Archive July 28, 2020

Existing-Home Sales Climb RECORD 20.7%

June 2020, Existing-home sales rebounded at a record pace in June, showing strong signs of a market turnaround after three straight months of sales declines caused by the ongoing pandemic, according to the National Association of Realtors®. Each of the four major regions achieved month-over-month growth, with the West experiencing the greatest sales recovery.

Total existing-home sales,1 https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 20.7% from May to a seasonally-adjusted annual rate of 4.72 million in June. Sales overall, however, dipped year-over-year, down 11.3% from a year ago (5.32 million in June 2019).

“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” said Lawrence Yun, NAR’s chief economist. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”

The median existing-home price for all housing types in June was $295,300, up 3.5% from June 2019 ($285,400), as prices rose in every region. June’s national price increase marks 100 straight months of year-over-year gains.

Total housing inventory3 at the end of June totaled 1.57 million units, up 1.3% from May, but still down 18.2% from one year ago (1.92 million). Unsold inventory sits at a 4.0-month supply at the current sales pace, down from both 4.8 months in May and from the 4.3-month figure recorded in June 2019.

Yun explains that significantly low inventory was a problem even before the pandemic and says such circumstances can lead to inflated costs.

“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply.”

Yun’s concerns are underscored in NAR’s recently released 2020 Member Profile, in which Realtors® point to low inventory as being one of the top hindrances for potential buyers.

Properties typically remained on the market for 24 days in June, seasonally down from 26 days in May, and down from 27 days in June 2019. Sixty-two percent of homes sold in June 2020 were on the market for less than a month.

First-time buyers were responsible for 35% of sales in June, up from 34% in May 2020 and about equal to 35% in June 2019. NAR’s 2019 Profile of Home Buyers and Sellers – released in late 20194 – revealed that the annual share of first-time buyers was 33%.

Individual investors or second-home buyers, who account for many cash sales, purchased 9% of homes in June, down from 14% in May 2020 and 10% in June 2019. All-cash sales accounted for 16% of transactions in June, down from 17% in May 2020 and about equal to 16% in June 2019.

Distressed sales5 – foreclosures and short sales – represented 3% of sales in June, about even with May but up from 2% in June 2019.

“It’s inspiring to see Realtors® absorb the shock and unprecedented challenges of the virus-induced shutdowns and bounce back in this manner,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco, Calif. “NAR and our 1.4 million members will continue to tirelessly work to facilitate our nation’s economic recovery as we all adjust to this new normal.”

According to Freddie Mac, the average commitment rate(link is external) for a 30-year, conventional, fixed-rate mortgage decreased to 3.16% in June, down from 3.23% in May. The average commitment rate across all of 2019 was 3.94%.

Single-family and Condo/Co-op Sales

Single-family home sales sat at a seasonally-adjusted annual rate of 4.28 million in June, up 19.9% from 3.57 million in May, and down 9.9% from one year ago. The median existing single-family home price was $298,600 in June, up 3.5% from June 2019.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 440,000 units in June, up 29.4% from May and down 22.8% from a year ago. The median existing condo price was $262,700 in June, an increase of 1.4% from a year ago.

“Homebuyers considering a move to the suburbs is a growing possibility after a decade of urban downtown revival,” Yun said. “Greater work-from-home options and flexibility will likely remain beyond the virus and any forthcoming vaccine.”

Regional Breakdown

In a complete reversal of the month prior, sales for June increased in every region. Median home prices grew in each of the four major regions from one year ago.

June 2020 existing-home sales in the Northeast rose 4.3%, recording an annual rate of 490,000, a 27.9% decrease from a year ago. The median price in the Northeast was $332,900, up 3.6% from June 2019.

Existing-home sales increased 11.1% in the Midwest to an annual rate of 1,100,000 in June, down 13.4% from a year ago. The median price in the Midwest was $236,900, a 3.2% increase from June 2019.

Existing-home sales in the South jumped 26.0% to an annual rate of 2.18 million in June, down 4.0% from the same time one year ago. The median price in the South was $258,500, a 4.4% increase from a year ago.

Existing-home sales in the West ascended 31.9% to an annual rate of 950,000 in June, a 13.6% decline from a year ago. The median price in the West was $432,600, up 5.4% from June 2019.

The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries. Talk To Tammy, and see what the best options are for you with selling your house or finding the right home. 636-931-9100, Tammy Fadler

REALTORS® Say Market Is in Recovery Phase of Pandemic as Buyers Return

After enduring months of setbacks brought on by the coronavirus pandemic, a new survey from the National Association of Realtors® shows that more than nine in 10 of its members believe they are in the process of recovering as many states start to reopen their economies.

NAR’s 2020 Market Recovery Survey polled agents about their respective residential and commercial real estate markets, finding that 92% of respondents stated that a portion of their buyers have either returned to or never left the market. Among those members, 18% reported that their buyers never left the market at all, and 9% said that all of their buyers have already returned to the market. Small towns and rural areas were more likely to report that there had been no pause in buyer activity and were also more likely to report a stronger return of buyers to the market.

“The residential market has seen a swift rebound of activity as numerous states have begun to ease mandatory stay-at-home orders,” said Lawrence Yun, NAR’s chief economist. “Many potential buyers and home sellers were kept at bay in the initial stages of the coronavirus outbreak, but Realtors® nationwide were able to quickly pivot, embracing technology and business practices to ensure the home buying process continued in a safe manner.”

In terms of seller activity, 89% of Realtors® said a share of their clients have either returned to the market or never delisted their property. Roughly one-quarter of respondents, or 24%, indicated that their sellers never left the market. Suburban and urban markets are more likely to have reported fewer sellers returning to the market compared to small and rural markets.

While the housing market as a whole was understandably caught off-guard by the pandemic, the NAR survey found that many members are now prepared should another surge of the coronavirus occur. Thirty-nine percent of those polled said they are at least somewhat prepared for a second wave of the disease, with 19% reporting they are “very prepared.” Moreover, of those who believe there might be a resurgence, 30% said they are more prepared now, as they know what to expect. Twenty-seven percent indicated that they are concerned enough that they have changed their business practices in some form in order to be prepared for another bout of the virus.

Of those who are currently working with buyers, 54% said that their buyers’ timelines to find and purchase a home has remained the same, while 27% report that their clients now express more urgency about buying a home.

Among NAR membership currently working with sellers, two-thirds said that their sellers’ timelines to sell have remained the same. Twenty-three percent reported sellers who feel more urgency to sell their property. Less urgency was cited more frequently in urban areas and in suburban areas or small towns and rural markets.

“A number of potential buyers noted stalled plans due to the pandemic and that has led to more urgency and a pent-up demand to buy,” said Yun. “After being home for months on end – in a home they already wanted to leave – buyers are reminded how much their current home may lack certain desired features or amenities.”

In some cases, respondents reported changes in their buyers’ preferences. Twenty-four percent of Realtors® indicated having buyers who shifted the location of where they intend to buy a house due to the coronavirus. Among those who noted having buyers change their intended location, 47% stated that their buyers prefer to purchase housing in the suburbs, 39% cited rural areas, and 25% cited smaller town markets.

Thirty-five percent of NAR members surveyed said buyers have modified at least one home feature that is important to them because of the coronavirus outbreak. The most common home features cited as increasingly important are home offices, spaces to accommodate family members new to the residence – older adult relatives, newborns or new pets – larger homes with more personal space and bigger yards that would allow for growing foods.

Also, in response to the pandemic, 13% said that homebuyers changed their home type of choice from multi-family to single-family. This shift is highest in urban markets at 16%. Thirty-three percent answered that buyers have adjusted commuting needs since the pandemic began, with 22% less concerned with their commute and 7% wanting to live close to bike trails that connect them to work. Just 5% responded that they now have a greater concern about parking and more concern for a location that affords the ability to drive to work.

On the commercial real estate front, some members indicated that they are contending with hardships, as only 19% of property managers said they have been receiving all rent payments on time, and only 36% of individual landlords have received timely payments.

Seventy-four percent have reported that leases have been terminated or said tenants have needed to delay rent payments, with the greatest shares (56%) happening in non-essential retail establishments, followed by the office sector at 38%. However, grocery stores are faring well, the least cited of the commercial properties at 4%.

“Consumers have been forced to move away from buying in stores and are now doing much more shopping from home,” said Yun. “Unfortunately, this has come at the detriment of commercial property owners, but these circumstances could be an opportunity for growth in the industrial warehouse market, as Americans have become more reliant on home delivery services.”

As economies reopen, 44% of NAR members say they expect the demand for industrial properties to increase, and 35% expect the demand for multi-family properties to increase. In comparison, 72% expect the demand for non-essential retail to decline and 66% said they expect office usage to decrease.

The biggest concern for small businesses, according to 83% of commercial members, is a lack of profitability due to a decrease in customers. A majority of Realtors® also expressed concern with the following: a resurgence of the outbreak forcing another shutdown (66%), protecting the health of employees, (61%) and challenges with implementing social-distancing measures (59%).

The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.

If you are ready to list your house or need help finding the right home for you and your family, Talk To Tammy 636-931-9100!

Commercial Real Estate Investments In Recessionary Times

The longest bull market in history came to an end in March 2020. A pandemic-driven economic shutdown plunged us into a recession. And while we all know what a recession means for the stock market, one has to wonder what it means for commercial real estate.

To better understand the performance of commercial real estate, let’s look to the past. Over the last 40 years, there have been five distinct recessions. CBRE evaluated the performance of multifamily, industrial and office real estate during the last two of those recessions (2001 and 2008-09).

2001 Recession

During the 2001 recession, CBRE found that multifamily outperformed office and industrial real estate. Any negative growth trends seen during the recession were more prolonged in industrial and office while minimized in multifamily.

Additionally, the post-recession recovery was far more robust for multifamily than it was for those other two commercial real estate asset classes.

2008-2009 Recession

When CBRE looked at the Great Recession, it found the exact same picture: Not only did multifamily outperform industrial and office real estate; it also surpassed retail real estate.

Whether you look at negative growth trends, return to prior peak or growth past prior peak, it’s not even close. Commercial multifamily real estate far outperformed the other commercial real estate asset classes.

The superior performance of multifamily in the last two recessions is interesting, but let’s go back further and see how it performed in older recessions.

NCREIF Property Index

The National Council of Real Estate Investment Fiduciaries (NCREIF) has been tracking the performance of commercial real estate since the fourth quarter of 1977. The NCREIF Property Index (NPI) is a composite index that reflects quarterly property returns for apartment, hotel, industrial, office and retail real estate. It’s the most commonly quoted performance measure for institutionally held private real estate.

In 1998, a research paper entitled “Twenty Years Of The NCREIF Property Index” (download required) was published. That study looked at the performance history of NPI from 1978 to 1997. This time period encompasses the other three recessions that occurred over the last 40 years.

What it found was that during that 20-year period, multifamily real estate outperformed the other commercial real estate asset classes. In fact, it was the only commercial real estate asset class to average a double-digit annual return over that period.

Not only did the research show that multifamily had the best overall annual return; it also had the best risk-adjusted return (Sharpe ratio) with a low standard deviation.

Multifamily Real Estate

Certainly, there have been years in which other commercial real estate asset classes have outperformed multifamily. However, over the long haul, apartments have consistently been the top performer.

In February 2018, the National Multifamily Housing Council (NMHC) authored a study titled “Explaining The Puzzle of High Apartment Returns.” It compared the performance history of apartment, industrial, retail and office real estate from 1987 to 2016.

What it found, yet again, was that over all long-term holding periods (three, five, seven, 10 or 15 years), apartments had the highest returns, best Sharpe ratio and lowest standard deviation. In other words, apartments consistently outperformed the other commercial real estate asset classes.

Covid-19 And Commercial Real Estate

Multifamily’s superior performance history both in good times and in bad is well established. However, the global pandemic caused by Covid-19 is far from your average recession. And while the history books are yet to be written about its economic effects, we do have the first 90 days that we can evaluate.

Take, for example, rent collections for apartments. NMHC publishes a monthly rent tracker. While many expected a large number of renters to forgo their rental payment obligations, it simply hasn’t materialized. Data from over 11 million apartment units shows that 94.6% and 95.1% of renters made their monthly payments in April and May, respectively. That is only minimally down from the same time period in 2019 (97.7% in April and 96.6% in May).

In contrast, consider the year-over-year declines for hotels (paywall). Statista reports that the week ending May 30, 2020, saw an average occupancy rate of 36.6%, an average daily rate of $82.94, and revenue per available room (RevPAR) of $30.34. That’s a year-over-year decline of 43.2%, 33.3%, and 62.1%, respectively.

In fact, as of May 2020, more than a third of hotel CMBS loans and a quarter of retail CMBS loans are currently on servicer watchlists due to distress.

Conclusion

Time and time again, commercial multifamily real estate has proved its mettle as a top-performing asset class. A big part of its recession-resistant nature lies in the resilience of housing and the basic need for shelter.

This insulates apartments to a large degree from the ups and downs of the market cycles. With the low correlation to the market, strong performance history and recession-resistant nature of apartments, it’s not surprising that many people see commercial multifamily real estate as an essential component of their portfolios.  Be sure to use a Realtor with knowledge of the area and who can give you good advice based on knowledge and experience.

If you have any questions about the real estate market, investment opportunities and if you want to sell your house or need help finding the right home for you – Talk To Tammy, 636.931.9100 !

SELLERS ITCHING TO PUT THEIR HOUSES ON THE MARKET AS COUNTRY RE-OPENS

With most of the country’s stay-at-home orders having been lifted and the country slowly continues to re-open, the real estate market is ready to take off like a Spacex rocket!

According to a recent survey of its membership from the National Association of REALTORS® more than 3-in-4 potential sellers have been preparing to sell their homes as soon as the restrictions are lifted and half of them have been working on do-it-yourself home improvement projects to help speed up that sale.“WHETHER IT’S A HOME OFFICE, OR A BIGGER YARD, OR MORE SPACE TO ACCOMMODATE MORE PEOPLE BEING AT HOME MORE FREQUENTLY, THE SWITCH IN IDEOLOGY FOR HOMEBUYING FROM SMALLER SPACES TO LARGER SPACES HAS ALREADY BEGUN.”

“After a pause, home sellers are gearing up to list their properties with the reopening of the economy,” said NAR Chief Economist Lawrence Yun. “Plenty of buyers also appear ready to take advantage of record-low mortgage rates and the stability that comes with these locked-in monthly payments into future years.”

According to the survey, which was conducted in May, 77 percent of the potential sellers are gearing up to list their property as soon as possible.

Other interesting results from the survey included 73 percent of those sellers who actually had their home listed at the time of the survey were not willing to reduce the price, despite the economic downturn.

Additionally, 13 percent of buyers have changed at least one home feature that is important to them as a result of COVID-19, with most buyers indicating the desire for more space as more important because of the pandemic.

Whether it’s a home office, or a bigger yard, or more space to accommodate more people being at home more frequently, the switch in ideology for homebuying from smaller spaces to larger spaces has already begun.

Related to that, 5 percent of the REALTORS® surveyed said their clients have shifted their focus for a new home from urban areas to suburban or rural ones as social distancing is expected to become a regular part of the lexicon and not just a passing fad.

If you need help finding a new home or want to list your house, Talk To Tammy 636.931.9100