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Ryan Parks' Blog

By Ryan Parks | Agent in Chicago, IL
  • Single-Family Housing Starts Remain Strong

    Posted Under: Home Buying, Home Selling  |  August 30, 2012 1:11 PM  |  153 views  |  1 comment


    Housing StartsThe market for newly-built homes remains strong.

    As reported by the U.S. Census Bureau, July featured 502,000 single-family housing starts nationwide on a seasonally-adjusted, annualized basis, marking the fourth straight month during which single-family starts posted north of one-half million.

    The last time this milestone occurred was in the four months ending April 2010 — the last month of that year’s federal home buyer tax credit.

    A “housing start” is a home on which construction has started and the rise in single-family housing starts is yet one more signal to buyers in Chicago and nationwide that the housing market has likely put its worst days behind it.

    Home builders, it appears, agree with that sentiment.

    Last week, the National Association of Homebuilders reported builder confidence to be at a 5-year high. Sales levels have been growing since January and builders expect the next six months to be blowout.

    One of the main drivers of today’s new construction market is rising rental costs throughout many U.S. markets. It has helped to create an influx of new home buyers at a time when low mortgage rates have helped to keep new homes affordable.

    As compared to one year ago, today’s home affordability is high.

    • July 2011 : A $1,000 mortgage payment afforded a loan size of $196,200
    • July 2012 : A $1,000 mortgage payment afforded a loan size of $223,000

    That’s a 13.7% purchasing power increase in just twelve months — one reason why builders report buyer foot traffic through new construction at pre-recession levels.

    The ability for buyers to access low downpayment mortgage programs is helping home sales, too.

    The FHA offers a 3.5% down payment program and today’s home buyers are taking advantage. FHA mortgages now account for an estimated one-third of purchase money mortgages, and the VA and USDA are gaining market share, too, with their respective 100% financing program for certain qualified buyers.

    With low rates, low downpayments and soon-to-rise home prices, it’s a good time to be a home buyer. If you’ve been shopping new construction, consider going under contract soon. As mortgage rates and prices rise, your personal home affordability falls.

  • New Home Sales Slow After Fast Start To 2012

    Posted Under: Home Buying, Home Selling  |  August 1, 2012 3:36 AM  |  165 views  |  No comments


    New Home Supply 2010-2012

    The number of newly-built homes sold slipped 8 percent in June from the month prior, says the U.S. Census Bureau in its latest New Home Sales report. The June data shows 350,000 homes sold nationwide on a seasonally-adjusted, annualized basis.

    The home sale tally fell short of Wall Street expectations but the Census Bureau revised higher its previously-released results for March, April and May by a collective 33,000 units. This left the June New Home Sales report as the weakest of the last five months, yet still stronger than the 21 months preceding February.

    In other words, despite retreating from May, the June New Home Sales data was still quite strong. As compared to June of last year, sales of newly-built homes are higher by 15% and the national inventory of new homes for sale is down to 144,000 units.

    This marks a 13 percent inventory reduction in just twelve months.

    At the current sales pace nationwide, the complete stock of new homes would “sell out” in 4.9 months, a noteworthy data point because analysts believe that a 6.0-month supply of homes marks a market in balance. Home supplies of below 6.0 months suggest a “seller’s market” where sellers have pricing power and excess leverage in negotiations. 

    Home supplies have been south of 6.0 months since October 2011. This is the same month that marked a shift with other housing data points, too, including Existing Home Sales and the Home Price Index.

    Since October 2011, the average new home sale price is higher by 6% nationwide, a trend that should continue in Chicago through the end of 2012 and into 2013 — especially with mortgage rates at new all-time lows and home affordability at all-time highs. As more buyers enter the market amid limited supply, prices are expected to rise.

    If you’re a home buyer in search of new construction, therefore, the best new home “deals” you may find may be the ones you find today.

  • Pending Home Sales Slip In May

    Posted Under: Home Buying, Home Selling  |  June 10, 2012 12:11 PM  |  147 views  |  1 comment


    Pending Home Sales IndexThe housing market took a breather in April.

    After forging past its benchmark value of 100 in March, April’s Pending Home Sales Index dropped back to 95.5, its lowest reading of the year. The data suggests fewer home resales throughout Illinois and nationwide in the months ahead.

    A “pending home” is a home under contract to sell, but not yet closed. The Pending Home Sales Index is tracked and published monthly by the National Association of REALTORS®.

    As a housing market indicator, the Pending Home Sales Index is fundamentally different from other housing metrics which often make headline news.

    Unlike the Existing Home Sales report, for example; or the New Home Sales report, the Pending Home Sales Index is purported to be predictor of future housing market performance. It measures the number of homes newly under contract in a given month and, because we know that 80% of homes under contract close within 60 days, the Pending Home Sales Index can foreshadow what’s next for housing.

    Other housing market metrics report on events which have already occurred.

    Based on April Pending Home Sales Index, therefore, buyers and sellers should expect to see a pull-back in closed home sales through May and June. However, like everything in real estate, home sales remain a local market.

    Even by region, performance varied : 

    • Northeast Region : +0.9% from March 2012
    • Midwest Region : -0.3% from March 2012
    • South Region : -6.8% from March 2012
    • West Region : -12.0% from March 2012

    Despite three regions posting losses, it’s worth noting that, on an annual basis, all four regions showed gains, led by the Midwest at 23 percent. 

    If you’re shopping for homes right now, the Pending Home Sales Index suggests that the current market may be “soft”, a scenario which can create ideal home-buying conditions. With mortgage rates low, home affordability has never been higher.

  • Pending Home Sales Rise To 22-Month High

    Posted Under: Market Conditions, Home Buying, Home Selling  |  March 5, 2012 8:21 AM  |  236 views  |  2 comments


    Pending Home Sales Index 2011-2012The housing market appears headed for a strong spring season.

    After a brief setback in December, the Pending Home Sales Index resumed its climb in January, posting a 2 percent gain over the month prior.

    The data puts pressure on Chicago home buyers. This is because a “pending home” is a home that’s under contract to sell, but has not yet sold. It’s tracked by the National Association of REALTORS® and, among all housing statistics, it’s the only one that’s “forward-looking”.

    The Pending Home Sales Index is important to home buyers throughout Illinois because 80% of homes under contract to sell close within 60 days of contract. In this way, the Pending Home Sales Index forecasts the housing market 1-2 months into the future.

    This is very different from how NAR’s Existing Home Sales report works; or, how the Census Bureau’s New Home Sales report works. These two metrics tell us what’s already happened in housing.

    By contrast, the Pending Home Sales Index tells us what’s coming next.

    January’s Pending Home Sales Index reading lifts the monthly metric to its highest level since April 2010 — the month during which the 2010 federal home buyer tax credit expired — foreshadowing a strong housing market through March and April 2012, at least.

    This should not be news, of course. The nation’s home builders have said “foot traffic” is rising and home supplies are scarce nationwide. The only wild-card for housing is the high contract cancellation rate.

    As compared to last January when just 9 percent of home purchase contracts “failed”, this January saw 33 percent of contracts fail. High failure rates undermine the Pending Home Sales Index’s viability as a forward-looking housing market indicator.

    Despite contract failures, though, the combination of low mortgage rates and low home prices is enticing to today’s home buyers. Expect home sales to climb in the coming weeks which will lead to a strong spring season for housing. 

  • Existing Home Sales Climb To A 20-Month Record

    Posted Under: Home Buying, Home Selling  |  February 27, 2012 8:23 AM  |  227 views  |  No comments


    Existing home supplyJanuary’s home resales moved to a 20-month high — additional evidence that the nation’s housing recovery is underway.

    According to the National Association of REALTORS®, the January 2012 Existing Home Sales showed 4.57 million units sold last month on a seasonally-adjusted, annualized basis — a 4 percent increase as compared to December’s revised figures.

    An “existing home” is one that’s been previously occupied and cannot be categorized as new construction.

    Beyond the headline numbers, though, there was plenty about which for today’s Chicago home sellers to get excited. Demand for homes remains strong, foreshadowing higher home prices through 2012.

    First, the national housing stock is at a 5-year low.

    In January, the number of homes for sale nationwide slipped to 2.31 million, the smallest home inventory since February 2007, and a 21% decrease from just one year ago.

    Falling home supply amid constant home demand leads home prices higher. At the current pace of sales, today’s complete home inventory would “sell out” in 6.1 months. 

    Analysts say that a 6-month supply is a market in balance. Anything less is Bull Market territory.

    Second, the National Association of REALTORS® says that one-third of all homes under contract “failed” last month. This means that many more buyers tried to buy, but couldn’t for a number of reasons including mortgage denials; or, insurmountable home inspections issues; or, homes appraising for less than the contract price.

    As contract failures subside, Existing Home Sales are expected to rise even faster.

    And, lastly, first-time buyers continue to power the home resale market. In January, 33% of all sales were made to first-time buyers, up four points from last year. This statistic suggests that renters are moving into homeownership, an important component in a sustained housing market recovery.  

    Given high demand and shrinking supply, we should expect for Lincoln Park home prices to rise in the coming months, if they haven’t already. Thankfully, mortgage rates remain near all-time lows.

    Low mortgage rates make homes more affordable.

  • Fewer Jobless Claims Suggests Higher Home Prices Ahead

    Posted Under: Market Conditions, Home Buying, Home Selling  |  February 20, 2012 6:54 AM  |  255 views  |  No comments

    Initial jobless claims 2008-2012

    Economists believe the strength of the 2012 housing market will be closely tied to jobs. If they’re right, the housing market is ripe for a boost. It spells good news for Chicago home sellers and may mean the end of bargain-basement prices for buyers.

    Since peaking in mid-2009, the number of U.S. workers filing for first-time unemployment benefitshas dropped 44 percent. Over the same period of time, the U.S. economy has added more than 2 million jobs and the national Unemployment Rate is down more than 1 percentage point to 8.3%.

    Employment’s link to the housing market of Lincoln Park is both economic and psychological.

    To make the economic link is straight-forward. A person with a job earns verifiable income and such income is required in order to be mortgage-eligible. For conventional and FHA purchase loans, for example, mortgage lenders want a home buyer’s monthly income be more than double his monthly debts. 

    For the formerly unemployed that have since returned to work, having a full-time income makes buying homes possible. It also supports higher home valuations nationwide because home prices are based on supply-and-demand. All things equal, when the number of buyers in a market goes up, prices do, too.

    The psychological connection between housing and employment is a tad more complicated, but every bit as important. It’s not just out-of-work Americans that don’t look for homes — it’s fearful Americans, too. People with concerns about losing a job are just as unlikely to shop for homes as people actually without a job. The same is true for people unsure of their prospects for a better-paying job, or their own upward mobility.

    A recovering job market can lessen those fears and draw out buyers — especially those who face a loss on the sale of an “underwater” home.

    The Initial Jobless Claims rolling 4-week average is at its lowest level since 2008. Fewer Americans are losing jobs, and more are finding permanent placement.

    It’s one more reason to be optimistic for this year’s housing market. 

  • Supply Of New Homes At 6.1 Months Nationwide

    Posted Under: Market Conditions, Home Selling  |  February 6, 2012 8:03 AM  |  215 views  |  No comments

    New Home Supply 2010-2011

    New Home Sales slowed into the New Year but the market for newly-built homes remains strong. For home buyers in Illinois and nationwide, December’s New Home Sales report is yet one more signal that the housing market recovery may be underway.

    According to the Census Bureau, the number of new homes sold in December 2011 slipped 2 percent to 307,000 units on a seasonally-adjusted, annualized basis nationwide.

    A “new home” is a home that is considered new construction; a home for which the buyer will be the first owner and tenant.

    As compared to December 2010, last months’ sales volume fell seven percent. It’s a statistic that suggests housing market weakness. However, in looking at a different component of the New Home Sales report — the supply of homes for sale — we’re forced to reconsider.

    At the current pace of sales, every new home for sale nationwide would be “sold” in a matter of 6.1 months. 

    Economists believe that a 6.0-month supply defines a market in balance — anything quicker is termed a “seller’s market”. Statistics like that are enough to create urgency among today’s Chicago home buyers. 

    Unfortunately, the Census Bureau’s data may be wrong.

    Although December’s New Home Sales report shows sales down 2 percent, the government’s data was published with a ±13.2% margin of error. This means that the actual New Home Sales figure may have been as low as -15.2 percent, or as high as +11.2 percent. And, because the range of possible values includes both positive and negative numbers, the Census Bureau had no choice but to assign its December data “Zero Confidence”.

    It will be a few months before final revisions are made to December New Home Sales data. Until then, therefore, buyers should take cues from the market-at-large and the market-at-large hints at recovery. One example of this is homebuilders showing more confidence in their product than at any time in the last 5 years.

    If your plans for 2012 call for buying new construction, therefore, consider using this lull to “make a deal”. As the year progresses, the great values in housing may be gone.

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