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US pending home sales fall slightly, latest NAR data shows
Pending home sales in the United States slowed modestly in August but contract signings remain at their second highest level over the past year, according to the latest data from the National Association of Realtors. All major regions experienced declines except for the West, which rose for the fourth consecutive month, the forward looking pending home sales index also shows. Overall the index fell 1% to 104.7 in August from 105.8 in July, and is now 2.2% below August 2013 when it was 107.1. Despite the slight decline, the index is above 100, considered an average level of contract activity, for the fourth consecutive month and is at the second highest level since last August. Lawrence Yun, NAR chief economist, said that contract signings are holding steady and fewer distressed sales and less investor activity is likely behind August’s modest decline. ‘Fewer distressed homes at bargain prices and the acknowledgement we’re entering a rising interest rate environment likely caused hesitation among investors last month. With investors pulling back, the market is shifting more towards traditional and first time buyers who rely on mortgages to purchase a home,’ he added. According to NAR’s Profile of Home Buyers and Sellers, some 81% of first time buyers in 2013 who financed their purchase obtained a conventional or FHA loan. Overall, first time home buyers have been less prevalent from the housing recovery, representing less than a third of all buyers each month for the past two years. Yun pointed out that first time buyer participation should gradually improve despite tight credit conditions and the inevitable rise in rates. ‘The employment outlook for young adults is brightening and their incomes finally appear to be rising. Jobs and income gains will help repay student debt and better position first time buyers, setting the stage for improved sales growth in upcoming years,’ he explained. The PHSI in the Northeast slipped 3% to 86.5 in August, but is still 1.6% above a year ago. In the Midwest the index fell 2.1% to 102.4 in August, and is 7.6% below August 2013. Pending home sales in the South decreased 1.4% to an index of 117 in August, unchanged from a year ago. The index in the West rose for the fourth consecutive month by 2.6% to 102.1, but still remains 2.6% below August 2013. Existing home sales are expected to be stronger in the second half of the year behind improved inventory conditions, continuously low interest rates and slower price growth. Overall, Yun forecasts existing homes sales to be down 3% this year to 4.94 million, compared to 5.09 million sales of existing homes in 2013. The national median existing home price is projected to grow between 5% and 6% this year and 4% and 5% next year. Continue reading
Many aspiring home buyers in the UK facing uphill struggle to save a deposit
Over a third of aspiring first time buyers in the UK have given up hope of ever being able to raise a deposit to buy a home, new research has found. Currently first time buyers need as little as a 5% deposit to qualify for a mortgage under the government’s Help to Buy scheme but this is due to end in the first few months of 2017 meaning that first time buyers will then need a much bigger deposit. The research from mortgage insurer Genworth says that it will mean a return to 20% deposits which would see the time needed to save for a deposit rise from three years to over 10 years. The research also shows that of those who can afford to save for a deposit they are putting aside £246 on average each month. With 3% annual interest, someone who started saving today would need two years and 10 months to reach £8,655 and would hit this target by July 2017. They could do so by the beginning of 2017 by saving just £33 extra each per month. But the return to a norm of 20% deposits as was common in 2011 to 2013, would mean them needing to save £34,662 in 2017. With monthly savings of £246 gaining 3% annual interest, it would take a buyer more than seven years longer to do so. Anyone starting to save today would not hit this target until November 2024 by which time an extra seven and three quarter years of house price growth would be likely to mean they are still left unable to buy a home. The same Bank of England forecast of 20% house price growth over three years also means aspiring first time buyers could face prices which are rising far faster than they can save. Reaching £173,308 by the first quarter 2017 would mean the average first time buyer property price gaining £28,876 since the beginning of this year. This is 3.12 times the £9,249 a typical first time buyer can save up over a three year period and the equivalent of house prices gaining £3.12 for every £1 saved towards a deposit. The firm says that Help to Buy has given aspiring first time buyers a lifeline by boosting access to loans with deposits starting from 5%, making it far more achievable to buy despite the forecast rise in house prices. ‘Trying to buy your first home in the current climate is like chasing a runaway train. Even with good salaries that could comfortably support a mortgage, thousands of aspiring first time buyers can only save modest sums, especially those who are already paying rent. This deposit trap is why many feel they are left with the all or nothing choice of borrowing from family or waving goodbye to ever owning a home,’ said Simon Crone, vice president for mortgage insurance Europe at Genworth. ‘Help to Buy has significantly improved access to mortgages with deposits that are actually realistic to save. The numbers… Continue reading
UK house price fall after 16 monthly rises in a row
UK house prices fell by 0.2% in September, following 16 consecutive monthly price rises but the picture on a quarterly basis is still relatively strong. However, the data from the Nationwide house price index for September clearly shows that the price growth is slowing. It also means that the annual pace of house price growth has fallen to 9.4% from 11% in August. It means the average price of a home is now £188,374 and in the UK as whole, prices are around 2% above their pre-crisis peak. Excluding London they are less than 1% above their 2007 peak. ‘While September saw a slowing in house price growth, the picture on a quarterly basis for July, August and September combined was still relatively strong, with all 13 UK regions recording annual price gains,’ said Robert Gardner, Nationwide's chief economist. ‘There remains significant regional variation however, with the South of England still seeing the strongest rates of growth,’ he added. Gardner said that price growth may soften further in the final quarter of the year, given the high base for comparison from the fourth quarter of 2013. ‘However, the outlook remains uncertain. There have been tentative signs from surveyors and estate agents that buyer demand may be starting to moderate, but the low level of interest rates and strong labour market suggest that underlying demand is likely to remain robust,’ he explained. Nationwide also released its quarterly index for the three months to September which shows that overall prices increased by 1.5%. London is still the most expensive region in the UK with Northern Ireland the cheapest. Prices were up 10.5% compared with the same quarter of 2013 and London did see a slight softening in the annual pace of price growth from 25.8% in the second quarter to 21%. Prices in the capital are now 31% above their 2007 peak, with the price of a typical London property just above £400,000. Annual price growth in Wales slowed from 9.3% to 5.0% while annual price growth in Scotland was similar to last quarter at 5.2%. Northern Ireland saw a 10.2% increase in prices, although they are still nearly 50% below their 2007 peak. Amongst the English regions, the South continued to outperform, with double digit annual growth rates recorded in London, Outer Metropolitan, Outer South East and East Anglia. The North was the weakest English region, with prices up 4.3% over the year. David Newnes, director of Reeds Rains and Your Move estate agents, said that momentum is needed to keep the market going, especially outside of London. ‘Higher LTV lending and the Help to Buy scheme are vital tools to keep firs -time buyers active in areas of the country where the recovery is vulnerable,’ he explained. ‘In London, which sped off of the blocks at the start of the year, the market is composing itself after an energetic few months and we’ve seen house price inflation start to ease back,’ he added. He also warned about the effect of a proposed Mansion… Continue reading
