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Real Estate Big Data

The NAHB Index’s newest numbers have some people on edge

(REAL ESTATE NEWS) The NAHB housing market index is reflecting a drop in home builder confidence which is not to be confused with another crucial home builder trait.

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The NAHB index

On Monday, The National Association of Home Builders released new data showing a drop in confidence among American home builders this month.

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The NAHB housing market index also fell by three points in April, to 68. In March, the NAHB index made it up to 71, which is the strongest reading in over a decade.

Incorrect

The NAHB index is based upon a survey of NAHB members, conducted monthly, which targets the single-family housing market, in particular. The survey asks for a rating of market conditions for new home sales, both in the present and in the next six months. It also asks for information about the behavior and numbers of potential new home buyers.

According to a poll conducted by Thomson Reuters, economists were incorrectly optimistic.

They expected home builder confidence to reach 70 this month, after the boost in March attributed to President Trump’s perceived anti-regulatory stance in the housing industry.

Apples to oranges

Chief economist of the National Association of Home Builders, Robert Dietz, accompanied the new report with a reminder to distinguish demand from confidence: “The fact that the HMI measure of current sales conditions has been over 70 for five consecutive months shows that there is continued demand for new construction,” he said, but “builders are facing several challenges.” According to Dietz, these include “hefty regulatory costs and ongoing increases in building material prices.”

NAHB Chairman Granger MacDonald had some reassuring words of his own to add.

“Even with this month’s modest drop, builder confidence is on very firm ground,” he said. “Builders are reporting strong interest among potential home buyers.” Basically, no one is worried about demand at this point. The problem lies in all the obstacles separating demand from supply.

No need to panic

Each of the index’s three components saw decreases in April: the current sales conditions component fell to 74, down 3 points; the sales expectations for the next six months also dropped three points, to 75; and the buyer traffic component fell a single point, to 52. However, the NAHB maintains that all three components remain at healthy levels.

The regional breakdown reveals a disparity between the West and the rest of the country.

Builder sentiment remained unchanged from March in the West, and went down a single point in the South. In the Northeast, however, builder sentiment went down an alarming eight points, and the Midwest saw a five-point decrease.

I dip, you dip, we dip

On the 18th, the Commerce Department is slated to release a report, unrelated to the NAHB, detailing new residential construction from March. New housing starts are expected to have declined to an annual rate of 1.262 million, after a jump to 1.288 million the previous month.

The industry may be starting to worry that President Trump will not keep his deregulation promises. If that’s the case, further dips may be in store as confidence drops across the board.

#NAHBIndex

Staff Writer, Natalie Bradford earned her B.A. in English from Cornell University and spends a lot of time convincing herself not to bake MORE brownies. She enjoys cats, cocktails, and good films – preferably together. She is currently working on a collection of short stories.

Real Estate Big Data

Are people jumping back on the flipping bandwagon?

(REAL ESTATE NEWS) House flipping is fun to watch on tv, but the housing crash ended the big wave of investor flips – is it that time again?

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Just when you thought all those shows about flipping houses on HGTV were going to be obsolete, the entity behind the nation’s largest property database, ATTOM Data Solutions, drops news that home flipping may be on the rise in emerging markets.

ATTOM’s Q3 2017 U.S. Home Flipping Report found that there was an influx of flipping and market competition in 44 out of the 93 metropolitan markets.

“A more than nine-year low in the ratio of flips per investor is evidence of this increased competition,” Daren Blomquist, senior vice president at ATTOM Data Solutions, said at the release of the report on Thursday. “[This] is pushing many investors to new metro areas that often have weaker market fundamentals but also come with a bigger supply of discounted distressed properties to flip.”

In order to perform the statistical analysis included in the report, ATTOM maintained its analytical definition of flipping from previous years. The property data firm defines a flipped home as a property “sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data” that was collected by their research firm.

Areas with the largest revitalized interest for flippers: Baton Rouge, Louisiana (up 140 percent); Winston-Salem, North Carolina (up 58 percent); Salem, Oregon (up 51 percent); Indianapolis, Indiana (up 51 percent); and Buffalo, New York (up 47 percent).

However, this flipping increase of 47 percent of markets is bucking the national trend of shifting away from flipping. Nationally, the report finds that while from Q3 to Q2, the rate of home flipping has decreased 0.5 percent, the overall home flip rate comparing Q3 2016 to Q3 2017 has stagnated at 5.1 percent. Also, return on investment (ROI) is decreasing, which might be driving this declining rate.

As detailed in the report, only 37 percent of major metropolitan markets are experiencing an increase of average gross home flipping return on investment (ROI) in Q3. The rest of markets? They’re experiencing an ROI downturn, receiving lowest average gross flipping ROI since Q2 2015.

“Home flipping profits continue to be squeezed by a dwindling inventory of distressed properties available to purchase at a discount and increasing competition from fair-weather home flippers often willing to operate on thinner margins,” Blomquist said.

It looks like we shouldn’t count out the creation of “Flip this House: Baton Rouge” coming soon to a TV near you.

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Real Estate Big Data

The average first time home buyer struggles with debt and down payments

(REAL ESTATE NEWS) For years, the first time home buyer has been squeezed out of the market, but for those qualifying, what are the traits of today’s average first timer?

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While the nation’s housing supply tightens and home prices continue to rise, first time home buyers are also struggling to save enough for a down payment while burdened with student loan debt.

As a result, only 34 percent of 2017 home buyers were first time homeowners, a minor decrease from 35 percent in 2016, according to the National Association of Realtors 2017 Profile of Home Buyers and Sellers. This figure continues to fall away from the long-term historical market average of 39 percent, per the NAR.

The typical first time home buyer? A 32-year-old with an average household income of $75,000 who carries some lingering student loan debt.

While millennials are in their prime home buying years, the NAR found debt and saving for a down payment are the most significant home buying hurdles. A quarter (25 percent) of new first time buyers said saving for a down payment was the most difficult task they faced during the process and more than half (55 percent) said student loan debt delayed their home purchase.

Among the surveyed home buying newbies, 41 percent indicated they have student loan debt, which is up from the 40 percent recorded in 2016. And, the average debt balance has increased even more in the past year, reaching an average of $29,000 compared to $26,000 in 2016. More than half of debt-carrying buyers owe at least $25,000, too.

The typical first time home? A single-family home in a suburban area with a median purchase price of $190,000. And, as saving for a down payment is difficult for many young buyers, the average first time home buyer down payment averaged 5 percent in 2017, the lowest percentage recorded by the NAR since 2013. The average down payment figure also indicates such buyers finance nearly 10 percent more (95 percent) of their home purchases than repeat buyers (86 percent).

In addition to personal finance burdens, first time buyers have struggled to find affordable options as the housing inventory in many parts of the U.S. tightens and prices increase for what is available. When buyers are on a budget and balancing debt, this can dampen the dreams of homeownership and prolong the time spent searching for their first home. Overall, the 2017 NAR survey found the average home buying search lasts 10 weeks.

Regardless of reality, many currently believe that it’s just too expensive to buy.

“With the lower end of the market seeing the worst of the supply crunch, house hunters faced mounting odds in finding their first home,” said NAR chief economist Lawrence Yun. “Multiple offers were a common occurrence, investors paying in cash had the upper hand, and prices kept climbing, which yanked homeownership out of reach for countless would-be buyers.”

The NAR annual Profile of Buyers and Sellers survey is survey data-based snapshot of home buyers who have purchased a home in the past 12 months, which, for the latest report, meant between July 2016 and June 2017.

While the new first time home buyer stats may not be the most promising, these findings can help real estate professionals better understand the current housing market and better assist home buyers – especially younger buyers who may benefit from more guidance.

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Real Estate Big Data

Retailers are selling off their real estate to survive

(REAL ESTATE NEWS) It’s no secret that retailers have struggled, and those that intend on surviving are looking to their most valuable assets to get creative with.

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With brick-and-mortar sales plummeting and more and more customers shopping online, retailers nationwide are laying off employees, shutting down stores, and desperately trying to adapt to changing conditions.

Department stores in particular are hurting. Decades ago, when department stores were having a heyday and browsing a huge inventory was a novelty experience, many companies like Macy’s, Lord & Taylor, and Sears bought or built enormous stores in prime locations.

Now, these companies are having a hard time moving inventory – but they sure do have some lucrative real estate. Many are leasing out parts of their stores to smaller retailers or as office space to startups and tech companies. Some are creating partnerships to share their store space. And some are simply selling these properties all together. Is this a savvy strategy for generating capital? Or the desperation tactics for sinking ships?

The number of companies selling some of their most noteworthy stores certainly gives credibility to what people are calling the “retail apocalypse.” In the past few years, Macy’s, who laid off 10,000 employees this year, has sold stores in San Francisco, Portland, Los Angeles, and Minneapolis. Sears began selling real estate two years ago, and many J.C. Penney locations have also closed down.

Hudson’s Bay Company, which owns Lord & Taylor and Saks Fifth Avenue, recently announced that they would sell their Fifth Avenue building in Manhattan to tech startup WeWork for $850 million. Lord & Taylor will then lease one or two floors from WeWork, who will use the rest of the building for their offices. Hudson’s Bay Company is also looking to sell another department store in Vancouver.

According to Garrick Brown, director of retail research for real estate broker Cushman & Wakefield, “some department store companies have real estate holdings that are move valuable than the retail business itself.” He says that some department stores are “getting choked” because they can’t face the facts that their giant locations are unnecessary and costly.

So while some companies, like Sears, may have waited until it was too late to make a last-ditch effort at selling their real estate, others may be selling or leasing their store locations as the next step towards the innovations they’ll need to survive.

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