Markets & Economy

Real estate daily market update: October 26, 2017

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Most recent market news

Thursday, October 26

Freddie Mac Primary Mortgage Market Survey

  • 30-year fixed-rate mortgage (FRM) averaged 3.94 percent with an average 0.5 point for the week ending October 26, 2017, up from last week when it averaged 3.88 percent. A year ago at this time, the 30-year FRM averaged 3.47 percent.
  • 15-year FRM this week averaged 3.25 percent with an average 0.5 point, up from last week when it averaged 3.19 percent. A year ago at this time, the 15-year FRM averaged 2.78 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.21 percent this week with an average 0.4 point, up from last week when it averaged 3.17 percent. A year ago at this time, the 5-year ARM averaged 2.84 percent.

“The 10-year Treasury yield surged this week, jumping 12 basis points,” said Sean Becketti, chief economist at Freddie Mac. “The 30-year mortgage rate followed suit, increasing 6 basis points to 3.94 percent. Today’s survey rate is the highest rate in three months.”

News from earlier this week

Tuesday, October 24

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CoreLogic releases Southern California housing data

  • A total of 20,956 new and resale houses and condos sold in September 2017 in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, down 12.9 percent month over month from 24,055 sales in August 2017 and down 1.7 percent year over year from 21,325 sales in September 2016.
  • September 2017 sales were the lowest for the month of September since 2014 when 18,874 homes sold. Since 1988, the average change in sales between August and September is a decrease of 9.4 percent.
  • September sales have ranged from a low of 12,455 in 2007 to a high of 37,771 in 2003, and September 2017 sales were 10.5 percent below the September average of 23,422 sales since 1988 when data for this report begins (data start dates vary by county).
  • In September 2017, sales of newly built homes – detached houses and condos combined – were 44.4 percent below the long-term September average. The resale market, however, is closer to its historical average with September 2017 resales coming in 5.1 percent below the September average. Ignoring the 2003-2006 housing boom that was fueled by risky home loans, September 2017 resales were 2.3 percent below the month’s average.
  • The median price paid for all Southern California homes sold in September 2017 was $505,000, up 1 percent month over month from $500,000 in August 2017 and up 9.8 percent year over year from $460,000 in September 2016.
  • The average change in the median sale price between August and September since 1988 is a decrease of 0.6 percent, and on a year-over-year basis the median has risen for 66 consecutive months, of which the last 40 have been single-digit gains. The September 2017 median matched the peak median of $505,000 reached in April, May and July of 2007; however, when the median sale price history is adjusted for inflation, the September 2017 median remained 12.9 percent below the peak.
  • Home sales of $500,000 or more accounted for 51.3 percent of all sales in September 2017, up from 50.5 percent in August 2017 and up from 44 percent in September 2016.
  • The number of homes that sold for $500,000 or more in September 2017 rose 14.8 percent compared with September 2016, and sales below $500,000 fell 14.3 percent over the same period.
  • Sales of $800,000 or more increased 16.9 percent year over year and sales of $1 million or more increased 18.9 percent. At the other end of the market, sales below $200,000 fell 28.8 percent in September 2017 compared with September 2016.

“The Southern California median sale price’s climb back to the peak it reached more than a decade ago reflects the region-wide strengthening of home prices, which has boosted homeowner equity and helped spur consumer spending and economic growth,” said CoreLogic research analyst Andrew LePage. “In inflation-adjusted terms, however, the region’s median last month was still almost 13 percent below its 2007 peak.

“Also, Southern California’s return to its record $505,000 median sale price doesn’t mean all of the region’s homes are worth as much as when values peaked at the top of the last real estate cycle. Prices in some pockets of the region, especially inland, have yet to return to peak levels from more than a decade ago,” he added.

C.A.R.: California pending home sales stall for third straight month in September

  • Year-over-year statewide pending home sales dropped in September on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* declining 6.0 percent from 127.7 in September 2016 to 120.0 in September 2017. California pending home sales increased on a monthly basis, rising 2.5 percent from the August index of 117.0.
  • Pending home sales have declined on an annual basis for eight of the last nine months so far this year. After a solid run-up of closed sales in May, June, and August, continued housing inventory issues and affordability constraints may have pushed the market to a tipping point, suggesting the pace of growth will begin to slow in the fall.
  • All of the major regions recorded a decrease in pending sales from the previous year, with the San Francisco Bay Area experiencing the largest drop in pending sales, falling 10.8 percent on an annual basis. San Mateo, Santa Clara and Monterey counties were all down in double-digits of 22.4 percent, 23.5 percent, 16.9 percent, respectively. Pending sales in San Francisco County inched up 2.8 percent.
  • Pending home sales were down 7.1 percent from the previous year in Southern California. Los Angeles, Riverside, and San Diego counties registered lower annual pending sales of 8.0 percent, 13.4 percent, and 11.5 percent, respectively. Orange County experienced its first year-to-year pending sales decrease (2.8 percent) in six months, and San Bernardino County posted its first annual decline (11.6 percent) in four months.
  • The Central Valley region experienced a nominal 0.6 percent annual pending sales decline, led by a 16.8 percent annual decrease in Sacramento County, while Kern County recorded a 5.2 percent decrease from last September.
  • C.A.R.’s Market Velocity Index – home sales relative to the number of new listings coming on line each month to replenish that sold inventory, or market indicator of future price appreciation – suggests that there continues to be upward pressure on home prices through the fall. Home sales continue to outstrip new listings coming online to restock sold units.
  • The Market Velocity Index dipped from 53 to 52, implying that there were 52 percent more homes sold than new listings, meaning the supply of homes available for sale continued to drop.

Year-to-year change in Pending Sales by county/region

Monday, October 23

Freddie Mac October 2017 Outlook: Hurricane season puts pressure on housing

  • The recent hurricanes are estimated to have damaged or destroyed over 270,000 homes, with more than 15,500 homes destroyed in Houston alone. We expect this to lead to a growth in demand for housing in nearby areas not affected by the hurricanes as families look to relocate. This will lead to an increase in house prices in those areas. The already-tight supply of homes was exacerbated by the hurricanes, with total home sales for August at a weak 5.9 million units.
  • It is estimated that mortgage delinquencies could rise 16 percent in hurricane-affected areas. As many as 300,000 borrowers could become delinquent (30 days past due), and another 160,000 could become seriously delinquent (90 days past due). Freddie Mac has suspended foreclosures and evictions in the wake of the hurricanes.
  • Texas was already having trouble filling construction positions, with 69 percent of contractors in Texas finding it hard to fill positions before the storm hit. It is estimated that the Houston metro area alone could need as many as 20,000 construction workers to handle the volume of repair and reconstruction work.

Freddie Mac

Freddie Mac

“Texas and Florida together represent 24 percent of the total housing starts in the U.S. Housing units impacted by the hurricanes are a fraction of the total starts in Texas and Florida, so we do not expect a huge national impact,” said Sean Becketti, chief economist at Freddie Mac. “However, the hurricanes won’t help with tight inventories. Building activities in the hurricane-affected areas may slow down as labor and capital gets drawn into rebuilding.”

Email market reports to press@inman.com.