of articles that appear to be mounting evidence that the importance placed on owning a home just isn't what it used to be. The latest Housing Market Insights report from Morgan Stanley indicates high rates of mortgage delinquency, foreclosures and liquidations are turning homeowners into renters. In addition a Treasury Department White Paper spells out that it the role of the Federal Government in the housing market is changing from increasing the number of homeowners to providing housing options.

This appears to be playing out in the marketplace. A separate new report from housing search engine HotPads indicates prices on rental properties grew 6.7 percent in June.

Morgan Stanley analysts expect the trends to continue. They say GSE reform, Dodd-Frank securitization rules, mortgage interest deduction reform, continued home price declines and a long workout period for distressed homes, will likely make it harder to buy an owner-occupied home.

"As such, we believe that the U.S. will become a Rentership Society, in which the homeownership rate will keep falling, the home rentership rate will conversely rise, and the rental market will dominate the investment landscape in housing for years to come."