Realtors Report Multiple Offers, Quick Sales but Continuing Appraisal and Credit Issues


The National Association of Realtors® (NAR) conducts a
monthly survey of its members and uses their responses to construct a REALTORS
Confidence Index (RCI)
.  Similar in some
respects to the builder confidence survey conducted by the National Association
of Homebuilders but more extensive, the NAR survey tracks Realtor’s
expectations about overall market conditions, buyer/seller traffic, home
prices, and issues of concern.  The RCI
report released today reflects information collected from about 3,700
respondents from November 26 to November 30. 
NAR cautions that “all real estate is local and conditions in
specific markets may vary from the national trend.

The RCI for single family homes held steady at 53 and those for townhouses and
condominiums were both below 50.  An
index of 50 indicates moderate expectations. 
The single-family index has risen from 30 one year ago while the other
two were below 20. 

The buyer traffic index is
at 53, while the seller traffic index is essentially unchanged at 37, down from a peak
of 42 last year. Buyer
traffic dipped slightly, reflecting in part
the seasonal slowdown and possibly a wait-and -see stance as
buyers and
sellers await
clearer direction
with regard to measures
to avert the fiscal cliff. 

Inventory has been generally tight
and agents report that sellers appear to be holding back waiting for higher
prices or for better appraisal values. 
Respondents report numerous cases of multiple bids especially for bank
owned real estate (REO) which go under contract in a little as seven to ten
days  The median
on the market for all
properties was 70 days in November compared to 98 days a
year earlier.

Realtors have above average expectations for business over the next six
months.  The single family sales index
rose to 59 from 58 in October and 36 one year ago and the confidence level also
improved for townhouses and condos as well. Still, Realtors report that the
market remains hampered by a “demanding and rigid loan qualification
process.”  This has led to cash
buyers and investors easing out first time buyers using mortgage financing.  Policy uncertainties on
a variety of economic and tax
issues as well
as tepid job growth continue
to dampen the market. Hurricane Sandy also caused
a temporary
slowdown in the affected areas.

NAR’s latest economic projection is for continued increases in residential home sales
along with continued price improvement (although
sales and price trends will
vary from
market to market).  Existing home sales
are projected to expand to 4.6
million in 2012 and to 5 million in 2013.

The median price for existing home sales
is forecasted at
$176,100 in 2012 and $185,200 in 2013. Shadow inventory is still high, but it is about 1
million fewer homes than two years ago. 
in sales inventory and a decline
in the distressed home sale of existing home sales
are projected to lead to continued market improvement.

The incidence of multiple offers
has led to shorter marketing time and approximately a third of respondents
noted that 57 percent of properties were sold within 3 months and many in less
than a month.  Only 20 percent of Realtors
reported selling houses that had been on the market for six months or more
compared to 28 percent a year ago.  The
median marketing time in November was 70 days compared to 98 days in November
2011.  Even the timeline on short sales
while still protracted has dropped from a median of 119 days one year ago to 90

About 22 percent of respondents
reported they had sold a foreclosed or short sale property and that cash sales
accounted for about 46 percent of those sales compared to 41 percent in
October.  Distressed properties sold on
average at a 20 percent discount and short sales at a 16 percent discount.  Discounts were strongly affected by property
condition.  Those of above average condition
sold for a 13 to 15 percent discount while those in the poorest condition were
discounted 34 to 38 percent.

Approximately 30
percent of respondents who made a sale reported
in November with most
reported to be investors and international
buyers.  Approximately 9 percent
of first-time homebuyers paid
compared to 70 percent
of investors who paid cash.  A sale to a first-time buyer was reported by
30 percent of Realtors, well below the 40 percent share historically enjoyed by
novice homebuyers.  Respondents noted
that this reflects the difficulty in securing mortgage financing, delays with
short sales, and purchases
of lower
priced properties

Second home sales accounted
12 percent of responses (relatively unchanged since
August) and 1.6 percent of Realtors reported sales
of U.S. residential
estate to foreigners
not residing in the U.S. (1.9% in
October).  Respondents
reported “lots of cash
investors from China and Canada”.

Approximately 37
percent of mortgage sales involved a down
of 20 percent or
(compared to 36 percent
in October). Down
of 11-19 percent were
at 5 percent. The trend
remained essentially unchanged since last year, in part
reflecting credit
conditions that have been generally reported as
“tight”, “stringent”, and “difficult.”

One of the most
frequent concerns expressed in the survey was “unreasonably tight credit
“, i.e. that some financial
institutions appear to lend only to individuals with the highest
of credit scores.

NAR says there appears
to be an unnecessarily high level of risk
aversion.  Approximately 75 percent of Fannie Mae and
Freddie Mac loans went to borrowers with credit scores over 740 in 2011
compared to 40 percent in the 2001-2004 time period.  Estimates
NAR economists have indicated
that an additional 500,000 to 700,000 additional
sales could be made if credit
conditions returned to normal which could generate an additional 250-350 thousand jobs on an annual basis across a wide spectrum of the economy, i.e., attorneys, painters, plumbers, landscapers, title companies, furniture manufacturers,
etc.; jobs that could be generated at no cost and almost immediately.

Realtors also
noted that appraisals continue to be a problem because
values are not keeping pace with the appreciation in market values. Realtors
complain that appraisers continue to use foreclosures as comps and they are
encountering out-of-area appraisers who do not know the local market.  They also
frustration at the slow turn-around time and
appraisal requirements
an unnecessary expense on
the buyer.

Thirty-four percent
of Realtors reported a problem with
an appraisal
in the past 3 months (same as
in September). 
Approximately 10
percent of
the respondents reported that appraisal problems
led to contract
about 10 percent reported a delay as
a result of an appraisal
problem, and
almost 15 percent reported
that the appraisal problems led
to lower prices.

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