I was consulting on a community last month in the Sarasota market and found that the share of affordable new homes is shrinking significantly. The Target Market Area (TMA) for this particular analysis contained much of northern Sarasota County and southern Manatee County, including the large master-planned community Lakewood Ranch. We created an affordability index using income levels, ad valorem tax rates, interest rates, and insurance premiums in the TMA to determine buying power at different income levels.

The current estimated median household income in the Sarasota-Bradenton MSA, utilizing Census based data, is $46,899. By this estimate, households with 100% of the median income could purchase a home priced around $185,000. Those earning 120% of the median income ($58,206) could purchase a home priced around $220,000. In 2013, roughly 19% of all new homes sold in the TMA were priced under $220,000, and Metrostudy expects this share to shrink to 8% by 2020.

An affordability analysis using median income isn’t always the best measure for markets like Sarasota with a large population of retirees. The TMA, however, is made up of many family neighborhoods in Manatee County, and it does provide valuable insight into the affordability for traditional family buyers.

As the Baby Boomers are beginning to retire, creating a wave of active-adult demand, land and home values across the Sarasota market are increasing. In communities like Lakewood Ranch, the percentage of active-adult buyers has grown significantly recently. Some builders are reporting that as many as 70% of their buyers are active adults. Builders are catering to this demand by offering plans, amenities, and subsequently pricing that is focused on this active-adult segment more than the family buyer. These price increases and growing sales numbers are driving up land values in all areas of the Sarasota MSA. Undeveloped land in Sarasota County is currently trading between $25,000 and $35,000 per entitled single-family unit in many areas. You can see that once you add development costs it’s almost impossible to sell a new home for less than $250,000 in the current market.

Another major factor influencing the first-time buyer market, both in Sarasota and nationally, is the new FHA loan limits that went into effect on January 1, 2014. Manatee and Sarasota Counties had some of the biggest loan limit declines. In 2013, the FHA loan limit in both counties for single-family homes was $442,500, and in 2014 it dropped 36% to $285,200. With increased lending requirements following the bust, FHA insured loans have been valuable to first-time buyers with other debt and limited credit history. Rising home prices in the market are leaving few options for first-time buyers needing to finance their new home with an FHA insured mortgage. Other markets in Florida are suffering from these changes as well, including Orlando and Jacksonville, which had $80,000 decreases from 2013 limits.

With Baby Boomers driving demand and pricing for the foreseeable future, FHA loan limits decreasing, and interest rates continuing to rise, it appears that first-time demand will remain depressed in the Sarasota MSA. I believe that some of this demand will move to inland areas with cheaper land, which can already be seen in the strong closings numbers in the under $200,000 price segment in both Polk and Lake Counties in 2013. But does this mean it will just shift among markets, or are we experiencing a fundamental reduction in the first-time buyer market? Since these trends appear to be happening nationally, I think we could see this depressed first-time demand over the next few years in many markets beside Sarasota. The National Association of Realtors reported that first-time buyers made up only 27% of all home sales in December 2013, down from the 30-year average of 40%. However, I believe there will always be demand for first-time homes, and I expect this demand to return to more normal levels once economic indicators like consumer confidence and employment growth show sustained improvement.

By Austin Evans – May 19, 2014 – http://www.builderonline.com/housing-data/the-shrinking-first-time-buyer-market

Home prices rose 9 percent year-over-year for the first quarter of this year, according to FNC, Inc.’s Residential Price Index, which measures sales activity for non-distressed homes in the 100 largest metros in the country. On a monthly basis, prices rose 0.6 percent in March.

On an annual basis, Western states continue to lead the nation with drastic price gains. FNC reported a 40 percent rise in prices in the sand states over the past two years.

On the other hand, the Midwest has experienced very little price relief since the start of the recovery, according to FNC.

In the FNC 30-MSA Composite, Sacramento, California (26.8 percent); Riverside, California (21.8 percent); and Las Vegas (21.3 percent) posted the greatest price increases over the year in March.

Only two of the 30 cities posted price declines year-over-year in March: St. Louis (-0.5 percent) and Cleveland (-2.9 percent).

In addition to rising prices among non-distressed homes, FNC reported declining foreclosure sales and smaller discounts in asking prices. Foreclosure sales made up 12.6 percent of sales in April, down from 13.4 percent in March, according to FNC.

Additionally, asking price discounts in April averaged 2.0 percent, down from 2.6 percent in March.

Non-distressed sales are rising “moderately,” according to FNC.

Author: Krista Franks Brock May 16, 2014 www.dsnews.com

The good thing about economic recovery, even when it’s not living up to expectations, is that forecasters always remain optimistic for tomorrow.

Despite many beginning-of-the-year predictions about spring growth in the housing market falling flat, and despite a still chugging economy that changes its mind quarter-to-quarter, economists at the National Association of Realtors and other industry groups expect an uptick in the economy and housing market through next year.

The key to the NAR’s optimism, as expressed by the organization’s chief economist, Lawrence Yun, earlier this week, is a hefty pent-up demand for houses coupled with expectations of job growth—which itself has been more feeble than anticipated. “When you look at the jobs-to-population ratio, the current period is weaker than it was from the late 1990s through 2007,” Yun said. “This explains why Main Street America does not fully feel the recovery.”

Yun’s comments echo those in a report released Thursday by Fitch Ratings and Oxford Analytica that looks at the unusual pattern of recovery the U.S. is facing in the wake of its latest major recession. However, although the U.S. GDP and overall economy have occasionally fluctuated quarter-to-quarter these past few years, Yun said that there are no fresh signs of recession for Q2, which could grow about 3 percent.

A major key to housing growth, of course, is job growth. The U.S. overall has recovered nearly all of the eight million jobs lost to the Great Recession and, according to Yun, employment is expected to grow 1.6 percent this year and 1.9 percent next. Similarly, the GDP is on course to grow 2.2 percent this year and about 2.9 percent in 2015.

Eric Belsky, managing director of the JointCenter for Housing Studies at Harvard University, said that growth in the stock market and the recovery in housing, along with pent-up demand, are major factors driving the economy right now, leading economists like Yun and Belsky to suggest that housing will improve, just not on the schedule many other economists had expected.

One thing to keep in mind is that 2014’s spring housing sales figures are being compared to those from 2013, which saw impressive gains‒‒existing-home sales rose more than 9 percent to nearly 5.1 million last year‒‒after four years of sagging sales. Because of tight inventories and rising sales last year, the median existing-home price rose 11.5 percent to just over $197,000. Still, according to NAR, sales figures will likely decline about 3 percent over the rest of this year to just over 4.9 million, then trend up to more than 5.2 million in 2015.

According to Yun, home price growth is likely to moderate from more new home construction. “Based on our forecast for this year, the median home equity gain over three years is expected to be $40,000,” he said. “A gap between new and existing-home prices from rising construction costs shows that prices are well supported by fundamentals in most of the country.”

Housing starts have stayed below 1 million a year for the past six years, but need to reach the long-term average of 1.5 million to balance the market. “Because of the prolonged slowdown in construction, we now need 1.7 million housing starts per year to catch up,” Yun said.

The sluggish recovery in housing starts is greatly affected by the fact that construction costs are rising faster than inflation. Add to that labor shortages in the building trades, and the onerous financial regulations preventing small banks from giving construction loans to small local builders, and it’s no wonder why construction starts are behind schedule, Yun said.

Dennis McGill, director of research for Zelman & Associates in New York, offered some hope. McGill said that his firm’s most recent analysis of Census Data shows an average of only 720,000 housing starts annually from 2010 through 2013. “But our projections over the next five years exceed an average of 1.9 million,” he said. “We won’t ramp up to that level right away, but if you average housing starts for the entire period from 2010 to 2019, it would be about 1.44 million.”

McGill added that there is “a strong tailwind” to housing starts. “We’re starting to see capital come back to single family construction, which is very favorable,” he said.

Author: Scott Morgan May 16, 2014 www.DSNEWS.com

Kennesaw’s Ashford Capital Partners’ Matthew Riedemann brings you news that you can use.

For many potential homebuyers, obtaining a loan is difficult. Tight credit standards make it difficult to qualify for a loan and many buyers are unable to save up enough money to provide a substantial down payment. That knocks a lot of potential buyers out of the market.

One way that a buyer can make it easier to get the necessary credit from a lender is agree to purchase mortgage insurance. That allows for the borrower to put up a smaller down payment to obtain the loan and provides the lender with security in case the borrower defaults.

That’s crucially important for younger buyers, especially those that are struggling to save because of student loans or the high cost of rent.

One way that buyers can obtain mortgage insurance is through the Federal Housing Administration, but the FHA’s high MI premiums have come under fire recently from the National Association of Realtors and others. In April, NAR President Steve Brown wrote to FHA Commissioner Carol Galante, saying, “NAR urges FHA to lower the annual mortgage insurance premiums and eliminate the requirement that mortgage insurance is held for the life of the loan.”

Galante responded and said that now is not the time to roll back the premiums and that the FHA’s MI rates are “priced appropriately.”

Those factors, plus a favorable shift in demographics could lead to growth opprotunities for private mortgage insurers, according to Bradley Shuster, president and CEO of NMI Holdings, Inc. (NMIH).

NMIH is the parent company of National Mortgage Insurance Corp., which issued its first mortgage insurance commitments a year ago.

“We expect that the recovery in the housing market and the resulting increase in purchase originations mean that private MIs should see a boost in business,” Shuster told investors this week.

“Based on median home prices across the country, research shows that it takes the average first time home buyer 14 years to save a 20% down payment for a home,” he said. “By providing the credit enhancement needed for lower down payment mortgages, private MI can reduce the time it takes a borrower to save a down payment to under six years.”

Shuster said that the population of younger buyers will be increasing in the next decade. He said that private mortgage insurers will be well positioned to capitalize on that growth.

“First-time homebuyers represent a critical segment of the home purchase market, and a considerable opportunity for private MIs,” Shuster said. “Approximately 33% of all GSE-securitized purchase mortgages in the first half of 2013 were first time homebuyers. Statistics show that the average age of a first-time homebuyer is 34 years old, and an increasing number of Americans will turn 34 nearly every year over the next decade. In fact, over 40 million Americans will reach that age in the next 10 years.”

While overall mortgage originations have decreased, the rate of purchase mortgages is increasing and refinances are dropping. “MI penetration is traditionally four times higher in purchase mortgages than in refinances,” Shuster said.

And with purchase originations expected to hit the highest level since 2008, private mortgage insurers are about to be in prime position to reap the benefits.

According to Shuster’s presentation, private mortgage insurance made up 38% of the total mortgage insurance industry in the fourth quarter of 2013. That’s nearly three times as much as it was in 2009, when private MI was only 15% of the market. In fact, private MI has been on a steady climb for the last three years.

Shuster told investors that the growing demand is going to require more capital. Shuster said that National MI estimates that the industry requires $1.5 billion to $2.1 billion of additional capital each year.

Despite Galante’s statement, the FHA announced a new program this week that offers discounts on its MI premiums if the buyer attends housing counseling.

It appears that the battle between the FHA and private mortgage insurers is about to get a lot more interesting.

The report found one in every 1,137 U.S. housing units with a foreclosure filing during the month.

Although April saw a decrease in overall foreclosure activity for the month, bank repossessions increased 4 percent from March. REO properties, which totaled roughly 30,000 in April, are still down 14 percent from a year ago.

“The rise in bank repossessions in many states is a sign that those markets are working through the final remnants of foreclosures left over from the recent housing crisis,” said Daren Blomquist, VP at RealtyTrac. “Many of these bank-owned homes are bottom-of-the-barrel properties in terms of location or condition, but they will provide some much-wanted inventory of homes for sale in some markets in the coming months. Investors and other buyers willing to do more extensive rehab will likely be best-suited for these incoming REOs.”

Foreclosure auctions scheduled in April also fell, down 3 percent from the previous month and down 21 percent from a year ago. Foreclosure auctions have decreased annually for 41 consecutive months.

New foreclosure starts declined nationally, but are up from a year ago in 16 states. Nationally, a total of 54,513 U.S. properties started the foreclosure process, down 2 percent from the previous month and down 22 percent from April 2013.

States with the top foreclosure rates include Florida, Maryland, Delaware, Indiana, and New Jersey. Florida accounts for 11 of the top 20 metros in foreclosure rates.

Bank repossessions increased from the previous month in 26 states and were up from a year ago in 16 states, including New York (142 percent), Oregon (91 percent), New Jersey (58 percent), Illinois (55 percent), Indiana (52 percent).

Author: Colin Robins May 15, 2014 – dsnews.com

With 2014 nearing its halfway point, a broad spectrum look at more than 380 markets nationwide confirms home prices jumped 11.3 percent in 2013’s final quarter compared to the year prior.

CoreLogic released Tuesday its own quarterly Case-Shiller Indexes, assembled using the company’s proprietary data supplemented with statistics from the Federal Housing Finance Agency (FHFA). The analysis differs from the monthly S&P/Dow Jones Case Shiller Indices in that it covers a wider range of markets over a different time frame.

While price percentages nationwide were up by double-digits in Q4, seven cities managed to shoot up into the 20 percent range year-over-year, with Las Vegas leading at 25.6 percent growth. The remaining six cities were all in California: Riverside (+23.8 percent), Oakland (+23.3 percent), Sacramento (+23.0 percent), Los Angeles (+20.3 percent), San Jose (+20.1 percent), and San Francisco (+20.0 percent).

The sharp increase comes as no surprise for the region, which has suffered from low inventory levels throughout the recovery.

“Limited construction of new homes and low inventories of existing homes for sale contributed to the jump in prices,” said Dr. David Stiff, principal economist for CoreLogic Case-Shiller. “Developers remain cautious about building too many new houses until they see stronger demand in their markets.”

Additionally, prices climbed up to new peaks in a number of metros, including Houston, Dallas, Denver, Honolulu, and Pittsburgh.

“These cities have never achieved price levels quite this high, not even in the record year of 2006,” Stiff said.

Even with so many markets remaining hot, CoreLogic is among those industry analysts calling for a drop-off in price gains this year. Through December 2014, the company predicts price appreciation will slow to 5.3 percent nationally, though that still comes in above the long-term annual average of 4.5 percent.

“For the remainder of 2014, investor demand and sales of foreclosed properties should drop off quickly. Traditional buyers are returning slowly to the market, but cannot replace demand from investors who led the market in recent years,” Stiff said.

Luxury home builder Toll Brothers was named BUILDER magazine’s Builder of the Year during proceedings of an annual awards program at BUILDER’s Housing Leadership Summit yesterday in Laguna Nigel, Calif. The Builder of the Year, BUILDER’s highest honor each year, is recognized for its excellence in successful business strategy, its achievements, and its corporate leadership.

Since Even while weathering the recession, Horsham, PA-based Toll Brothers has transformed itself into a national multi-threat real estate power brand, with a complement of suburban, closer-in, and urban options for affluent home buyers and renters. Led by CEO Doug Yearley, the company’s success stems from its ability to raise capital, acquire land, and create value in new residential communities.

Noteworthy among Toll Brothers’ achievements in 2013, in November it announced it won the Shapell family’s selection as winning bidder for Shapell Industries’ residential land and home building operations for $1.6 billion. Completed on February 5, 2014, the purchase includes approximately 5,200 home sites in established coastal California communities in the San Francisco Bay area, metro Los Angeles, Orange County and the Carlsbad market.

“The company’s up-market price-point, lifestyle segmentation positions, and its best-of-breed execution set it apart from competitors in production home building and development as one of housing’s most powerful and promising brands,” said BUILDER editorial director John McManus in presenting the award. “Toll Brothers one day will be a globally recognizable luxury housing and hospitality trademark along the lines of Four Seasons or Ritz-Carlton.”

The Builder of the Year is chosen from the ranks of the BUILDER 100 rankings produced by Builder, which is featured in the May 2014 issue of BUILDER magazine and on BuilderOnline.com.

Also, three other Builder 100 companies received honors yesterday at HLS, include Aliso Viejo, Calif.–based New Home Company and Matthews, N.C.-based Bonterra Builders in the private builder category and Scottsdale, Ariz.–based Taylor Morrison in the public builder category.

THE NEW HOME CO.: The five-year-old New Home Co. expanded an astounding 192 percent last year in advance of its January Wall Street debut, in which it raised $86 million. Its success is fueled by smart land strategies that focus on markets where buyers will pay a premium for the firm’s thoughtful architecture and innovative floor plans. The company is ranked No. 93 in closings on the Builder 100 list, moving up from No. 154 the previous year. “The New Home company, our fastest-growing private builder of 2013, has since joined the ranks of public builders, but the company’s unwavering commitment to customer service and operational excellence is not changing,” notes BUILDER‘s McManus. “The firm is now poised for monumental growth.”

BONTERRA BUILDERS: This rising star in the building industry has made a name for itself by offering quality homes that appeal to move-up buyers. The company’s diverse product line features something for every family at a variety of price points, from condos in the $300s to $1 million single-family homes. The company is ranked at No. 124 on the Top 100/Next 100 list.

“When buyers come through the door of a Bonterra home, they instantly recognize the company’s dedication to high-quality construction, finishes, and product selection,” McManus says. “It separates them from the national public builders they compete with.”

TAYLOR MORRISON: The past several years have been eventful for Taylor Morrison, which builds in the U.S. as Taylor Morrison and Darling Homes, and in Canada as Monarch Homes. During the recession, while other builders were contracting, Taylor Morrison purchased Texas-based Darling Homes. Then in April 2013, Taylor Morrison raised $628 million in an initial public offering that was buoyed by record-low mortgage rates and rising sales prices. The company ranked No. 8 on the Builder 100 for 2013.

In presenting the award, McManus credited much of Taylor Morrison’s success to its president and CEO, Sheryl Palmer. “Palmer and her expert team organized two companies into a unified one with staffs working together efficiently and effectively,” says McManus. “Plus, they navigated a declining market, a private equity purchase, and a public offering.”

Source:  Builder Online 5/13/2014