U.S. home buyers signed more contracts to buy existing homes in January than they have since August of 2013, according to the National Association of Realtors. Its monthly index of so-called pending sales, an indicator of future closed sales, rose 1.7 percent month-to-month, and is now 8.4 percent higher than it was a year ago. This is the fifth straight month of year-over-year gains, and the gains are increasing. "Contract activity is convincingly up compared to a year ago despite comparable inventory levels," said the association's chief economist Lawrence Yun in a release. "The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth." The report is a turnaround from far lower-than-expected closed sales of existing homes in January. Those are based on contracts signed at the end of 2014. While some have blamed cold, harsh weather in much of the country for weakness in housing activity so far this year, the real problem is a lack of for-sale supply. Last winter was particularly cold and snowy as well, but there were more homes available for buyers to choose from.
Read MoreNo housing jackpot: Vegas price gains still hurting sellers Mortgage applications to purchase a home have been weak so far this year, despite interest rates being significantly lower than they were a year ago. Both supply and still-tight credit standards are weighing on would-be buyers. The lack of supply is also pushing price gains again. They had been shrinking throughout much of last year, but recent reports show the gains accelerating again. Realtors expect sales to gain strength over the next few months, with one big caveat. "The pace will greatly depend on how much upward pressure the impact of low inventory will have on home prices. Appreciation anywhere near double digits isn't healthy or sustainable in the current economic environment," admitted Yun. Read MoreLow inventory may take bloom off spring home sales Pending home sales in the Northeast inched up 0.1 percent in January, and are now 6.9 percent above a year ago. In the Midwest, sales fell 0.7 percent, but are 4.2 percent above January 2014. Sales were strongest in the South, up 3.2 percent to the highest level since April 2010 and 9.7 percent above last January. Sales in the West rose 2.2 percent and are 11.4 percent above a year ago. The U.S. housing market still has a long way to go to fully recover from the 2008 financial crisis, Lennar CEO Stuart Miller said Wednesday.
"The housing market continues to improve at a slow and steady pace, but it looks like there's a lot of runway out ahead of us. If you look at the primary driver for housing right now, you're basically looking at a production deficit that's been building up over the past years," Miller told CNBC's "Squawk Box." Miller added that the housing market's recovery would continue even if the Federal Reserve increases its rates. "I'm quite sure that, as soon as the Fed starts raising rates, the first thing that's going to happen is we're going to see a stock pullback, and that's a knee-jerk reaction. But the reality is that a Fed rate hike is likely to reflect an improvement in the employment market," he said. Read MoreMortgage application volume rises 0.1%: MBA The country's housing market should also keep improving as temperatures rise, Miller said. "As we look at markets across the country, we've been impacted by weather. Certainly in the Northeast, it's been a long, tough winter," he said. "We're going to have to wait and see as the spring season comes along, but as we sit right now, given the weather patterns, certainly the sunnier side of the country is looking a little bit brighter and I think we'll see the rest of the country come along." Why you shouldn’t ignore your Social Security statementWorkers recently began to get Social Security benefit estimate statements in their mailboxes again for the first time since 2011. Here’s what to look for when you open yours.
Prepare for the largest wealth transfer in historyAmericans will transfer $16 trillion in wealth over the next three decades, mostly to family members. The $25,000+ mortgage mistake nearly half of borrowers makePeople don’t shop around for mortgages. IRA accounts are tax-smart and better than everFavorable changes to the IRA contribution rules have kicked in. Here’s what you need to know. 5 states most hurt by falling oil pricesNorth Dakota’s not feeling it. ELSEWHERE ON MARKETWATCH:The only state where less than half its civilians workWest Virginia’s civilian labor participation rate fell to 49.8% in November. SEC inspections to focus on retirement adviceThe Securities and Exchange Commission on Tuesday said it will particularlyscrutinize retirement advice this year, including fees that are charged and the information provided when accounts are moved. U.S. stocks end lower, erasing triple-digit gainsThe Dow’s dramatic reversal from a gain of as much as 280 points to big losses reflected the lack of conviction and confidence among investors as crude oil’s unabated slide stoked fears of global deflation. Obama: We can all agree on taxes, trade, cybersecurityPresident Barack Obama met with top lawmakers Tuesday to discuss where they can make bipartisan agreements. Warren Buffett’s star pupils failed to beat S&P 500 in 2014Warren Buffett’s would-be successors Todd Combs and Ted Weschler were both doing a pretty good job until last year. This superbear says gold will rally 30% in 2015The guy who is sometimes referred to as Dr. Doom has positive thoughts on where gold will go. Republican congressman ripped for comparing Obama to HitlerDemocrats blasted Rep. Randy Weber for making comments in a now-deleted tweet about Obama for his failure to go to Paris last weekend for a march supporting free speech. With mobile technology, it’s easy to work in any room of a house. And yet, according to designers and home builders, the home office is becoming one of a home’s must-have features. Dedicated office space might not always be a full room. In fact, it might be a nook with desk space on the landing of a staircase or a corner of a bedroom or family room. But as people do more work away from the office and kids do more work outside of the library, the home office is growing in importance. “That office or desk space is becoming as essential as the family room,” said Mollie Carmichael, who leads the consumer research team at John Burns Real Estate Consulting, based in Irvine, Calif. And that’s true no matter how large of a home it is, from a small apartment to a large single-family home, she added. In fact, 77% of people surveyed by John Burns said that any additional rooms not dedicated as bedrooms would be used as an office in their next home — the most popular response. (Fifty-six percent said they’d use the extra space as a guest room, 25% said multipurpose room.) Dodgy home appraisals make a comebackHome appraisers are returning to dubious practices seen before the financial crisis, as they inflate the values of some properties they assess. There’s also some evidence that home offices can make a home more attractive to buyers. According to Remodeling Magazine’s 2014 Cost versus Value report, you can recover an average 48.9% of the cost of a home office remodel at resale, up from 43.6% in 2013 and 42.9% in 2012. A midrange office remodel, as defined by the report, is a $28,000 investment that involves installing custom cabinets that include 20 feet of laminate desktop, a computer workstation and wall cabinet storage, along with rewiring of the room for computer, fax machine, cable and telephone lines. There are a couple of reasons that people are demanding a dedicated office space. “For one, it gives them a place to collect all the paperwork and miscellaneous stuff they need to run the household, as well as for the work they may be doing from home for their job,” said Elissa Morgante, co-principal of Morgante-Wilson Architects, based in Evanston, Ill., in an email. “And secondly, it is helpful to have a space that is dedicated to work and not filled with other distractions—plus they have all the things they need within arm’s reach. I think it helps focus and provides a sense of intention.” If you’re one of the growing number of people who regularly work from home, you’re more apt to want an office space away from the center of the house, Morgante said. The number of people who work from home on a regular basis (and are not self-employed) grew by 89.8% from 2005 to 2013, to 3.5 million employees, according to data from Global Workplace Analytics, a consulting and research firm that studies work-at-home trends. The most recent statistics show that 2.5% of the workforce works from home at least half of the time, said Kate Lister, president of the organization. Those who don’t regularly work from home may want the office space on the first floor, close to the center of the home, Morgante said. Workspace near the kitchen or great room can make it easier for parents to keep their eyes on kids—whether it’s the adults or the children who are working at the desk space. With an open office area, kids are also prevented from sequestering themselves in their rooms with laptops, she said. “I think in five to 10 years from now it is going to become a big conversation about how to keep kids engaged and present in the family, because the constant chatter with friends and outside stimulation on their phones and devices is very addictive,” Morgante said. Builders are getting creative in setting up office-friendly areas for their new-home customers. Some buyers are requesting office spaces be put in places that are often underused, such as large landings on staircases, or lofts, said Jeff Benach, co-principal of Lexington Homes, a builder based in the Chicago area. Home offices have become a growing priority over the past five years, he said. Even in Lexington’s townhouses where floor plans are smaller, most often people choose the option to have a flexible space that can be used as an office, den or playroom in the home, as opposed to having a larger kitchen, Benach said. Having a specific area dedicated as a home office may make it easier for those who work from home to deduct office expenses on their income taxes. But remember: You need to regularly use that room or area exclusively for conducting business, and if you are an employee and you work from home, your business use needs to be for your employer’s convenience, among other stipulations. (For more information see the Internal Revenue Service’s guidelines on the home office deduction.) Sales of newly built homes in February beat the Street's expectations by a bundle. Analysts had projected a 4 percent drop from January and instead saw an 8 percent jump. The sales pace is the highest in seven years and is a full 25 percent higher than a year ago. There is, however, a big backstory. The "annualized sales pace" hit 539,000—which means that is the estimated number of homes that would sell in all of 2015, based on the pace in February. Again, it is the highest clip in seven years, but back then housing had just undergone an epic crash, from a 1.4 million annualized pace in July 2005 to a bottom of 270,000 in February 2011, according to the U.S. Census Bureau. If you take the numbers back to 2000, before the housing boom, sales were at an 880,000 annualized pace, still higher than today, and the U.S. population has grown more than 11 percent since then.
So here's the rub: The supply of existing homes for sale is also lower today than it was in 2000, again, with that population growth, so builders' sales are likely getting a boost simply because there are so few homes altogether on the market. Read MoreUS new home sales hit 7-year high in February "Bottom line, with Realtors complaining about the lack of product (as stated in Monday's existing home sales release), homebuilders responded with more new home sales," noted Peter Boockvar, chief market analyst at The Lindsey Group. "There is plenty of runway for more building." While the sales numbers in February showed nice percentage gains, the housing market still desperately needs more construction. Housing starts are running at about half of where they should be, given the demand. Smaller builders, really the meat of the market, are hamstrung by a lack of construction loans, and larger, public builders are pushing higher-end homes because that's where they see demand and a higher profit margin. While the price gains for new construction in February were the smallest in six months, the premium for new construction is still higher than it has been historically. With so little supply, prices will continue to gain, and that is not what today's buyers want to see, especially first-time buyers. Location and price aren't everything. Success in getting top dollar for your home may also come down to a few "unique" factors, such as the words you use in your property listing. With just 1.89 million homes for sale, the housing market is off to a slow start this year. Low supply, especially relative to demand, does mean properties are moving a bit faster, though. February data from Realtor.com released earlier this month found that homes nationwide spent an average 102 days on the market, down 1.9 percent from January. It's in the sellers' best interest to keep that figure low. "People make a lot of inferences, correct and incorrect, about houses that have been on the market for a long time," said Stan Humphries, author of "Zillow Talk: The New Rules of Real Estate." Namely, that there must be something wrong with the property, and that there's room for negotiation in the price. Some smart planning can help you sell faster, and at a better price: Read MoreWhen remodeling won't help sell your home Listing timing Most real estate professionals say spring is the best time to list. But that's a pretty big window. "In every market, there's this sweet spot," said Humphries, who is also the chief economist at Zillow.com. Aim to list after the first wave of sellers in January and February, and before the influx of buyers in April and May, which will mean your listing pops up when most buyers are starting their hunt, boosting the average sale price by 2 percent. Nationally, that timing works out to the last two weeks of March, he said, or maybe a little later for cold-weather locales. DIY tendencies One-third of sellers don't use a traditional agent, but going the "for sale by owner' route doesn't mean you don't need some professional help, said Steve Udelson, president of real estate site Owners.com. A DIY approach won't always cut it. "You're probably only going to reach one in five buyers, at best," he said, which can lead to sellers' boomeranging back to full-service agents after their home has been on the market for months (costing them on selling price and commissions). He suggests allocating some funds for marketing on listing sites and on a buyer's agent commission to entice them to bring clients. Wording
Be careful what you write about your home. It can influence how many buyers decide to visit, and what they are willing to pay. Listings that include the word "unique" sell for 30 to 50 percent less than comparable properties (Tweet This), said Humphries, while those that use "nice" sell for 1 percent less. "Basically what you're saying is, 'I like the home, but few others will like the home,'" he said. That said, don't be afraid to wax poetic about home features that will appeal to buyers, like spacious closets and granite countertops. "The longer the description, the more the home sold for, up to about 250 words," said Humphries. "If you've got it, flaunt it." Wrong representation Interview several real estate agents before picking one to work with, said National Association of Realtors president Chris Polychron. "Experience in the marketplace is very, very valuable," he said. It's important to find a full-time, veteran agent who knows enough about the local market to price your home appropriately, and market it so it stands out among comparable properties, he said. That can make a difference in how quickly it sells, and at what price. (Different agents may also charge different commissions.) Read MoreThat college aid offer isn't as good as you think Price drops Overpricing is far from ideal. "It can lead to your home selling for less than it would otherwise," said Humphries. About half of sellers take at least one price cut, and the depth of the cuts and when you make them can make a big difference. A cut of 10 percent or more typically means the home will sell for another 2 percent less, he said. Buyers also tend to view cuts more favorably when they're made shortly after listing (i.e., you realized you overpriced) rather than when a home has lingered on the market. Photographs Nine out of 10 buyers start their search online, according to Zillow, and the NAR estimates that 45 percent of buyers check out homes on their tablet or phone. A listing's photos can be make-or-break in getting someone to schedule an in-person visit. Consider hiring a professional photographer rather than relying on your own skills or those of your agent, especially for pricier homes, said Polychron. Don't photograph potential "eyesores," like an outdated bathroom, he said; buyers will still assume there's an issue, but may decide to see the space anyway. Take time to make the space photo-ready, too. That might mean hiring someone to stage a space or, at minimum, doing some sprucing up yourself, Udelson said. "Buyers don't have the best imagination about what a space can look like," he said. Rents are soaring, and mortgage rates are still historically low, but renters seem less and less inclined to buy, even when homeownership could save them money fast. How fast? Two years, according to Zillow, a real estate sales and analytics company. While the numbers vary market to market, Zillow found that most homebuyers would be paying less per month to own a home than to rent after two years. It made its calculation by incorporating the costs associated with buying and renting, including upfront payments, closing costs, anticipated monthly rent and mortgage payments, insurance, taxes, utilities, maintenance and even renovation costs . Amid the nation's 35 largest metropolitan housing markets, Dallas-Fort Worth had the lowest break-even horizon, at 1.2 years. Indianapolis and Detroit were next at 1.3 years. The highest break-even horizons were in Los Angeles at 5.1 years, Washington, D.C., at 4.2 years and San Diego at 3.8 years. And yet the math isn't moving renters. "If the buy versus rent decision were about simple math, we'd likely have millions more homebuyers in the market, because the equation is tilted heavily in favor of buying," said Stan Humphries, chief economist at Zillow. "But no matter what the numbers say, buying a home is a huge commitment. Every day, Americans make decisions to buy or rent based on any number of personal dynamics, including preference, flexibility needs, family factors and, yes, financial considerations."
Another survey done in March by mortgage giant Fannie Mae found respondents less inclined than ever to buy a home if they were to move. This may be because people also feel less confident that their financial situation will improve. This dovetails with new numbers from the U.S. Labor Department showing still slow income growth. Read MoreWeak March jobs may not be crying wolf: Ex-Bush aide Younger renters, who may in fact want to buy, are struggling to save for a down payment, given their high rents and high level of student loan debt. Of renters surveyed by Zillow, 16 percent said they couldn't qualify for a loan and 13 percent said they didn't have enough for the down payment. Mortgage credit availability is tight, according to most industry surveys, but some argue that the numbers don't paint an accurate picture. Today's borrowers, they claim, may have higher credit scores, but only because borrowers with lower credit scores generally don't have the means to purchase a home, so they're not even applying. That takes them out of the credit mix. Read More4 million mortgages that never were: What happened This also shows up in demand for both new and existing homes—the bulk of which is on the higher end. Home builders say that's where their business is, and that is why they're not building as many cheaper, entry-level homes as they have in the past. On the existing home side, still very tight inventory paints a similar picture. There are so few homes for sale that lower-end owners who may want to move up are not listing, for fear they won't find somewhere else to live, somewhere they can afford. "It's still a seller's market," said Jonathan Smoke, chief economist at Realtor.com. "Supply is not keeping pace with surging demand. We expect rising prices to persuade those who may be on the fence about listing their homes to do so in the coming months, leading to closer parity between supply and demand." Home prices, however, will be the key driver. Fast, investor-fueled home price appreciation in 2013 threw a wet blanket on sales in 2014. That's because investors priced themselves out, and regular owner-occupant buyers couldn't afford the new market. As price gains eased toward the end of last year, the hope was that buyers would return; the trouble now is, again, still-short supply buoying prices. The number of homes for sale grew by just 2 percent from February to March, according to Realtor.com, far below normal spring growth. Fence-sitting sellers may be more inclined to list, but only if they know they can afford the move-up home and only if they feel certain the investment is the right move. If their confidence in both the broader economy and their own personal wealth potential is anything like that of renters, they may continue to ride the fence. Baby boomers in their 50s and 60s are carrying much more mortgage debt than their parents did at their age. While some boomers may be willing to seek financing again to purchase another home, others are eager to get rid of their mortgage debt altogether.
A recent study by the Employee Benefit Research Institute found "the percentages of families whose debt payments are excessive relative to their incomes are at or near their highest levels since 1992." The report found that as a result, "even more near-elderly and elderly families are likely to find themselves at risk for severe changes in lifestyle after retirement than past generations." Housing debt is a major concern. The median outstanding mortgage balance for a 50-to-69-year-old household grew 142 percent in 20 years, from nearly $49,000 in 1992 to $118,000 in 2013, according todata from the not-for-profit Demand Institute. Still some financial experts say racing to retire "mortgage-free" isn't always the best strategy, even as boomers try to lessen their financial burden before they retire. Read MoreHow much should you really set aside for retirement? "A lot of baby boomers aren't on track for retirement, and rushing to pay off a mortgage could be problematic for a lot of them," said Thomas J. Anderson, author of "The Value of Debt in Retirement." Instead, "having a portfolio of cash and conservative, globally diversified investments gives you liquidity and flexibility," he said. Before refinancing into a shorter-term loan or making extra payments to pay off their mortgage, Boomers should make sure they've taken these three steps: Pay off high-interest credit card debtNot all debt is "good," Anderson said. If your goal is to be debt-free, he suggested first paying off any credit card and other high-interest debt. Paying bills on time and limiting using less than 30 percent of your available credit are also two ways to improve your credit score. An excellent credit score will help to ensure you get the best available rate on your mortgage—if you do decide to refinance at some point. Max out retirement savings contributionsWhile you're working continue to put as much as money as you can into your retirement savings and get a tax break. Remember if you're 50 or older, you can make "catch-up" contributions to your 401(k) and IRA which will add thousands more dollars to your nest egg. With catch-up contributions, someone 50 or older can put up to $24,000 into a 401(k) this year and up to $6,500 in a traditional or Roth IRA. Read More7 habits of highly effective retirement savers "Money tied up in the home is illiquid, and prepaying a mortgage makes no sense if you're not maximizing your tax-advantaged retirement savings options, including catch-up contributions," said Greg McBride, chief financial analyst at Bankrate.com. Build your emergency fundIt's even more important to keep stashing money in an emergency fund in the years leading up to retirement. "Money in the bank will pay the bills, home equity will not," McBride said. You want to have enough cash on hand so you're not forced to dip into retirement accounts to pay for unexpected expenses in retirement. "It's like an insurance policy; nothing gets you through a crisis like cash," Anderson said. U.S. housing starts rose far less than expected in March and permits recorded their biggest drop since last May, which could raise concerns about the economy's ability to bounce back from a soft patch hit in the first quarter. Groundbreaking increased 2.0 percent to a seasonally adjusted annual pace of 926,000 units, the Commerce Department said on Thursday. That left the bulk of February's decline, which had been blamed on bad weather, intact. Read MoreWeekly mortgage applications drop as rates tick higher Starts for single-family homes rose, while groundbreaking for the multifamily segment fell last month. February's starts were revised up to a 908,000 million-unit pace from the previously reported 897,000-unit rate. Economists polled by Reuters had forecast groundbreaking rising to a 1.04 million-unit pace in March. Permits for future home construction declined 5.7 percent to a 1.04 million-unit pace. Permits have been above a 1 million-unit pace since July. The economy stumbled early in the year under the weight of a harsh winter, a resurgent dollar, weaker global growth and a now-resolved labor dispute at the West Coast ports. There are expectations that growth will rebound in the second quarter, but the tepid housing starts report and a struggling manufacturing sector suggest the momentum will probably not be strong enough for the Federal Reserve to start raising interest rates before September. Groundbreaking rebounded sharply in the Northeast and Midwest, which had been affected by snowy and cold weather in February. Starts, however, tumbled 19.3 percent in the West and fell 3.5 percent in the South, where most of the home building takes place. Read MoreUS foreclosures rise, repossessions mounted Last month, single-family homes groundbreaking, the largest part of the market, rose 4.4 percent. Groundbreaking for the multi-family homes segment fell 2.5 percent.Single-family permits rose 2.1 percent last month. Multi-family permits plunged 15.9 percent. The housing recovery is coming at a steep price—for both homebuyers and renters. The reasons can be found in the unique supply and demand circumstances that were left in the wake of the worst housing crash in history. For several years, would-be buyers stayed on the sidelines, unwilling or unable to buy a home. That pushed rents higher. Homeowners, who might have wanted to move up, also stayed put, either underwater on their mortgages or afraid to sink more money into a new home. And builders never returned even close to the pace of historical norms. Now demand is finally surging again, thanks to higher rents and a slowly improving economy, but supplies of homes for sale are anemic. There were just 2 million existing homes for sale at the end of March, a 4.6 month supply at the current sales pace. A six-month supply is considered healthy. The lack of homes for sale pushed the median price of a single-family home sold in March up 8.7 percent, more than twice the gains housing was seeing a year ago. "We are not seeing the inventory gains we had expected," said Lawrence Yun, chief economist of the National Association of Realtors. "It's not healthy." Sales of existing homes did jump to the highest level in 18 months in March, but first-time buyers were still barely a third of the market. They should be more like 40 percent of it. Realtors say that if sales stay at this pace, 2015 will end up being the strongest year for housing in nine years, but that's a big "if" since in order for sales to happen there needs to be more homes for sale.
Read MoreTiny Seattle house takes a final stand "For sales to build upon their current pace, homeowners will increasingly need to be confident in their ability to sell their home while having enough time and choices to upgrade or downsize. More listings and new home construction are still needed to tame price growth and provide more opportunity for first-time buyers to enter the market," added Yun. While sales are improving, they are nowhere near where they should be given demographics and market demand. Household formation is still all on the rental side, and homeownership is sitting at a 20-year low and expected to fall further. That is why rents continue to rise, up 3.7 percent from a year ago, according to a monthly rent index from Zillow. Read MorePhilly housing lifted by grads who stick around "By the end of the year, Zillow expects growth in rents to outpace growth in home values," noted the company's latest report. With renters paying ever more for their housing, they are less likely to be able to save for a down payment on a home. The mortgage market, while loosening ever so slightly, is not helping much. Rates are still near historic lows, but the bar is high when it comes to credit score and personal debt levels. Younger Americans are saddled with more student loan debt than ever before, which only exacerbates the problem. Income growth is also nowhere near keeping pace with home value growth. Read MoreMortgage applications rise 2.3%, led by homebuyers "Further 8 percent home price gains is not going to bring the first-time household into buying instead of renting," said Peter Boockvar, chief market analyst of The Lindsey Group. It begs the question: Is there a breaking point? Soaring home prices at the end of 2013, fueled by investors at the low end of the market, brought an unexpected slide in sales throughout much of 2014. Prices then began to ease in the latter half of the year, only to turn sharply higher again at the start of this year. The Realtors' Yun said his hope for the best sales year in nearly a decade could be quashed "if affordability gets out of hand." Read MoreUS foreclosures rise, repossessions mounted |
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