Real Estate

Half of major metros on track to hit highest home sales since 2007

All-cash share rebound, FHA buyer share growing

Single-family home and condo sales through August were on pace for an eight-year high nationwide and in 110 out of 204, or 54%, metropolitan statistical areas with sufficient sales data, according to RealtyTrac.

A total of 1,947,028 U.S. single family homes and condos sold through August in 2015, up 5.4% from the same time period a year ago to the highest total for the first eight months of the year since 2007, when there were 2,069,963 sales.

“The continued strength in sales volume across a wide spectrum of markets in August indicates that shockwaves from recent global stock market instability have not weakened the housing recovery and in fact there is evidence that the instability has fueled more demand for U.S. real estate,” said Daren Blomquist, vice president of RealtyTrac. “The share of cash sales nationwide in August bounced back from a seven-year low in July, and the month-over-month increase in cash sales share was more pronounced in markets that have traditionally been magnets for foreign cash buyers, including Boston, Las Vegas, San Francisco, Seattle and New York.”

Despite the findings of the RealtyTrac report, there are concerns the housing market may be slowing.

Existing home sales dropped in August despite slowing price growth and a positive turnaround in the share of sales to first–time buyers, according to the National Association of Realtors. This follows three months of consecutive gains. None of the four major regions experienced sales increases in August.

Total existing home sales, which are completed transactions that include single–family homes, townhomes, condominiums and co–ops, fell 4.8% to a seasonally adjusted annual rate of 5.31 million in August.

Furthermore, housing starts fell to a three month low of 1.126 million in August, missing expectations of 1.116 million, and below last month's downward revised 1.161 million, the Census Bureau reported.

Still, according to RealtyTrac, out of the 204 local markets, 58 (28%) were on pace through August to reach nine-year highs in home sales in 2015, and 22 (11%) were on pace through August to reach 10-year highs, including Denver, San Diego, the Florida markets of Sarasota, Naples, and Palm Bay, along with Grand Rapids, Michigan and Reno, Nevada.

The 110 metro areas on pace for at least an eight-year high in home through August included Los Angeles, Phoenix, Dallas, Denver, Riverside-San Bernardino in Southern California, Detroit, Seattle, Tampa, Minneapolis and Portland.

“We are seeing more globalization as Southern California has become a destination for international buyers,” said Mark Hughes, chief operating officer with First Team Real Estate, covering the Southern California market. “Eighty percent of new construction in Irvine last year was sold to Chinese buyers. International buyers are driving home prices up and sometimes out of reach for many local residents.”

“Sales have been very brisk in the Reno-Sparks market,” said Craig King, COO at Chase International brokerage, covering the Lake Tahoe and Reno, Nevada markets. “Seasonally the market may follow a traditional fourth quarter slowdown, but overall we expect sales to remain very strong with this influx of new people from outside the marketplace and more new first time buyers coming into the area to fill initial jobs with businesses like Tesla and Switch expanding into the local area.”

All-cash sales accounted for 24.5% of all single family home and condo sales in August, up from a seven-year low of 23.6% in July but still down from 26.7% of all sales in August 2014 and down from a peak of 39.6% of all sales in February 2013.

“The South Florida market is more balanced and healthier today than in the past decade. With an abundance of financing options we are seeing strength in the first-time home buying market,” said Mike Pappas, CEO and president of the Keyes Company covering the South Florida market. “The spike in home values has strengthened the move-up market and our international buyers and investors weigh in heavily as cash buyers.” 

The share of buyers using Federal Housing Administration loans — typically loan down payment loans with an average down payment of about 3% — continued to increase in August, when 23.1% of all single family and condo sales were to FHA borrowers, up from 23% in July and up from 17.8% in August 2014.

“It wasn’t just cash buyers that kept home sales volume strong in August,” Blomquist noted. “The share of buyers using FHA loans in August increased 30% from a year ago, and the year-over-year increase in the share of FHA buyers was 50% or more in markets such as Nashville, Phoenix, Colorado Springs, Portland and San Diego. Those markets with a solid and fast-growing share of FHA buyers are poised for longer, more sustainable growth going forward than markets that are more dependent on capricious cash buyers.”

Among metropolitan statistical areas with a population of at least 1 million, those with the highest share of FHA buyers were Las Vegas (39%), Riverside-San Bernardino in Southern California (36.5%), Baltimore (32%), Phoenix (31.8%), and Atlanta (30.9%).

The biggest year-over-year decreases among markets with at least 10,000 sales through August were in Cleveland (down 13.8%), Baltimore (down 12.1%), Cincinnati (down 11.8%), Chicago (down 10.4%) and New York (down 10.1%).

Other major markets with a year-over-year decrease in year-to-date sales volume included San Francisco (down 2.5%), Las Vegas (down 1.2%), Oklahoma City (down 0.9%), Houston (down 0.6%), and Cape Coral-Fort Myers, Florida (down 0.3%).

Distressed sales, including sales of homes in the foreclosure process and sales of bank-owned homes, accounted for 8.9% of all single family home and condos in August, down from 9.3% in July and down from 12.2% a year ago to the lowest level going back as far as RealtyTrac has distressed sales data, January 2000.

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