The Real Estate Report 8/6/2014

Let's Add Up The Data

We very rarely get a week of economic data like the past week. We had a week of employment releases, culminating in the release of the employment report on Friday. We also had the Federal Reserve's Open Market Committee meeting last week. Add to that the release of personal income and spending data for June and for good measure add in the first estimate of the second quarter growth of the economy (GDP). It is tough to sum up all that data in a short amount of time and indeed it may take some time for the markets to fully absorb the data as well. But let's give it a shot by asking the general question -- how did we do?

With regard to second quarter growth, the preliminary number released on Wednesday was strong. However, the 4.0% growth rate is subject to revision and it comes after a drop of 2.1 % in the first quarter due to the harsh winter we experienced. Taken together, the economy grew at less than a 1.0% rate during the first half of the year and economists expect faster growth during the second half, but not necessarily as strong as 4.0%. Meanwhile, the Fed's statement after their meeting contained no surprises as they continue to lessen stimulus by paring down on purchases of securities and were a bit more upbeat in their assessment of the economy which gave the markets the idea that a rate increase will still come down the road, but that "down the road" is probably closer than it has been.

The big release was supposed to be the jobs report on Friday. Actually the numbers released were fairly tame. The 209,000 jobs created were close to expectations, but did not exceed expectations. Even the increase in the unemployment rate from 6.1% to 6.2% was not seen as bad news because more Americans were participating in the labor market which is a key component of confidence. The tame numbers served to calm the markets which fell precipitously on Thursday because of fears that if the positive GDP report was coupled with strong jobs growth, the Fed could raise rates even sooner than expected.

Young people are starting to leave their parent’s home and move out on their own. The Current Population Survey for 2013 showed a drop in the percentage of 20-somethings living with parents, marking the first decline since 2005. As of now, the percentage drop appears minimal: Those aged 18 to 24 living with parents or a related subgroup dropped from 56 percent to 55 percent in one year. However, Brad Hunter, chief economist at Metrostudy, notes in a Builder online article that the one-percentage-point decline represents 300,000 people who were previously living with their parents that are now looking for a household of their own. Indeed, a recent report by Harvard University’s Joint Center for Housing Studies predicts that 2.7 million more households will form among people in their 30s over the next decade. First-time buyers usually make up about 40 percent of home buyers. However, lately, the share has been in the 35 percent to 38 percent range, Hunter says. The delay in millennials branching out on their own has greatly reduced household formation in recent years. Household formation rates usually average 1.4 million per year. Lately, the rate has been about 500,000 to 700,000 a year. “We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place,” Hunter notes. “While most of these newly-emerging twenty-somethings will be going into rentals, the movement out of the parental home is nonetheless expected to support a series of positive steps from rentals to entry-level re-sales to entry-level new homes, and on up the ladder.” Source: Builder 

The average monthly rent for an apartment increased in the most recent quarter to $1,099, up 0.8 percent from the first quarter of this year and up 3.4 percent year over year, according to Reis Inc., a real estate research firm. It marked the 18th consecutive quarter for rent increases at a time when income growth has mostly been stagnant. All 79 U.S. metro areas that Reis tracks saw an increase in effective rents, with coastal cities posting some of the highest rent growth in the past year. For example, rents rose more than 6 percent in the past year in San Francisco, San Jose, and Seattle, according to Reis. Other metros not usually associated with high rent increases also saw a rise, such as Charleston, S.C., and Nashville, Tenn., where each saw rents increase about 5 percent or more in the past year. "You have definitely seen that recovery now spread to all of the major markets around the country, even if some of them were laggards," Ryan Severino, an economist at Reis, told The Wall Street Journal. While rents have been rising, household incomes have mostly been stagnant. The median household income in 2012 was $50,017, compared to the 2007 peak of $55,627, according to U.S. Census data. Some relief may be in sight for renters soon. Apartment vacancies in the second quarter were unchanged nationwide at 4.1 percent, which could signal that supply is starting to catch up with demand. The market is expected to add 180,000 multifamily units this year, according to Reis.Source: The Wall Street Journal 

A new study initiated by Smart Growth America says that creating dense, walkable developments gives cities a fatter wallet. In Washington, D.C., cited as the most walkable U.S. city, the most walkable parts take up less than one percent of the area but contain almost half of the city's top wealth-generating square footage. Smart Growth America says that while urban areas can contain drivable communities and outer areas can encourage walking, a community with good walkability will still feature "high density, a mix of real estate uses, multiple transportation options, and the ability to serve the daily needs of residents largely on foot," according to Gizmodo.com writer Alissa Walker. Source: Gizmodo.com 

Laura Glass

The Real Estate Report June 11, 2014

No More Excuses

Over five years ago we suffered the worst recession since the great depression almost 100 years ago. Since then our economic recovery has been the weakest of all recoveries as well. There are many reasons for the weak recoveries. The fact that our real estate market was devastated and needed years to recover was certainly a main factor. But there were other reasons for the stops and starts which were external. We had domestic and world-wide natural disasters from hurricanes and super storms to tsunamis. We will not get into a debate as to whether global warming is causing these extreme weather events but we will acknowledge that they were very, very extreme and caused major damage to populations and property.

There were events that were not weather related, of course. There was the fiscal crisis in Europe and political crises at home. We had wars being fought and terrorist events. Many of these events prolonged the recovery and made us wonder whether we would suffer a double dip recession, which never came. 2014 has certainly not been smooth sailing with our famously cold winter and the crisis in Ukraine. However, we believe our economy has recovered to the point that we no longer talk about slipping back in recession. The drop in the economic growth in the first quarter is a testament to that confidence. Economists shrugged off the down quarter almost universally. So what comes next?

The sun is shining and there is no more cold winter. We are running out of excuses for the economy being so lackluster during a recovery period. The employment report released on Friday showed continued progress in that regard. The last two months has seen a significant pickup in hiring but the employment report also shows how far we need to go. We have recovered all the jobs lost during the recession, but accounting for population growth during the past six years, we have seven million jobs to go. Economists surveyed by CNN/Money indicate that it would take two years or more at this pace for the unemployment rate to reach 5.5% and wage growth is still anemic. The good news? A slow recovery continues to support low interest rates and hopefully the Federal Reserve Board agrees with that assessment when they meet shortly. 

Rates on home loans have dropped so much this year – falling about one-third of a percentage point — that the low levels could “stimulate” the housing market, Nobel Prize-winning economist and home-price expert Robert Shiller said. “These declines matter,” Shiller said in a CNBC interview. “People are watching interest rates.” Shiller’s remarks echo comments earlier this year from Federal Reserve Chairwoman Janet Yellen, who said that low rates “should serve as a stimulus to people coming back into the housing market.” Buyers faced a double whammy to affordability over the past year. Rates started rising in May 2013 as the market speculated about when the Federal Reserve would start pulling back on its massive asset-purchase program that exerted downward pressure on long-term rates. At the same time, builders and home owners cranked up asking prices, enabled by a low number of homes on the market. As a result, recent home-sale readings are trailing year-earlier results. But sales conditions are improving. Rates dropped this year on a string of weak economic reports. A combination of lower rates, slower price growth and an improving economy may lead to faster home sales this year. Source: Market Watch

Consumers are more committed to buying or selling this year, according to Prudential Real Estate's Consumer Outlook Survey. Of the 2,500 consumers surveyed, 78 percent held a favorable view of real estate, a five-point jump from the previous quarter and 15 points higher than at the end of 2012. Sixty-three percent said they were more committed to buying and selling in 2014. One generation in particular has a favorable perception of real estate right now: Millennials. The generation peaked at 87 percent with a favorable perception of real estate in the latest survey. “Consumers understand that the U.S. economy and residential real estate continue moving in positive directions,” says Earl Lee, CEO of HSF Affiliates LLC. “Accordingly, they’re feeling much better about their personal situations and want to take advantage of attractive home prices in many markets and interest rates that remain low by historical standards.” While they’re optimistic, consumers are also realistic, believing that the rate of appreciation of U.S. home values will slow after a strong run in 2013. They say their No. 1 concern about the housing market is “decreasing home values,” followed by “saving enough for a down payment.” Respondents to the survey also say that tight housing inventories would likely impact their home-buying decisions this year, and 67 percent expect to face more buyer competition. “Normalcy is returning to residential real estate,” says Lee. “People are seeking homes for all the right reasons: to gain shelter and security, raise a family, and generate long-term wealth.” Source: Realtor Magazine

Americans are much less mobile than we think. Almost 70 percent of us who were born in the U.S. still live in the state of our birth, as only 1.5 percent of population moves across state borders, a rate lower even than that of our parents. When we do move, it is most often in search of a new job, less expensive housing or a warmer climate -- and not, as is often suggested, to find a state with lower or no income taxes. What is the primary driver? One force, especially for older people, is the sun. Over the past two decades, cold-weather states such as Ohio, Pennsylvania, New Jersey and Michigan have lost a significant share of population to sun-belt states. A second motivator is housing; people who move from cities in California or New York to those in Texas or North Carolina typically benefit from substantially lower housing costs. The biggest draw of all for someone of working age, though, is a job. Nearly a third of Americans who relocate across state lines say they are moving for a “new job or job transfer.” Source: Bloomberg 

Laura Glass at Landmark Bank Mortgage

The Real Estate 5/29/2014

Why Does The Stock Market Keep Bouncing Back?
The stock market has been on quite a run for the past five years or so. Granted, most of this was a rebound from the precipitous drop we experienced during the financial crisis and recession. However, a run this long and this far is hard to ignore. So many times in the past five years we have seen periods of weakness that looked like either corrections or the end of the run, only for stocks to bounce back and hit new highs. Why have stocks been so resilient?
There are a multitude of theories, but the bottom line is that stocks would not be doing well if companies were not doing well. It is that simple. Of course, that begs the next question, why have earnings been so strong when the economy has been in such a slow and painful recovery? One explanation delves into the theory that technology has made companies more efficient. Of course, that also means companies need to hire fewer employees to run their businesses and this is possibly one reason the labor markets have not recovered. Certainly, the growth of online shopping is one of the factors that come into play in this regard.
The real question is, what does the strong stock market say about the economy? Here is where there seems to be a disconnect. Is the stock market saying -- don't worry, the recovery is coming; Or is the stock market saying -- we don't care how slow the economy is, as long as we are producing results? If the markets could talk, we could find out an answer. Meanwhile, we will speculate that both answers are in play. If the markets felt that darker days were ahead of us, strong earnings today would not matter as much. 

The majority of metro areas in the first quarter continued to show price growth, but the gains are smaller than previous quarters, the National Association of Realtors® says in its latest quarterly housing report. Median existing single-family home prices rose in 74 percent of the 170 metro areas measured, based on closings in the first quarter compared with the first quarter of 2013. Twenty-two percent of the areas – or 37 – showed double-digit increases. For comparison, in the fourth quarter of 2013, 26 percent of metros had registered double-digit gains. “The cooling rate of price growth is needed to preserve favorable housing affordability conditions in the future, but we still need more new-home construction to fully alleviate the inventory shortages in much of the country,” says Lawrence Yun, NAR’s chief economist. “Limited inventory is creating unsustainable and unhealthy price growth in some large markets, notably on the West Coast.” Overall, the national median existing single-family home price was $191,600 in the first quarter, up 8.6 percent from $176,400 in the first quarter of 2013, NAR reports. At the end of the first quarter, inventories of for-sale homes did show some growth. There were 1.99 million existing homes available for sale at the end of the first quarter -- 3.1 percent higher than year-ago levels. The average supply during the quarter was five months. A supply of six to seven months is considered a healthy balance for the market. Source: NAR
Seventy percent of baby boomers say that the house they live in when they retire will be the best home they've ever had, according to a survey conducted by Better Homes and Gardens Real Estate. The survey had 1,000 respondents. What’s more, 57 percent say they plan to move out of their current home in order to search for their dream retirement home. “With approximately 77 million boomers in the U.S., it’s quite significant to see that this population has so much positive anticipation for the home in which they will be retiring — and for the majority, their aspirations involve making a move,” says Sherry Chris, president and CEO of Better Homes and Gardens Real Estate. “Baby boomers are known for being a hardworking, trailblazing generation. As they have done with every other major life event, they are marching head-on into retirement with big plans and no desire to change pace. Our study shows that boomers continue to surprise with nuances of what they care about and what they are prioritizing.” About one in four boomers say they likely will buy a second home to use during their retirement years, such as a vacation or beach house. Source: Better Homes and Gardens Real Estate

The population is shifting to the South. Between 2010 and 2013, 51 percent of the population increase in 52 major metros nationwide was in the South, according to U.S. Census Bureau data. In comparison, the West accounted for 30 percent of the increase, followed by the Northeast at 11 percent and the North Central (Midwest) area at 8 percent. What’s more, the Census Bureau data shows that nearly 785,000 more people moved to major metro areas in the South than moved away. That’s far more than the 170,000 domestic migrants who moved to major metro areas in the West. On the other hand, the Northeast lost 485,000 net domestic migrants while the Midwest lost 280,000. The largest growth in domestic migration was to Texas. Source: NewGeography

Laura Glass at Landmark Bank Mortgage

The Real Estate Report 5/23/2014

Listing Shortage: Just The Beginning?

Last week we wrote about a shortage of listings which has characterized the real estate markets for the last several months. From an economic perspective with bank owned properties still being put on the market, it seems that this shortage is surprising. Yet, it is not. Some three years ago, we reported that several analysts had concluded that we were not building enough houses to meet the demands of population growth. Here is a quote from one article published in Alpha in 2011 ... housing starts are going to have to increase by leaps and bounds over the next several years, if only just to catch up to the demands of a growing population...
The Census Bureau has projected that the population will grow from the baseline of 300 million in 2007 to 440 million in 2050, an increase of 140 million in just over 40 years. By contrast, it took the country 100 years to grow by 200 million during the last century. Another perspective? We are adding two times the population of the whole country in 1900 during the next three and a half decades. And these people will need somewhere to live.
One might argue that the current homeownership rate is around five percent less than at the peak of the real estate boom. But when you increase the population by 50%, a drop in the homeownership rate of 5% or even 10% does not make a dent. And keep in mind that many who rent will still be renting single family homes. Therefore, a drop in the homeownership rate does not necessarily drop the demand for single family housing--including condominiums. So the question we must ask: Is today's listing shortage the beginning of a severe housing shortage which could cause housing prices to increase further in the future? We don't have the answer with regard to whether such a shortage will occur or when it might occur, but the question is valid. Either way, expect more homebuilding to accommodate this growth in the future.

Sixty-nine percent of consumers recently admitting to having a “home crush”—a property they liked so much they were drawn back to looking at it more than once online or in person, according to a new realtor.com® survey of 1,000 consumers. But men and women respond quite differently to these crushes, according to the survey. For example, the survey found that women are more likely than men to have a crush on a home that was out of their financial league. Forty-one percent of women revealed their home crush is out of their price range, compared to only 30 percent of men who said the same. Men were more likely than women to move from one home crush to another. Thirty-six percent of men surveyed say they find a new house crush weekly, compared to 29 percent of women. But when it comes to true love, the sexes agreed on one thing that makes them most fall in love with a home: outdoor living space. Both men and women identified this feature as the top attribute in a home. Women's hearts tended to be set a-flutter by open floor plans, great curb appeal, and appliances and fixtures, while men said they swooned over good garage space, curb appeal, and open floor plans. Source: realtor.com ®

The federal government had a budget surplus of $114 billion in April, the Congressional Budget Office estimated. That is $1 billion more than a year ago and would be the biggest April surplus since 2008. CBO estimates receipts were 2% higher in April versus the same month a year ago. Spending rose 2.5%. For the fiscal year to date, CBO estimates the deficit to be $301 billion, down $187 billion compared to the same period in 2013. The fiscal year runs from October to September. Source: MarketWatch

Buy a new or existing home? An untouched abode offers advantages, of course, such as a sleek modern layout and few repairs. Buying an existing home, however, may allow you to seal the deal faster and can offer better short-term price appreciation. These head-to-head comparisons can help you decide which choice better fits your priorities.

1. Sales Price. Winner: Draw. All else being equal, new structures typically command 10% to 15% premiums over similar existing places. You're unlikely to be making an equal comparison, however. "In most of the country the lots in the best locations are already gone," says David Brown, a Dallas-based housing consultant for Metrostudy. The newest homes are often built farther from centrally located areas and may have smaller yards than their older counterparts, so they can wind up costing less.
2. Speed of Transaction. Winner: Existing. Most builders today are selling new homes from models, says Jody Kahn of John Burns Real Estate Consulting in Portsmouth, N.H. Once you agree to buy, the actual construction begins. The upside: There are still lots of ways to personalize the home, such as adding extra storage or creating an office. But the finished product probably won't be ready for six to nine months, which can be tough for those who need to move in soon. Timing the purchase is also a challenge when you're looking at a waiting period, especially if you have a home to sell.
3. Cost of Ownership. Winner: New. After a few decades, roofs get leaky and boilers go bust. You'll spend an average of $18,000 on a new roof, according to Remodeling magazine, and $3,000 for a furnace. New homes also carry lower utility bills. Energy use per house has fallen over the past decade in part thanks to changes to building energy codes, which call for more insulation and tighter sealing, and should fall further in new homes as more states adopt the latest 2012 codes. "New construction on average is 30% to 40% more efficient than existing homes," says Indiana energy consultant John Milligan.
4. Chance for Near-Term Gains. Winner: Existing. While handy homeowners can reap the benefits of sweat equity, a new home offers very little room for improvements and is likely to sell for about the same price as others around it. "New homes are for the most part based on a set of conforming architectural styles," says Corbett. Prefer new? It can pay to buy into a development early, since builders usually raise prices as construction progresses (particularly if the homes prove popular). The risk is that there's no guarantee how the neighborhood will turn out. Source: CNN/Money

Laura Glass

The Real Estate Report 4/30/2014

It Sure Seems Like Spring

Even though there has been snow in some parts of the country very recently, it feels like springtime with regard to the economy. We continue to have some fairly positive economic news released. The releases have included a stronger than expected retail sales report and leading economic indicators for March. Any good news regarding consumer spending is good news for the economy as a whole. The news from the real estate sector we received last week was much less promising and again we wonder how much this news was affected by the weather.

This week is a very important week and will go a long way to let us know whether the cold winter slowdown is behind us. We start out with pending home sales then follow with consumer confidence and a meeting of the Federal Reserve and then towards the end of the week personal income and spending numbers are released. And that is just the warm up. After the private payroll data is release by ADP on Wednesday, the jobs report closes out the week.

Lately there has been no report more important than the release of the employment numbers for the month. With the Federal Reserve making their post-meeting announcement on Wednesday, personal spending data on Thursday and the employment report release on Friday, it could be a week with plenty of fireworks. Any one release could give us a surprise that could shake up the markets. At this point, the markets believe that the economy is waking up. We just might see if the economy awakens groggily or with plenty of vigor.

The 2013 State of Hispanic Homeownership Report, published by the National Association of Hispanic Real Estate Professionals, finds that Hispanics are expected to comprise 50 percent of all new home buyers by 2020. The U.S. Hispanic population accounted for an increase of 2.6 million owner households—or nearly 47 percent of all home ownership growth in the country between 2000 and 2013. The population of Hispanic people in the United States is growing rapidly and is a key indicator of housing demand, the report notes. The Hispanic population in the U.S. is currently about 53 million. Between now and 2050, that number is expected to grow 167 percent—compared to a 42 percent growth rate projected for the rest of the U.S. population. “This is a story of pent-up demand,” says Jason Madiedo, president of NAHREP. “Latinos are ready to buy homes now. Their biggest obstacle coming into today’s market isn’t credit; it’s lack of available housing. The readiness of this first-time buyer market represents a whole new purchase cycle that can drive recovery in local communities and put the housing recession behind us once and for all.” Source: RISMedia. Click Here For The Full Report.

The number of homes for sale is on the rise, a long-awaited welcome to home buyers who are finding more selection than last spring and less competition, according to realtor.com®’s National Housing Trend Report for March of the 146 markets it tracks. Inventories of for-sale homes on realtor.com® in March increased 9.5 percent higher than year ago levels, according to the report. The median list price is $199,900 – 5.3 percent higher than in March 2013. The median age of inventory has also risen – 22.9 percent above year ago figures to a median of 102 days on the market. “These figures suggest that the market is more balanced than it was in 2013, when a shortfall in available supply led to double-digit increases in many markets’ housing prices,” according to the realtor.com® report. “Having more homes on the market may mean more affordable prices for first-time and move-up buyers. Lack of inventory in 2013 led to intense competition, creating another barrier to home ownership.” Bidding wars were frequent last year and caused prices to rise and become out of reach to some first-time home buyers who could barely save for a down payment, says Steve Berkowitz, CEO of Move, Inc. “While inventory is still low, the continuing annual lift in the number of homes on the market that we’ve seen over the first months of 2014 is an indicator that buying conditions this year may be notably improved from the frenzied pace of last spring,” says Berkowitz. Source: realtor.com®

Both parties have to come together in a transaction, and real estate professionals sometimes find themselves wedged in the middle of buyer and seller disagreements. Some sellers may accuse the home buyers of being too pushy with their demands. Here are several ways that homebuyers have been annoying some sellers recently, including:

·         Disrespectful house visitors: Some buyers may not be respectful when touring a home, letting their child run wild or bounce on the furniture, cranking up the heat and air conditioning, or even using the restroom.

·         Submitting a long list of defects: Ron Phipps, principal with Phipps Realty in Warwick, R.I., and a former president of the National Association of Realtors®, says that buyers are doing themselves a disservice when submitting an offer with a long list of what’s wrong with the house. It makes sellers question why the buyers would want this place. Instead, Phipps recommends a gentler approach:

·         Too many visits: After buyers have committed to purchase a home, they want to make lots of visits to their future home, bringing the decorators, architects as well and entire family with them, says Mike Lubin, associate broker for Brown Harris Stevens in New York. The sellers may find the constant visits disruptive, however, as they’re busy packing and possibly doing repairs to meet a deadline.

·         Renegotiation: Buyers may agree on the price but then repeatedly demand concessions and discounts. The home inspection can be a culprit. For example, buyers may realize the furnace has about five good years left and then make a demand for a new furnace or monetary equivalent. “A realistic buyer knows everything’s not going to be perfect,” says Matt Laricy, managing partner with Americorp Real Estate in Chicago. Source: Bankrate.com 

Landmark Bank Mortgage

Real Estate Report 4/16/2014

 It is Finally Happening

For years the slow recovery was hampered by the existence of tighter credit. A vicious cycle was created when the recession caused consumer credit to worsen and at the same time banks tightened up on lending standards. For some time we have been predicting that lending standards in the real estate sector would not loosen up until two factors emerged. Factor one was the stability or recovery of real estate values. It makes sense that lenders would be shy about lending in a real estate sector in which the underlying asset was unstable.
Yet, the real estate markets recovered over the past few years without a significant improvement in lending standards. Why? Some blamed it on new legislation aimed at making lenders more responsible with regard to their lending. But most aspects of the legislation were not implemented until recently. In reality, there was a second aspect we cited over the past few years which has now come to fruition. For the past three years lenders were inundated with refinances because of record low rates. Now with rates still really low but a bit higher than they were, the refinance craze has abated.
It makes sense that lenders would not lower standards while they were overwhelmed with demand. Today, lending standards are loosening because lenders are hungrier. Many national sources for real estate loans have lowered their minimum credit score requirements. And we think that this will flow into other areas of lending such as cars and business loans. This is all part of building a virtuous cycle. Keep in mind that we are not looking for a return to the subprime era or anything close to that. The new legislation we cited makes sure lenders will be more careful. Underwriters are still scouring loans with a fine-tooth comb. But it is interesting that while lenders are implementing the new legislative standards, their requirements are getting somewhat less restrictive.

The Senate Finance Committee has passed a two-year retroactive extension of tax relief for households who’ve had home finance debt forgiven by a lender as part of a short sale or loan modification. “We applaud the Senate Finance Committee for approving a bipartisan compromise bill,” NAR President Steve Brown says. The legislation still needs to be passed by the full Senate and also by the House. The issue has been one of NAR’s top legislative priorities since 2007, when the association worked with lawmakers to enact the relief into law and also later to encourage them to extend the relief in 2008 and 2012. The relief expired at the end of last year, and unless the full Senate and House approve the extension, households will face the prospect that when they file their returns next year, they’ll pay tax on so-called phantom income, which is the amount of debt forgiven. Absent the provision, the tax law provides that such forgiven debt is income. “This is, at its core, an issue that’s all about fairness,” Brown says. “It is unfair to ask homeowners who are underwater on their home loan and who make the prudent decision to do a short sale instead of allowing their home to go into foreclosure to pay tax on the forgiven amount of the loan.” Brown says the tax hit encourages owners to walk away rather than sell their house, which hurts neighborhoods and the communities they’re in. The tax relief provided in the past has been one of Congress’ bipartisan success stories, and there’s a good chance an extension will pass Congress this year, too, analysts say. Some 350,000 households could be affected by the tax if relief isn’t extended, because that’s the number of households who sold their house last year as a short sale. “And we expect a large number of short sales this year,” says Brown. Source: Realtor.com

Vacation home sales rose strongly in 2013, while investment purchases fell below the elevated levels seen in the previous two years, according to the National Association of Realtors®. NAR’s 2014 Investment and Vacation Home Buyers Survey, covering existing- and new-home transactions in 2013, shows vacation-home sales jumped 29.7 percent to an estimated 717,000 last year from 553,000 in 2012. Investment-home sales fell 8.5 percent to an estimated 1.1 million in 2013 from 1.21 million in 2012. Owner-occupied purchases rose 13.1 percent to 3.7 million last year from 3.27 million in 2012. The sales estimates are based on responses from households and exclude institutional investment activity. NAR Chief Economist Lawrence Yun expected an improvement in the vacation home market. “Growth in the equity markets has greatly benefited high-net-worth households, thereby providing the wherewithal and confidence to purchase recreational property,” he said. “However, vacation-home sales are still about one-third below the peak activity seen in 2006.” Vacation-home sales accounted for 13 percent of all transactions last year, their highest market share since 2006, while the portion of investment sales fell to 20 percent in 2013 from 24 percent in 2012. Yun said the pullback in investment activity is understandable. “Investment buyers slowed their purchasing in 2013 because prices were rising quickly along with a declining availability of discounted foreclosures over the course of the year,” he said. "With a return to more normal market conditions, investors now have to evaluate their purchases more carefully and do their homework,” Yun added. The median investment-home price was $130,000 in 2013, up 13 percent from $115,000 in 2012, while the median vacation-home price was $168,700, up 12.5 percent from $150,000 in 2012. All-cash purchases remained fairly common in the investment- and vacation-home market: 46 percent of investment buyers paid cash in 2013, as did 38 percent of vacation-home buyers. Source: NAR

As the housing market and hiring continue to recover, consumers are making their home loan payments a priority again. A growing number of borrowers are paying off their home loans before their credit card debts, reversing a trend first seen in September 2008, according to a TransUnion study that examined the delinquency rates of borrowers with mortgages, auto loans and credit card debt. The delinquency rate for home loans fell to 1.71% in December, down from 3.32% in September 2008. Meanwhile, the rate of credit card delinquencies was 1.83% in December, down from 3.29% in 2008. After the housing bubble burst, many borrowers owed more on their homes than they were worth and stopped making home loan payments a priority. "As unemployment rose and home prices cratered, many borrowers chose to value their credit card relationships above their home loans," said Ezra Becker, vice president of research and consulting for TransUnion. "When people lose jobs they need credit cards as a source of liquidity." Yet, last September the delinquency rates began to shift to pre-recession norms -- home loan delinquencies fell to 1.79%, while credit card delinquencies came in at 1.86%, TransUnion found. One debt borrowers continue to prioritize over everything else is auto loans, mainly because they rely on their cars to get to work. In December, the delinquency rate on auto loans was 0.87%, compared with 1.65% in September 2008. Source: CNN/Money

Laura Glass at Landmark Bank