2013 Record Home Sales

The Mortgage Corner

Home Sales Highest Since 2006

            The National Association of Realtors (NAR) just reported that for all of 2013, there were 5.09 million sales, which is 9.1 percent higher than 2012. It was the strongest performance since 2006 when sales reached an unsustainably high 6.48 million at the close of the housing boom, and is now back to the 2000 sales rate at the beginning of the housing bubble.

Graph: Calculated Risk

Lawrence Yun, NAR chief economist, said housing has experienced a healthy recovery over the past two years. “Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates and a large pent-up demand driving the market,” he said. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

But for sale inventories have declined and are putting upward pressure home prices.  The national median existing-home price for all of 2013 was $197,100, which is 11.5 percent above the 2012 median of $176,800, and was the strongest gain since 2005 when it rose 12.4 percent.

The is in large part because total housing inventory at the end of December fell 9.3 percent to 1.86 million existing homes available for sale, which represents a 4.6-month supply at the current sales pace, down from 5.1 months in November. Unsold inventory is 1.6 percent above a year ago, when there was a 4.5-month supply.

The median existing-home price for all housing types in December was $198,000, up 9.9 percent from December 2012. Distressed homes – foreclosures and short sales – accounted for 14 percent of December sales, unchanged from November; they were 24 percent in December 2012. The shrinking share of distressed sales accounts for some of the price growth.

Ten percent of December sales were foreclosures, and 4 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in December, while short sales were discounted 13 percent.

Interest rates will play a big part on home sales this year, needless to say, but will probably not rise much above current rates, even with higher economic growth.  This is because of the tremendous cash hoard of businesses that obviates their need to borrow, as well as consumers that are borrowing much less than in the past.   The 30-year conforming fixed rate is averaging 4.0 percent in California for a 0.5 point origination fee, and high-balance 30-year conforming is averaging 4.125 percent for a 1 point origination fee.

Harlan Green © 2013

The Post-Crash Rebound, Not Job Growth, Drove 2013 Price Gains

The Trulia Price Monitor and the Trulia Rent Monitor are the earliest leading indicators of how asking prices and rents are trending nationally and locally. They adjust for the changing mix of listed homes and therefore show what’s really happening to asking prices and rents. Because asking prices lead sales prices by approximately two or more months, the Monitors reveal trends before other price indexes do. With that, here’s the scoop on where prices and rents are headed.

Asking Prices Up 11.9% Y-o-Y in December, Slower Than in NovemberIn December, the year-over-year increase in asking home prices slowed for the first time since the price recovery began in early 2012: prices rose 11.9% year-over-year in December, compared with November’s 12.2% year-over-year increase. Asking prices rose 0.4% month-over-month, seasonally adjusted, the third straight month of gains less than 1%.

Quarter-over-quarter, prices rose 2.6% seasonally adjusted, which is also a slowdown from previous months. Quarter-over-quarter asking prices rose in 83 of the 100 largest metros and fell in 17, which is the most metros with quarter-over-quarter price declines in 10 months.

December 2013 Trulia Price Monitor Summary
	% change in asking prices	# of 100 largest metros with asking-price increases	% change in asking prices,excluding foreclosures
Month-over-month, seasonally adjusted	0.4%	Not reported	-0.5%
Quarter-over-quarter, seasonally adjusted	2.6%	83	1.6%
Year-over-year	11.9%	98	11.3%
*Month-over-month change is December versus November. Quarter-over-quarter and year-over-year changes are three-month averages. Data from previous months are revised each month, so data being reported now for previous months might differ from previously reported data.

Asking Prices in 2013 Rose Most in Hardest-Hit MetrosAll of the 10 metros with the largest year-over-year price increases in December were hard-hit during the housing bust. Asking prices fell by at least a third from peak to trough in these 10 metros, and by almost half or more in the three metros with the biggest price rebounds year-over-year: Las Vegas, Sacramento, and Riverside-San Bernardino.

Where Asking Home Prices Rose Most in 2013
#	U.S. Metro	Y-o-Y % asking price change, Dec 2013	Price change in bust, peak to trough	Y-o-Y % change in jobs, Nov 2013
1	Las Vegas, NV	33.0%	-61%	2.4%
2	Sacramento, CA	28.2%	-48%	1.5%
3	Riverside-San Bernardino, CA	25.9%	-50%	0.9%
4	Oakland, CA	25.2%	-39%	0.3%
5	Ventura County, CA	23.6%	-38%	2.0%
6	Warren-Troy-Farmington Hills, MI	22.7%	-37%	1.7%
7	Detroit, MI	21.8%	-40%	-0.2%
8	Los Angeles, CA	21.3%	-35%	1.7%
9	Orange County, CA	19.9%	-33%	2.1%
10	Fort Lauderdale, FL	19.1%	-48%	2.4%
Note: peak-to-trough price change from Federal Housing Finance Agency (FHFA). Change in employment from Bureau of Labor Statistics (BLS); November is the most recently published metro employment data. Among 100 largest metros. To download the list of asking price changes for the largest metros:Excel or PDF.

In most metros where the housing bust was milder, prices rose modestly year-over-year. The exceptions are Dallas, Houston, andAustin, where the housing bust was mild but prices experienced double-digit increases in 2013. West Palm Beach and several other Florida metros, in contrast, stand out for having had a severe housing bust but slower price gains in 2013 than most metros in California and Nevada.

The 10 metros with the smallest year-over-year price increases – or even declines – all had a milder housing bust than the 10 metros with the largest year-over-year price increases:

Where Asking Home Prices Rose Least in 2013
#	U.S. Metro	Y-o-Y % asking price change, Dec 2013	Price change in bust, peak to trough	Y-o-Y % change in jobs, Nov 2013
1	Albany, NY	-1.3%	-5%	0.5%
2	Baton Rouge, LA	-0.6%	-3%	0.0%
3	Little Rock, AR	0.0%	-4%	1.8%
4	Hartford, CT	1.0%	-14%	1.5%
5	Rochester, NY	1.5%	-2%	0.6%
6	Syracuse, NY	1.9%	-3%	0.7%
7	Albuquerque, NM	2.4%	-17%	0.9%
8	Camden, NJ	2.5%	-23%	1.2%
9	Tulsa, OK	2.7%	-4%	2.2%
10	Long Island, NY	3.2%	-20%	2.5%
Note: peak-to-trough price change from Federal Housing Finance Agency (FHFA). Change in employment from Bureau of Labor Statistics (BLS); November is the most recently published metro employment data. Among 100 largest metros. To download the list of asking price changes for the largest metros:Excel or PDF.

Overall, regression analysis shows that recent price gains are most strongly associated with the severity of the local housing bust. Markets where prices fell most during the bust (roughly 2006 to 2011, but varies by metro) offered bargains for investors and other buyers who have helped bid prices back up over the past two years. A second important factor is foreclosures: adjusting for other factors, metros with a higher foreclosure inventory today – including many in Florida – have slower price growth. Job growth, however, had little impact on local home price gains in 2013: the relationship between job growth and price gains was positive but not statistically significant.

Therefore, year-over-year price gains in December 2013 are still primarily a reaction to the housing bust, but this rebound effect is fading as we enter 2014. Looking at the quarter-over-quarter price changes throughout 2013, the relationship between the severity of the housing bust and the recent price recovery was stronger earlier in the year than later in the year. More specifically, the correlation between peak-to-trough price change (FHFA) and the Trulia Price Monitor quarter-over-quarter change was -.59 in March; -.45 in June; -.43 in September; and -.33 in December. This correlation is moving closer to zero, which signifies that the rebound effect is fading.

As the housing market continues to recover, factors other than the rebound effect – like job growth – will matter more for price gains. That means slower but more sustainable price increases.

Rent Gains Driven More by Job GrowthIn December, rents rose 3.0% year-over-year nationally. Among the 25 largest rental markets, rents rose fastest in San Francisco,Portland, and San Diego. Unlike recent price gains, rent gains have a positive, statistically significant relationship with job growth. Of the five large rental markets with the biggest rent increases, four had job growth of 2% or more. But of the five large rental markets with rent declines or slowest increases, just one had job growth of 2% or more.

Rent and Job Growth Trends in the 25 Largest Rental Markets
#	U.S. Metro	Y-o-Y % change in rents, Dec 2013	Y-o-Y % change in jobs, Nov 2013
1	San Francisco, CA	10.6%	2.4%
2	Portland, OR-WA	10.5%	2.0%
3	San Diego, CA	9.5%	1.8%
4	Seattle, WA	8.9%	2.3%
5	Denver, CO	7.6%	2.5%
6	Miami, FL	6.9%	1.5%
7	Houston, TX	6.3%	3.1%
8	Atlanta, GA	5.9%	2.5%
9	Phoenix, AZ	5.4%	2.3%
10	Dallas, TX	5.2%	2.6%
11	Chicago, IL	5.0%	1.5%
12	Orange County, CA	3.2%	2.1%
13	Riverside-San Bernardino, CA	3.1%	0.9%
14	Minneapolis-St. Paul, MN-WI	3.0%	1.8%
15	Sacramento, CA	2.5%	1.5%
16	Tampa-St. Petersburg, FL	2.4%	3.3%
17	New York, NY-NJ	2.3%	2.4%
18	Oakland, CA	2.2%	0.3%
19	Los Angeles, CA	2.1%	1.7%
20	Las Vegas, NV	1.9%	2.4%
21	St. Louis, MO-IL	1.3%	0.5%
22	Boston, MA	0.9%	2.4%
23	Baltimore, MD	-0.1%	1.9%
24	Philadelphia, PA	-0.1%	1.0%
25	Washington, DC-VA-MD-WV	-1.6%	0.5%
To download the list of rent changes for the largest metros: Excelor PDF

 The next Trulia Price Monitor and Trulia Rent Monitor will be released on Thursday, February 6. Here’s the full 2014 release schedule:

Month	Release Date
January	Thursday, January 9 at 12:01AM ET
February	Thursday, February 6 at 12:01AM ET
March	Thursday, March 6 at 12:01AM ET
April	Thursday, April 10 at 12:01AM ET
May	Thursday, May 8 at 12:01AM ET
June	Thursday, June 5 at 12:01AM ET
July	Thursday, July 10 at 12:01AM ET
August	Thursday, August 7 at 12:01AM ET
September	Tuesday, September 9 at 12:01AM ET
October	Thursday, October 9 at 12:01AM ET
November	Thursday, November 6 at 12:01AM ET
December	Tuesday, December 9 at 12:01AM ET

How did we put this report together? To recap the methodology, the Trulia Price Monitor and the Trulia Rent Monitor track asking home prices and rents on a monthly basis, adjusting for the changing composition of listed homes, including foreclosures provided byRealtyTrac. The Trulia Price Monitor also accounts for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices. The Monitors can detect price movements at least three months before the major sales-price indexes do. Historical data are sometimes revised each month, and historical data in the current release are the best comparison with current data. Our FAQs provide all the technical details.

WRITTEN BYJed Kolko, Chief EconomistMore about Jed Kolko, Chief Economist