The National Association of Realtors® (NAR) conducts a monthly survey of its members and uses their responses to construct a REALTORS Confidence Index (RCI). Similar in some respects to the builder confidence survey conducted by the National Association of Homebuilders but more extensive, the NAR survey tracks Realtor's expectations about overall market conditions, buyer/seller traffic, home prices, and issues of concern. The RCI report released today reflects information collected from about 3,700 respondents from November 26 to November 30. NAR cautions that "all real estate is local and conditions in specific markets may vary from the national trend.
The RCI for single family homes held steady at 53 and those for townhouses and condominiums were both below 50. An index of 50 indicates moderate expectations. The single-family index has risen from 30 one year ago while the other two were below 20.
The buyer traffic index is at 53, while the seller traffic index is essentially unchanged at 37, down from a peak of 42 last year. Buyer traffic dipped slightly, reflecting in part the seasonal slowdown and possibly a wait-and -see stance as buyers and sellers await clearer direction with regard to measures to avert the fiscal cliff.
Inventory has been generally tight and agents report that sellers appear to be holding back waiting for higher prices or for better appraisal values. Respondents report numerous cases of multiple bids especially for bank owned real estate (REO) which go under contract in a little as seven to ten days The median days on the market for all properties was 70 days in November compared to 98 days a year earlier.
More Realtors have above average expectations for business over the next six months. The single family sales index rose to 59 from 58 in October and 36 one year ago and the confidence level also improved for townhouses and condos as well. Still, Realtors report that the market remains hampered by a "demanding and rigid loan qualification process." This has led to cash buyers and investors easing out first time buyers using mortgage financing. Policy uncertainties on a variety of economic and tax issues as well as tepid job growth continue to dampen the market. Hurricane Sandy also caused a temporary market slowdown in the affected areas.
NAR's latest economic projection is for continued increases in residential home sales along with continued price improvement (although sales and price trends will vary from market to market). Existing home sales are projected to expand to 4.6 million in 2012 and to 5 million in 2013.
The median price for existing home sales is forecasted at $176,100 in 2012 and $185,200 in 2013. Shadow inventory is still high, but it is about 1 million fewer homes than two years ago. Decreases in sales inventory and a decline in the distressed home sale of existing home sales are projected to lead to continued market improvement.
The incidence of multiple offers has led to shorter marketing time and approximately a third of respondents noted that 57 percent of properties were sold within 3 months and many in less than a month. Only 20 percent of Realtors reported selling houses that had been on the market for six months or more compared to 28 percent a year ago. The median marketing time in November was 70 days compared to 98 days in November 2011. Even the timeline on short sales while still protracted has dropped from a median of 119 days one year ago to 90 days.
About 22 percent of respondents reported they had sold a foreclosed or short sale property and that cash sales accounted for about 46 percent of those sales compared to 41 percent in October. Distressed properties sold on average at a 20 percent discount and short sales at a 16 percent discount. Discounts were strongly affected by property condition. Those of above average condition sold for a 13 to 15 percent discount while those in the poorest condition were discounted 34 to 38 percent.
Approximately 30 percent of respondents who made a sale reported cash sales in November with most reported to be investors and international buyers. Approximately 9 percent of first-time homebuyers paid cash, compared to 70 percent of investors who paid cash. A sale to a first-time buyer was reported by 30 percent of Realtors, well below the 40 percent share historically enjoyed by novice homebuyers. Respondents noted that this reflects the difficulty in securing mortgage financing, delays with short sales, and purchases of lower priced properties by investors.
Second home sales accounted for 12 percent of responses (relatively unchanged since August) and 1.6 percent of Realtors reported sales of U.S. residential real estate to foreigners not residing in the U.S. (1.9% in October). Respondents reported "lots of cash investors from China and Canada".
Approximately 37 percent of mortgage sales involved a down payment of 20 percent or more (compared to 36 percent in October). Down payments of 11-19 percent were at 5 percent. The trend has remained essentially unchanged since last year, in part reflecting credit conditions that have been generally reported as "tight", "stringent", and "difficult."
One of the most frequent concerns expressed in the survey was "unreasonably tight credit conditions", i.e. that some financial institutions appear to lend only to individuals with the highest levels of credit scores.
NAR says there appears to be an unnecessarily high level of risk aversion. Approximately 75 percent of Fannie Mae and Freddie Mac loans went to borrowers with credit scores over 740 in 2011 compared to 40 percent in the 2001-2004 time period. Estimates by NAR economists have indicated that an additional 500,000 to 700,000 additional sales could be made if credit conditions returned to normal which could generate an additional 250-350 thousand jobs on an annual basis across a wide spectrum of the economy, i.e., attorneys, painters, plumbers, landscapers, title companies, furniture manufacturers, etc.; jobs that could be generated at no cost and almost immediately.
Realtors also noted that appraisals continue to be a problem because values are not keeping pace with the appreciation in market values. Realtors complain that appraisers continue to use foreclosures as comps and they are encountering out-of-area appraisers who do not know the local market. They also expressed frustration at the slow turn-around time and appraisal requirements that are an unnecessary expense on the buyer.
Thirty-four percent of Realtors reported a problem with an appraisal in the past 3 months (same as in September). Approximately 10 percent of the respondents reported that appraisal problems led to contract cancellation; about 10 percent reported a delay as a result of an appraisal problem, and almost 15 percent reported that the appraisal problems led to lower prices.
