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Home price growth in the US continues to moderate
National home price gains in the United States fell to 6.7% year on year and 1% quarter on quarter in November, according to the latest index from Clear Capital. National trends were echoed at the regional level, with the West seeing the strongest moderation across the country and overall growth has slowed now for 11 months in a row. In fact, for the first time since the start of the recovery three years ago, the West’s yearly rates of growth fell below 10%, a sure sign of more moderation to come over the next several months for the nation, according to the firm. At the height of the recovery in 2013, national prices including distressed sales outperformed the performing only sale segment of the market by 4.2%. Now the all sale segment is outperforming the performing only sale segment by 3%. These segments’ rates of growth will likely continue to fall in line with each other as investor engagement dwindles, a result of fewer distressed sale opportunities. As this occurs, markets will be more reliant on performing only sale demand and price growth,’ the index report explains. It also points out that improvements in the broader economic landscape have not instilled confidence in traditional home buyers and the general lack of demand in the performing only segment, coupled with a dwindling supply of distressed inventory, leaves the future of home prices squarely in the hands of traditional home buyers, who have yet to show any signs of re-engaging. It says that performing only sales are not yet strong enough to support recovery sized market growth without distressed sales. The data also shows that it has been a steady descent for national yearly rates of growth. They have dropped 5% from a high of 11.7% in December 2013. This is due in part to the market’s natural normalisation as the correction to the correction subsides and distressed sale inventory dries up. While this is healthy for markets overall, the weakness of price growth in the performing only segment is further cause for concern. Excluding distressed sales, performing only national home price growth over the last year was just 4.4%, down from a recovery high of 7.2%. Even more concerning is the performing only segment’s drop in quarterly growth to 0.6%, nearly cut in half over the last rolling quarter which saw quarterly rates of growth at 1.1%. ‘Reduced reliance on distressed sales and diminishing gains in the performing only sale segment could be too much for the recovery to overcome as we enter winter. The recovery is at a tipping point. Markets need non investor demand to ramp up, and home buyer confidence restored,’ said Alex Villacorta, vice president of research and analytics at Clear Capital. ‘Should this turn into a negative feedback loop, the likelihood for quarterly price declines at the national level could turn into yearly price declines by the end of 2015. Performing only sale trends are a bellwether for what’s to come next year,’ he explained. ‘Think of… Continue reading
More transparency and communication needed in property leasehold sector
Property managers should not be subject to more formal regulations by the government but there needs to be more transparency and communication in the leasehold market, it is claimed. The Competition and Markets Authority (CMA) has, however, made a number of recommendations as a result of its market study into the residential property management services sector in England and Wales. It had consulted extensively with consumer groups, leaseholders, the industry and government during the course of the study and found that overall while the market works well for many leaseholders, some have experienced significant problems in a sector where total annual service charges are estimated at £2.5 to £3.5 billion. The issues identified include leaseholder frustration at a lack of control over the appointment of property managers, high charges for services arranged by property managers or poor standards of service. It also found leaseholders suffered unexpected costs and were being charged for works they consider unnecessary, poor communication and transparency between property managers and leaseholders, and difficulties in getting redress. The CMA has also identified some concerns about prospective purchasers’ understanding of leasehold, and their obligations and service charge liabilities for leasehold flats. In light of its findings and on-going developments in the market, the CMA has made a number of detailed recommendations aimed at improving prospective purchasers’ awareness of leaseholders’ obligations. It also wants to improve disclosure, transparency and communication between property managers and leaseholders and leaseholders’ access to appropriate forms of redress. It says that these recommendations will make leaseholders better informed about the responsibilities and performance of property managers, while greater transparency will increase pressures on property managers and landlords to take account of leaseholder interests. They will also provide improved mechanisms for dispute resolution, should issues arise that require action. The CMA is also recommending changes to legislation affecting rights of consultation relating to major works, as well as supplementing the existing Right to Manage legislation to enable leaseholders, where there is a majority in favour, to require the landlord to re-tender the property management of their block. The CMA is not recommending that property managers should be subject to more formal regulation by government. It says that for many the market works reasonably well, and satisfaction levels are particularly high where leaseholders have exercised their Right to Manage. It adds that existing legislation provides significant protections for many leaseholders, and the sector has engaged constructively with the CMA during the course of its study, recognising that there are improvements to be made and showing a willingness to address the issues that have been identified. ‘Many property managers provide a good service to leaseholders, but protection against the worst failures by property managers is vital because when problems do occur they have a major impact on leaseholders,’ said Rachel Merelie, the senior director at the CMA who led the study. ‘We are pleased that within the sector there is a consensus that change is needed and a genuine willingness to be part of that change. This is evidenced… Continue reading
Mortgage market in Wales looking strong going into 2015, says CML
Mortgage lending in Wales remains driven primarily by lending for house purchase, with first time buyers in particular showing strong year on year growth, according to the latest data from the Council of Mortgage Lenders. In the third quarter, there were 3,300 first time buyer loans in Wales, 18% up on the third quarter of 2013. But in the short term lending to this grow is slowing and was 3% down on the previous quarter. Also, first time buyers in the period borrowed £350 million, unchanged from the previous quarter but 21% up on the third quarter of 2013. There were 3,900 home mover loans in the third quarter, up 11% on the previous quarter and 8% more than in the third quarter of 2013. Total value of these loans was £520 million, up 16% on the second quarter and up 18% on the third quarter 2013. Remortgage lending in the quarter in Wales remained unchanged in volume levels quarter on quarter but down 23% compared to the same quarter in 2013. However, the data also shows that the past two quarters have seen the highest lending volumes by first time buyers since 2007. The CML said that first time buyer affordability has been relatively good in Wales compared to the UK, with first time buyers typically borrowing 3.23 times their gross income, which was unchanged from the second quarter but less than the UK average of 3.41. The typical loan size for first-time buyers breached the £100,000 mark for the first time in Wales since 2007, totalling £100,800, up from £99,000 in the second quarter. The typical gross income of a first time buyer household was £31,868 compared to £30,484 in the second quarter. The relatively low level of interest rates saw first-time buyers' monthly payment burden remain relatively low in the third quarter at 18.2% of gross income being spent to cover capital and interest payments, a smaller proportion of income than the 19.6% UK average and unchanged from 18.2% in the second quarter. Lending to home movers, unlike first time buyers, saw an increase quarter on quarter in Wales. Home mover affordability improved fractionally, with home movers typically borrowing 2.79 times their gross income compared to 3.41 for the UK overall and 2.82 in the second quarter. The typical loan size for home movers was £121,599 in third quarter, up from £117,995 in the previous quarter. The typical gross household income for home movers was £46,001 in third quarter compared to £42,247 in second quarter. Home movers' payment burden remained relatively low in Wales at 17.5% of gross income being spent to cover monthly capital and interest payments, less than the 18.8% UK average and 17.2% seen in the second quarter. Remortgage lending in Wales totalled 3,100 loans advanced in the third period of 2014, unchanged from the second quarter, but down 23% compared to the same quarter in 2013. These loans totalled £340 million in value, an increase of 6% quarter on quarter but down… Continue reading
