Pending Home Sales Slip in June, Remain Above a Year Ago

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 1.4 percent to 99.3 in June from a downwardly revised 100.7 in May but is 9.5 percent higher than June 2011 when it was 90.7. The data reflect contracts but not closings.

Lawrence Yun, NAR chief economist, said inventory shortages are a factor. “Buyer interest remains strong but fewer home listings mean fewer contract signing opportunities,” Yun said. “We’ve been seeing a steady decline in the level of housing inventory, which is most pronounced in the lower price ranges popular with first-time buyers and investors.”

Here’s the data for the Nation:

And looking at the Local South Bay Real Estate Market

and how about for Homes in Palos Verdes Estates

To obtain specialized Palos Verdes Estate real estate trend data as well as real estate trends for all Palos Verdes Homes including real estate in Rancho Palos Verdes and Rolling Hills Estates homes for sale and Rolling Hills property, follow the link in the yellow tab below.  Here’s a quick video on the type of information you will find which also includes an interactive map based search product to find homes for sale in Palos Verdes

Palos Verdes Real Estate Trends vs the National Housing Market

It was reported in one of the online trade journals I subscribe to that pending home sales (this is an indicator of “now” activity and measures how buyers “now” are voting with their dollars) have increased  yet again.  What I would ask that you do is read the article below and then continue on for a more localized report.  How are Palos Verdes homes and real estate around the Greater South Bay area faring in relation to these trends?  Let’s find out…  at the bottom of this article you will see a chart for the South Bay.

National Association of Realtors reports Pending Home Sales Up in May, Continue Pattern of Strong Annual Gains

Daily Real Estate News | Wednesday, June 27, 2012

Pending home sales bounced back in May, matching the highest level in the past two years, and are well above year-ago levels, according to the National Association of REALTORS®. Both monthly and annual gains were seen in every region.

 
The national median existing-home price is expected to rise 3 percent this year and another 5.7 percent in 2013.
 
The PHSI in the Northeast increased 4.8 percent to 82.9 in May and is 19.8 percent above May 2011. In the Midwest the index rose 6.3 percent to 98.9 in May and is 22.1 percent higher than a year ago. Pending home sales in the South increased 1.1 percent to an index of 106.9 in May and are 11.9 percent above May 2011. In the West the index jumped 14.5 percent in May to 108.7 and is 4.8 percent stronger than a year ago.
 
Low inventory could hold back some contract activity. “If credit conditions returned to normal and if we had more inventory, especially in the lower price ranges, more people would become successful buyers. In an environment of historically favorable housing affordability conditions, it’s frustrating to see some consumers thwarted in the process,” Yun said.
 
Low inventory results partly from underwater homeowners who are unwilling to list their homes, which would require a lengthy short sale process, or additional cash to complete the transaction. NAR estimates 85 percent of homeowners have positive equity, with 15 percent in an underwater situation.
 
“Low inventory can be cured by increasing new home construction,” Yun said. He projects housing starts to rise by 26 percent this year and another 50 percent in 2013.
 
“If housing starts do not rise in a meaningful way over the next two years due to the difficulty in getting construction loans, and barring an unexpected shift in the economy, the steady shedding of inventory could lead to shortages where home prices could get bid up close to 10 percent in 2013,” Yun said.
 
Source: National Association of REALTORS®

For more information on real estate trends for the Palos Verdes homes market please go here.

Will the Palos Verdes Real Estate Market follow National Trends?

You may hear the video near the bottom of this post, start to play immediately.  To stop it, just scroll down and click the pause key.  You can return to it later after reading this post.

In the trade journal, “Realty Mag”, there was an article in which 5 projections were made as to where the housing market is headed.

Real estate markets across the country are inching their way to a slow recovery after bottoming out, according to several real estate economists who spoke at a forum hosted by the National Association of Real Estate Editors.

National Association of REALTORS®’ Chief Economist Lawrence Yun, Zillow Chief Economist Stan Humphries, and National Association of Home Builders Chief Economist David Crowe shared their views on the direction of the housing market during the forum.

“Last year was the worst year on record for [new] house sales, for 60 years of housing-sale info,” Crowe said.

But things are picking up, the economists note, despite several challenges still threatening that recovery. Yun says that appraisal issues are holding back up to 20 percent of home sales and that lenders’ tightened mortgage underwriting standards are likely holding back another 15 to 20 percent of potential home deals.

Here are some of the economists’ forecasts:

1. New-home market: The NAHB predicts a 19 percent increase in single-family housing starts this year over last (from 434,000 last year to a projected 516,000 this year).

2. Single-family rental market: This could be the next housing market bubble, Humphries warns. He expects this sector to cool as rental rates continue to increase and as home ownership looks more attractive to the public again.

3. Distressed home sales: The percentage of distressed homes sales is projected to drop by 25 percent in 2012 and 15 percent in 2013, Yun says.

4. Home price appreciation: Yun says it’s possible some markets may see a 10 percent rise in home-price appreciation next year due to an increase in demand, or a 60 to 70 percent increase in housing starts. Yun argues it won’t be both, however, but rather one or the other. He notes it greatly depends on whether lawmakers reach an agreement once again on the looming debt-ceiling deadline.

5. Home owners’ negative equity: About a third of home owners are underwater, owing more on their mortgage than their home is currently worth. As such, the housing recovery will likely be “stair stepped,” Humphries says. He says home owners with negative equity will gradually begin to list their homes as they see prices inch up, but when they do, that may temporarily swell the housing supply and cause a brief pause to the recovery.

There was further discussion in that article about a study done by the Harvard Joint Center for Housing Studies that showed some interesting trends going on right now.  I wondered if we would see the same pattern for the Palos Verdes homes market

Beginning in mid-2008, mortgage payments were cheaper than rents

As of today, the median sale price of a home sold on the Palos Verdes Peninsula in the last 3 months is $1,200,000.  With 25% down payment, and today’s interest rates for a 30 year fixed rate loan being about 4.275%, your monthly PITI (principle, interest, taxes and insurance would be around $5,791/mo.  The median rent paid for a Palos Verdes home in the last 3 months is $4,147/mo. 

Palos Verdes is not following the national trends in this regard.  For more information from my “newsroom” play this video

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Real estate is no different than any other commodity; whether we’re talking about gold, silver, lumber or pork belly futures.  Real estate is yet another commodity ruled by the economic laws of supply and demand. Understanding the ebb and flow of the market, seeing the changes in prices, volume, and the rate at which inventory is absorbed, helps both the buyer and the seller in a real estate transaction. Better decisions can be made as to pricing your home for sale relative to the past competitive sales, as well as making better decisions when you are a buyer.

As you can see by the graph here, my proprietary supply/demand chart predicted the real estate slow down by about 18 months.  What’s the chart telling us now?  Click on the chart to view a larger picture by signing up for my proprietary charts.

If you fill out this brief “sign in” page with your information (this will remain private, I promise you, your information will not be sold, shared or distributed to anyone!), you will receive the link to these pivotal charts and key information to study at your leisure. The information is proprietary and is intended for your use only. Making copies or redistributing the link to others is expressly forbidden without prior permission.  The information is intended ONLY for existing and potential clients; not for other real estate professionals (except as a fee based service) Thank you for understanding.

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