The document discusses a meeting of realtors where speakers explained the slow housing recovery, noting that recovery depends on one's financial position prior to the crisis. Younger generations are not buying homes as expected due to factors like student debt or preference to live at home. While local markets are improving, with sales and prices up, the national recovery remains uneven and hampered by restrictive lending and high unemployment.
Everything you ever Wanted to Know about Florida Property Tax Exemptions.pdf
Housing Recovery Continues as Prices Rise and Equity Returns
1. The (not so) Great Recovery.
That was the message from one speaker we heard from when several hundred Realtors
from around the country descended on Washington D.C. a couple weeks ago to discuss
housing issues with our Congressional leaders. Apparently the degree of recovery has a
great deal to do with your position relative to it. If you had a fair amount of money to
begin with, you’ve recovered nicely. If not, well, there’s still hope and change I guess.
Speakers including HUD Secretary Shaun Donovan, FHA Commissioner Carol Galante,
CFPB Director Richard Cordray and NAR Chief Economist Dr. Lawrence Yun attempted to
explain why the housing market isn’t carrying it’s weight in the current recovery. Four
knowledgeable people, sixteen different theories.
Turns out millenials, that huge generation readying to assume the reigns of commerce
and government, aren’t buying homes as expected. They’re ‘choosing’ to live at home into
their 30’s. It could be they like being catered to, or they might be saddled with college
debt, or that might not have anything to do with it. Of course a lot of potential move-up
buyers can’t move-up because they don’t have equity in their homes yet, or not enough
to prompt a move. This is preventing many baby-boomers who want to down-size from
doing that since there aren’t enough buyers who can afford their big old houses. And even
though 80% of people who lost their homes to foreclosure or short sale during the past
few years plan to buy another home, they aren’t able to quite yet.
Overly restrictive lending regulations seem to play a big role in the problem, and rising
interest rates and prices have conspired to drive many investors and first-time buyers out
of the market. Consumer confidence continues to weigh down the economy as well,
because even as the nation posts decent job growth statistics, participation in the labor
market continues to suffer and those people, the record numbers of unemployed and
under-employed can’t buy a home either.
One economist posited that the next couple months will set a tone for the year. Housing
could actually fall back into another mini-recession for 2014 with both sales and prices
dropping some only to recover in 2015. Nobody put too much weight on this idea but
most acknowledged the possibility.
Locally our market continues to chug along. Sales were up slightly from the previous
month, although pending home sales portend a drop in June. Prices were up about 6%
from April and still holding 16% ahead of last year. Overall, prices for the region are back
to 2004 levels, up about 40% from their trough. Statistically we’ve made back exactly half
of the value we lost in 2008-2009. Our regional median is $147 higher than it’s lowest
point but still $148 away from it’s highest.
According to the U.S. Census Bureau, Southwest County was home to 3 of California’s 10
fastest growing cities. Temecula grew 2.1% to 106,780, Menifee grew 2.6% to 83,447
and Lake Elsinore was the fastest growing in the state increasing 3.3% to 57,525. Quality
of life and housing affordability will keep Southwest County at the forefront of the
recovering market.
Now if we could just get the rest of the country to follow along.
2. 0
500
1000
1500
2000
2500
1/11
2/11
3/11
4/11
5/11
6/11
7/11
8/11
9/11
10/11
11/11
12/11
1/12
2/12
3/12
4/12
5/12
6/12
7/12
8/12
9/12
10/12
11/12
12/12
1/13
2/13
3/13
4/13
5/13
6/13
7/13
8/13
9/13
10/13
11/13
12/13
1/14
2/14
3/14
4/14
5/15
Inventory Sales
Inventory v Sales
I thought it might be interesting to chart not only the inventory, as we have been for some
time, but compare it to sales during the same period. Sales have stayed in roughly the 500 –
600 home range for the past three years, spiking to nearly 800 in May 2012 (796). Meanwhile
inventory has drifted from as high as 2,300 units to 581 and back up to 1,900. In December
2012, March 2013 and May 2013 sales actually exceeded inventory.
Following a precipitous drop in February 2012, inventory continued to decrease until last June
when it started to increase again. We’ve gone from less than 1 month inventory for the region
to 3.5 months – a hefty increase but still well below the 6-7 months considered to be a
balanced market inventory. That ‘sellers’ market has propelled prices from a low of $217,924
for the region in January 2012 to $364,163 today, an increase of 40%. That’s still a far cry from
our regional median of $512,963 reached in January 2006, but it’s definitely progress.
As indicated in later reports, this increase has helped lift some 300,000 homeowners out of a
negative equity position in just the first quarter of 2014, 3.5 million in the past year. It hasn’t
lifted many of them far enough yet to turn them into move-up buyers, but the numbers are
getting better.
Now if we can just keep those borderline homeowners from slipping back into default as many
of them face their first interest rate re-set on their modified mortgages.
3. SW Market @ A Glance
Southwest
California Reporting
Period
Current
Period
Last
Period Year Ago
Change
from
Last
Period
Change
from
Year Ago
Existing Home Sales
(SFR Detached)
May 2014 638 579 686 9% 7%
Median Home Price $364,163 $341,630 $307,440 6% 16%
Unsold Inventory
Index (SFR Units)
1,902 1,751 677 8% 60%
Unsold Inventory
Index (Months)
3.5 3.2 1.1 9% 69%
Median Time on
Market (Days)
64 67 48 4% 25%
Source: CRMLS
4. 0
50
100
150
200
250
3/12 6/12 9/12 12/12 3/13 6/13 9/13 12/13 3/14
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
Southwest California Homes
Single Family Homes
Unit Sales
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
3/12 6/12 9/12 12/12 3/13 6/13 9/13 12/13 3/14
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake
Southwest California Homes
Single Family Homes
Median Price
May Transaction Value*:
Temecula $77,335,798 Lake Elsinore $26,399,367
Murrieta $58,595,175 Wildomar $7,380,300
Menifee $44,818,677 Canyon Lake $11,889,800
* Revenue generated by single family residential transactions for the month.
5. 0
20
40
60
80
100
120
140
160
180
200
3/13 6/13 9/13 12/13 3/14
Hemet/San Jacinto 2014 Unit Sales
Single Family Residential
Hemet San Jacinto
$0
$50,000
$100,000
$150,000
$200,000
$250,000
3/13 6/13 9/13 12/13 3/14
Hemet/San Jacinto 2014
Single Family Residential Median Price
Hemet San Jacinto
April Transaction Value:
Hemet $28,109,563 San Jacinto $11,228,700
* Revenue generated by single family residential transactions for the month.
6. May Median Price:
2013 2014 %
Temecula $414,100 $449,627 8%
Murrieta $359,189 $368,523 2%
Menifee $221,796 $269,992 18%
Lake Elsinore $232,509 $280,843 17%
Wildomar $277,214 $320,883 14%
Canyon Lake * $335,012 $495,408 32%
Southwest California $ 307,440 $364,163 16%
Hemet $159,218 $195,205 18%
San Jacinto $149,716 $190,317 22%
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
3/12 6/12 9/12 12/12 3/13 6/13 9/13 12/13 3/14
Southwest California Murrieta Temecula
Southwest California Median Price
* If I were doing weighted averages, I would note that of 24 sales last month in Canyon Lake, one sale of $1.3 million had a
disproportionately positive impact on median price for the city and, to a lesser degree, the region.
7. 0
100
200
300
400
500
600
On Market
(Supply)
Pending Closed (Demand) Days on Market Months Supply Absorption rate *
4
9
3
1
7
9
1
5
9
5
9 3
.
1
7
2
%
5
5
5
1
8
4
1
7
2
7
5
3
.
2
6
6
%
4
2
3
1
8
2
1
4
4
5
7 2
.
9
1
0
0
%
3
3
8
1
5
9
1
6
6
6
1 2
.
0
1
2
0
%
2
9
3
1
3
3
9
4 7
0 3
.
1
8
0
%
1
6
4
7
2
5
9
5
0
2
.
8
9
2
%
1
4
3
2
2
2
4
7
9
6
.
0
4
6
%
8
0 4
2 2
3
4
1
3
.
5
7
0
%
Murrieta Temecula Hemet Menifee Lake Elsininore San Jacinto Canyon Lake Wildomar
* Absorption rate - # of new listings for the month/# of sold listings for the month
May Market Demand
On Market 7%
Pending 4%
Closed 6%
Days on Market 4%
Months Inventory 3%
Absorption 5%
Month over Month
Inventory continues to climb, closed sales were up slightly from the prior month, pending sales were down in
May meaning June sales could be down as well, properties were staying on the market a few days less, months
inventory was up slightly to 3.5 months (still well below average) and absorption was down slightly although
Menifee sold 20% more homes than they listed and Hemet sold every new listing.
Standard sales hold steady at 85% of the market and distressed sales have made up 15% of the market since
January.
May Market Activity
By Sales Type
Standard Sale Bank Owned Short Sale
Active
% of
MKT Sold
% of
MKT Active
% of
MKT Sold
% of
MKT Active
% of
MKT Sold
% of
MKT
Temecula 522 94% 153 89% 14 3% 10 6% 13 2% 7 4%
Murrieta 454 92% 138 87% 11 2% 5 3% 27 5% 16 10%
Wildomar 71 89% 26 113% 1 1% 1 4% 8 10% 2 9%
Lake Elsinore 258 88% 80 85% 6 2% 4 4% 28 10% 8 9%
Menifee 302 89% 140 84% 14 4% 12 7% 21 6% 10 6%
Canyon Lake 133 93% 22 92% 4 3% 1 4% 5 3% 0 0%
Hemet 373 88% 115 80% 19 4% 17 12% 28 7% 11 8%
San Jacinto 129 79% 43 73% 12 7% 7 12% 19 12% 6 10%
Regional
Average
2242 90% 717 85% 81 3% 57 7% 149 6% 60 7%
8. 312,000 Properties Regain Equity in Q1 2014
Author: Colin Robins June 5, 2014 0
CoreLogic released an analysis of residential properties in the first quarter of 2014, focusing specifically on
homes with negative equity. The company found that more than 300,000 homes returned to positive equity in
the quarter, bringing the total number of mortgaged residential properties with equity to more than 43 million.
Negative equity, more commonly known as a home being "underwater," means borrowers owe more on their
mortgage than their homes are worth. The company cites declines in value, an increase in mortgage debt, or
some combination of the two as factors leading to a home having negative equity.
The company's analysis found that roughly 6.3 million properties, or 12.7 percent of all residential properties
with a mortgage, had negative equity as of Q1 2014. The first quarter of 2014 saw a decline from the fourth
quarter of 2013, when 6.6 million homes had negative equity, or 13.4 percent.
Year-over-year, negative equity properties have declined 20.2 percent from 9.8 million in 2013 to 6.3 million in
Q1 2014.
Underwater homes have a national aggregate value of negative equity of $383.7 billion at the end of the quarter,
according to CoreLogic. Negative equity is down $16.9 billion from roughly $400 billion in the fourth quarter of
2013.
"Despite the massive improvement in prices and reduction in negative equity over the last few years, many
borrowers still lack sufficient equity to move and purchase a home," said Sam Khater, deputy chief economist for
CoreLogic. "One in five borrowers have less than 10 percent equity in their property, which is not enough to
cover the down payment and additional costs associated with a conventional mortgage."
The company commented that of the 43 million residential properties with equity, roughly 10 million have less
than 20 percent equity. Homes in this particular situation may have a more difficult time refinancing or obtaining
new financing to sell and buy another home due to tougher underwriting standards.
"Prices continue to rise across most of the country and significantly fewer borrowers are underwater today
compared to last year," said Anand Nallathambi, president and CEO of CoreLogic. "An additional rise in home
prices of 5 percent, which we are projecting will occur over the next 12 months, will lift another 1.2 million
properties out of the negative equity trap."
Nevada had the highest percentage of mortgaged properties in negative equity at 29.4 percent, followed by
Florida (26.9 percent), Mississippi (20.1 percent), Arizona (20.1 percent) and Illinois (19.7 percent). These top
five states combined account for 31.1 percent of negative equity in the United States.
Texas had the highest percentage of mortgaged residential properties in an equity position at 96.7 percent,
followed by Montana (96.3 percent), Alaska (95.7 percent), North Dakota (95.7 percent) and Hawaii (95.6
percent).
The company found that the bulk of home equity for mortgage properties is concentrated at the high end of the
housing market. CoreLogic noted that 93 percent of homes valued at greater than $200,000 have equity
compared to 82 percent of homes valued at less than $200,000.
9. Where have all the investors gone?
Some states are faring better than others in the housing recovery. Florida, California, Arizona
and Nevada all experienced significant declines in pricing following the bust of the sub-prime
market and sharp declines in employment. However, Arizona and California have also
experienced the sharpest declines in their foreclosure rate, respectively. By contrast, the
improvements in Florida and Nevada have not been as strong.
Phoenix, the original poster child for institutional investor activity, has seen the institutional
investor share fall from a high of 13.2 percent in July 2012 to 3.6 percent in March 2014, as
significant rises in home prices and rapidly shrinking inventory levels made investing no longer
attractive. Not surprisingly, this rapid drop-off in institutional interest is taking place in many
of the California and Florida markets for similar reasons.
As a reminder, institutional investors are defined as parties that have made 10 or more
purchases in the past year within a metro area.
10. Interest Rate Resets a Concern for Modified Mortgages
The Data and Analytics division of Black Knight Financial Services released its latest Mortgage Monitor Report,
which analyzed data as of the end of April 2014. The report found that there were roughly 2 million modified
mortgages facing interest rate resets, with 40 percent of those loan modifications currently underwater.
According to Black Knight, more than one in 10 of all active loans are in near negative equity positions, with 9.0
percent equity or less.
"We have seen a continual reduction in the number of underwater borrowers at the national level for some
time now, but modified loans show a different picture," said Kostya Gradushy, Black Knight's manager of Loan
Data and Customer Analytics. "While the national negative equity rate as of April stands at 9.4 percent of active
mortgages, the share of underwater modified loans facing interest rate resets is much higher—over 40
percent."
Gradushy noted that another 18 percent of modified borrowers have 9 percent equity or less in their homes,
and that resets in interest rates pose an increased risk for defaults in the years ahead.
Home prices continued towards recovery, up to $235,000, a monthly increase of 0.97 percent and a yearly
increase of 7.0 percent.
April saw a decline in foreclosure starts, which fell 10.56 percent from March to 78,800 in April. Troubling, the
total U.S. loan delinquency rate increased 1.84 percent month-over-month to 5.62 percent. The loan
delinquency rate remains down, however, on a year-over-year basis by 9.5 percent.
The number of properties in foreclosure pre-sale in April was approximately one million, down 54,000 from
March and down nearly 575,000 from April 2013.
"Finally, as foreclosure sales (completions) increased in both judicial and non-judicial states—though the
increase was larger in the former than the latter—Black Knight observed the gap between judicial and non-
judicial pipeline ratios (ratio of loans 90 or more days past due or in foreclosure to the current rate of
foreclosure completions) had narrowed to its lowest point since at least 2005," Black Knight noted.
On average, foreclosures in judicial states take 52 months to complete, compared to the 2011 high of 118
months. By comparison, the average time to complete a foreclosure in non-judicial states in 2011 was 33
months. It was has since increased to 48—the highest point on record.
States with the highest percentage of non-current loans include: Mississippi (13.8 percent), New Jersey (12.9
percent), Florida (11.7 percent), New York (11.0 percent), and Louisiana (10.8 percent).
States with the highest percent of seriously delinquent loans include Mississippi, Nevada, Rhode Island, Alaska,
and Massachusetts.
Black Knight noted that seven of the top ten states for total non-current loans are judicial states. (California is a
non-judicial state).
11. No one wants dirty water, but at a time when our economy is struggling, why is the Environmental Protection
Agency (EPA) pursuing new rules on water which place greater restrictions and financial penalties on law-
abiding Americans? The new rules reclassify the meaning of water and expand government intrusion onto
private lands.
According to a report in the Washington Post, at issue is the definition of federally protected waters. In March,
the Environmental Protection Agency pitched new rules meant to clarify and expand its regulatory reach
under the Clean Water Act to include small streams, riverbanks, wetlands and floodplains.
Gina McCarthy, the agency’s administrator, has defended the proposal, saying that it would not significantly
expand the department’s authority to monitor and regulate waters.
However, when these new regulations now give the federal government regulatory control over dry washes
that run through private lands, there is something certainly amiss.
You have to wonder, why do we even have a Congress and representatives when a government agency can
institute insidious regulations with impunity — and with no regard to the economic impact or intrusion into
our private lives?
Small business owners and some lawmakers warn the new rules will subject farmers, ranchers, homebuilders
and other entrepreneurs to complicated and potentially costly new regulations that were written with other
industries and other purposes in mind.
Rancher Jack Field has a small stream running through his pasture from which his cattle drink. Under the new
rules, the stream may qualify as federally protected water, requiring a new permit for use of the land and
“opening me and my ranch up to significant liability,” he said during a hearing last week before the House
Small Business Committee. Permitting means paperwork and that means money to apply for the permit and
fines if found not in compliance. And it seems the financial penalty is substantial, at $30,000 a day
I sat on the House Small Business Committee and can attest that it is a truly one of the few bipartisan
committees (the repeal of the Obamacare 1099 form requirement is an example). Rep. Sam Graves (R-Mo.)
said the rule “threatens to drown small businesses in unnecessary regulatory requirements,” and called the
revision one of the most “expansive and potentially damaging” proposals the panel has examined during his
four-year tenure leading the committee. On the other side of the aisle, Rep. Kurt Schrader (D-Ore.) described
the rules as an “abomination” and “a power grab for private property.”
New EPA rules may reclassify the meaning of “water”
Written by Allen West on June 2, 2014
The National Association of Realtors® is strongly opposed to this
redefinition of ‘navigable waterways’ by the EPA and will continue to
work on behalf of private property rights.
Navigable Waterway.
12. The Last Word…
So what do Realtors® do in D.C.? Well, we do what you might expect of the largest grassroots political advocacy
group in the country, we lobby. And some would argue we lobby pretty effectively.
This year we had three primary issues we focused on:
• Preserving the mission of the FHA. Celebrating 80 years of helping people buy homes, the FHA played
a critical role in helping move the nation out of the recent recession. Even in California, FHA loans went
from single digits in 2005 to over 60% in 2011. However, recent increases in down payment have
hampered consumers without adding to the FHA’s bottom line. Their recent drop, along with Fannie &
Freddie, of conforming loan limits hit higher cost areas like ours especially hard and proposed bills like
H.R. 2767 would impose further costs on consumers and reduce the role of the FHA. Conversely, S. 1376,
the FHA Solvency Act provides additional tools to the FHA to better manage risk to taxpayers.
• Reform of the secondary mortgage market. Fannie Mae and Freddie Mac were created to ensure that
creditworthy borrowers had access to affordable mortgage products. That formula worked for 70 years
until Congress decided to dictate a new mission starting in the late 1990’s, which ultimately lead to them
being taken over by the government in a massive bail-out scheme. Never mind that Fannie & Freddie
have both repaid their loans, with interest, and are highly profitable today and contributing significant
revenues to the federal government, moves are afoot to replace them with a new agency, the FMIC
(imagine the FDIC only for mortgages). We agree that reforms are necessary to insure that in the future
profits are not privatized while losses are borne by the public, but the backstop of the Federal
government is necessary to reassure the market, to reassure private mortgage lenders and to provide
stability and liquidity to the secondary market.
• Preserve real estate related tax policies. These provisions include
• Preservation of the mortgage interest deduction, which has helped make homeownership
more affordable for more than a century. We oppose bills like the PATH Act which proposes to
severely limit or eliminate MID on both primary and secondary residences.
• Maintaining property tax deductions so homeowners are not double-taxed on their homes.
• Retaining the mortgage debt forgiveness tax relief so homeowners who short sale their
homes will not be subject to taxation on the phantom income of forgiven debt. While California
is not subject to this thanks to a 2010 bill sponsored by the California Association of Realtors,
the federal bill expired the end of 2013. This has had a deleterious impact on prospective short
sales across much of the country, encouraging homeowners to go to foreclosure rather than
short sale.
• Allowing Like-kind exchanges to continue. This has long been a key part of a high percentage
of investment related real estate transactions. Repeal of this provision would harm economic
growth.