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US pending home sales reach highest level since June 2013
Pending home sales in the United States in February increased to their highest level since June 2013, according to the latest figures from the National Association of Realtors. Sizeable gains in the Midwest and West offset smaller declines in the Northeast and South and overall demand is increasing as the residential real estate market moves into the spring buying seasons. The NAR pending homes sales index, which is a forward looking indicator based on contract signings, rose 3.1% to 106.9 in February from a slight downward revision of 103.7 in January and is now 12% above February 2014. Indeed, the index is at its highest level since June 2013 when it was 109.4, and has increased year on year for six consecutive months and. It is also above 100, considered an average level of activity, for the tenth consecutive month. ‘Pending sales showed solid gains last month, driven by a steadily improving labour market, mortgage rates hovering around 4% and the likelihood of more renters looking to hedge against increasing rents,’ said NAR chief economist Lawrence Yun. ‘These factors bode well for the prospect of an uptick in sales in coming months. However, the underlying obstacle, especially for first time buyers, continues to be the depressed level of homes available for sale,’ he added. According to NAR’s monthly confidence index the percent share of first time buyers increased slightly for the first time in February since November 2014, up to 29% from 28% in January. ‘Several markets remain highly-competitive due to supply pressures, and real estate agents are reporting severe shortages of move-in ready and available properties in lower price ranges. The return of first time buyers this year will depend on how quickly inventory shows up in the market,’ Yun explained. The PHSI in the Northeast fell 2.3% in February, but is 4.1% above a year ago. In the Midwest the index leaped 11.6% and is now 13.8% above February 2014. Pending home sales in the South decreased 1.4% but is still 10.8% above last February. The index in the West climbed 6.6%, the highest since June 2013, and is now 18.3% above a year ago. Total existing homes sales in 2015 are forecast to be around 5.25 million, an increase of 6.4% from 2014. The national median existing home price for all of this year is expected to increase around 5.6%. In 2014 existing home sales declined 2.9% and prices rose 5.7%. Continue reading
Research reveals lack of knowledge on returns and finance in buy to let
Almost a quarter of buy to let investors in the UK residential property market don’t keep track of the returns on their property portfolio, it is claimed. There is also considerable landlord confusion about the most accurate way of assessing their buy to let finances, according to new research from specialist firm Platinum Property Partners. It found that 23% of UK landlords do not measure the return on their buy to let investments at all and this means that £300 billion of investment in the sector is left unmonitored, leaving UK landlords unaware of the current or ongoing health of their property portfolio. Landlords owning Houses in Multiple Occupation (HMOs) for young professionals and key workers are the most likely to measure their portfolio, with 95% tracking the profitability of their property portfolios in some way. But landlords who let out holiday homes are least likely to assess the returns on their investment with 33% failing to measure the financial performance of their rental properties. Not only is there a significant failure among UK landlords to measure buy to let returns, but there is also a worrying lack of consensus about the most effective way to measure the performance of property portfolios, the firm says. Return on Investment is considered the most effective way to measure the performance of all investments, including property. For buy to let it is the only method to take into account gross profit, the cost of the property (including fees and refurbishment) and capital gain. Return on equity uses a similar calculation so can also be considered an effective measurement, according to the firm. However, just 21% of buy to let investors measure the performance of their investment using these methods and 56% of property investors use a less effective method to calculate the profitability of their portfolio, which means that £700 billion of buy to let investment is at risk of not being monitored accurately. The research suggests that not only are landlords using ineffective methods to calculate the performance of their property portfolio, but the vast majority do not fully understand the key financial terms. Just 24% of landlords understood the term ‘Return on Investment’. When asked to select the correct definition, 56% failed to do so while 20% were not sure. Landlords letting out flats were the least savvy about this type of financial measurement, with only 8% able to define this term correctly. Overall some 26% could accurately define ‘Gross Yield’ and the research found that landlords of HMOs for working tenants and holiday homes are the most clued up about the meaning of this term at 38% and 42% respectively. The research also found that just 12% knew what is meant by ‘Gross Profit’, with 73% of landlords incorrectly identifying the definition. Landlords with holiday homes were the most familiar with this measure with 25% understanding the term. However, even among those investors who correctly understand financial terms, there was no… Continue reading
Almost a quarter of UK landlords entered the business accidentally
Some 24% of UK landlords, that’s around 360,000, came into the residential private rental market accidentally or unintentionally, new research has found. The National Landlords Association (NLA) survey asked landlords why they first entered the buy to let market and found that 11% were by chance such as inheriting property. It also found that 5% acquired an extra property such as when they met a spouse or partner, 5% intended to sell a property but experienced difficulties and 3% had to relocate for work, either home or abroad. Central London was found to have the highest proportion of accidental landlords at 31%, followed by Wales at 29% and then the East of England and Yorkshire, both with 27%. The North West had the least with just 15% claiming to have got into the business unintentionally. The research also found that 30% of 10 landlords with a single property only break even or make a loss. ‘The figures show that there are a significant number of people who find themselves as landlords without ever having really planned to enter the market,’ said Carolyn Uphill, NLA chairman. ‘It may be surprising to find that so many single property landlords struggle to make it work, but we often find that this is because so many simply don’t realise what they’re getting themselves into. While a buy to let property can provide a steady return, you’re in business to provide a home for someone else so you need to know your obligations and make sure that you have a plan to make a success of it all,’ she explained. She pointed out that all landlords can sign up to the NLA for free to see how the organisation can help make a success of their business. The NLA offers free best practice tenancy agreements and other sample forms and letters which may be needed during the life cycle of a tenancy. Alternatively, enlisting the help of a letting agent is an option if you prefer a more hands off approach but just make sure they are a member of a reputable trade organisation such as the Association of Lettings Agents,’ added Uphill. Continue reading
