Residential Real Estate Market Overview: May 2018 Data 2018 Mark A. Melikian Chief Valuation Officer mark.melikian@summitvaluations.com 900 Madison Avenue, Suite 900 Toledo, OH 43604 MAY 2018 QUICK GLANCE: In May 2018, the following increased year over year Median Sales Price Seasonally Adjusted Annualized Housing Starts Mortgage Interest Rates In May 2018, the following decreased year over year Seasonally Adjusted Number of Homes Sold Month Supply of Existing Homes Unemployment Rate On a regional level, the South had the highest number of existing home sales and the West had the highest median price. The Northeast was the only region that experienced a month over month increase in the number of seasonally adjusted existing home sales. All regions saw month over month increases in the median sales price (see Figures 8 and 9). Report Highlights: The five markets where homes are selling the fastest. See commentary on page 11 and 12 Page 1 of 12
Market Overview: The median sales price of existing homes in May 2018 was $264,800. In April 2018, the median sales price was $257,900 and in May 2017 the median sales price was $252,500. This month s median sales price increased month over month by 2.7%, and increased year over year by 4.9% (see Figure 1). $270,000 $265,000 $260,000 $255,000 $250,000 $245,000 $240,000 $235,000 $230,000 $225,000 Median Sales Price of Existing Homes Figure 1 Source: NAR Page 2 of 12
Market Overview: The seasonally adjusted annual number of existing homes sold in May 2018 was 5,430,000. In April 2018, the revised number was 5,450,000 and in May 2017 it was 5,600,000. May s annual number of existing homes sold decreased by.4% month over month and decreased by 3% year over year (see Figure 2). 5,800,000 5,700,000 5,600,000 5,500,000 5,400,000 5,300,000 5,200,000 5,100,000 Number of Existing Homes Sold: Seasonally Adjusted Annual Rate Figure 2 Source: NAR Page 3 of 12
Market Overview: In a normal real estate market, there is typically a 4 to 6-month supply of housing inventory. The month supply of existing homes for sale in the U.S. was 4.1 in May 2018. In April 2018, the figure was 4 months and in May 2017, the month supply was 4.2. The month supply increased by 2.5% month over month, while decreasing by 2.4% year over year (see Figure 3). 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Month Supply of Existing Homes Listed for Sale Figure 3 Source: NAR Page 4 of 12
Market Overview: Housing starts (new home construction) averaged 1.51 million annually between 1950 and 2000. From 2001 to 2006, during the formation of the housing bubble, average annual housing starts jumped to 1.8 million units. However annual housing starts averaged only 870,000 units from 2007 to 2016, leaving a housing shortage as evidenced by the current levels of inventory. There will need to be several years of above-average housing starts, realistically anywhere from 1.6 to 1.7 million units, to increase inventory levels and establish a more balanced market. Anything below 1.5 million will likely result in a continued housing shortage, exacerbating the affordability crisis in some markets. In May 2018, the annualized number of housing starts was 1,350,000. In April 2018, the revised number of housing starts was 1,286,000, and in May 2017 it was 1,122,000. The month over month increase was 5%, while the year over year increase was 20.3% (see Figure 4). 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Housing Starts: Seasonally Adjusted Annual Rate Figure 4 Source: NAR Page 5 of 12
Market Overview: The U.S. Department of Labor summarizes the National Unemployment Rate as follows: People with jobs are employed. People who are jobless, looking for a job, and available for work are unemployed. The labor force is made up of the employed and the unemployed. People who are employed, or unemployed and not seeking work, are not considered in the unemployment rate. Therefore, when someone gives up seeking work, they will not be included in these statistics. The unemployment rate among people seeking work in May 2018 was 3.8%. In April 2018, the rate was 3.9%, and in May 2017 the U.S. unemployment rate was 4.3%. The month over month unemployment rate decreased by 2.6%, and the year over year unemployment rate decreased by 11.6% (see Figure 5). 4.5 4.4 4.3 4.2 4.1 4 3.9 3.8 3.7 3.6 3.5 National Unemployment Rate Figure 5 Source: US Dept. of Labor Page 6 of 12
Market Overview: Freddie Mac reports the interest rate on a 30-year fixed rate mortgage in May 2018 was 4.59%. In April 2018, the rate was 4.47% and in May 2017, the 30-year mortgage rate was 4.01%. This reflects an increase of 58 basis points, year over year (see Figure 6). 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 30-Year Fixed Mortgage Rates Figure 6 Source: Freddie Mac Page 7 of 12
Existing-Home Sales Regions Figure 7 Source: NAR Page 8 of 12
Market Overview: The May 2018 median sales price by region is as follows (with percentage increase or decrease over last month): Northeast $275,900 (+.3%) Midwest $209,900 (+5.2%) South $233,100 (+2.7%) West $395,800 (+1.5%) Median Sales Price Existing Homes by Region: May 2018 $395,800 $275,900 $209,900 $233,100 Northeast Midwest South West Figure 8 Source: NAR Page 9 of 12
Market Overview: Of the 5,430,000 seasonally adjusted number of homes sold in May 2018 (see Figure 1), the regional breakdown is as follows (with percentage increase or decrease over last month): Northeast 680,000 (+4.6%) Midwest 1,260,000 (-2.3%) South 2,320,000 (-.4%) West 1,170,000 (-.8%) Existing Home Sales Seasonally Adjusted Annual Rate by Region: May 2018 2,320,000 1,260,000 1,170,000 680,000 Northeast Midwest South West Figure 9 Source: NAR Page 10 of 12
MAY 2018 COMMENTARY In a recent USA Today article by Paul Davidson, five cities were identified as having the fastest selling homes (they also have rapidly appreciating home prices). The following is an excerpt from that article: Seattle. It's taking just 36 days from listing to sale. In April, home prices were up 19.5% from a year earlier in the technology hub that's home to giants such as Microsoft and Amazon. Strict zoning regulations make it harder to build new houses, limiting supply. San Jose, Calif. Time to sale: 36 days. This Silicon Valley epicenter was the most competitive housing market in the country in March, with 83.2% of homes sold above list price, according to Redfin. Home prices are up 22% in the past year. San Francisco. Time to sale: 36 days. It's the most expensive housing market in California with the median price topping $1.3 million, up 13.7% from a year ago, according to Trulia. The nosebleed prices are forcing out many residents, but those choosing to stay are snapping up homes. Oakland, Calif. Time to sale: 38 days. The somewhat more affordable market is benefiting from its status as a bedroom community to San Francisco. Home prices are actually down 6.2% annually but still up 50.5% the past five years. Denver. Time to sale: 41 days. Another technology hotbed that has seen home prices climb 10% the past year. As noted in our February 2017 report, well-paying jobs are being created in these cities, so it s no wonder that homes here are selling quickly, and for increasing amounts of money. Research reveals home prices in the West have risen by the greatest percentage over the past five years. California, Colorado, Oregon, and Washington are all located in this region (see figure 7). Those states, collectively, are home to a significant percentage of high-tech and creative marketing companies. Well-paying jobs in these industries are being created in metro areas such as San Francisco (including San Jose and Oakland), Los Angeles, San Diego, Denver, Portland, and Seattle. There is data showing the same phenomenon occurring, to a lesser extent, in the South. The Austin and Nashville metro areas are both in the South (see figure 7) and are experiencing a similar increase in job creation. Jobs in these regions are being filled by potential homebuyers who drive up prices in the local markets. Page 11 of 12
Other factors driving up housing prices include zoning regulations, building restrictions, and the scarcity of desirable land. Many areas in Portland and Seattle have restrictive regulations on new development. While some parts of the West and South still have relatively affordable housing, there is another side to the story. Land near the coast in the West is a desirable and finite resource, which also leads to increasing prices. It is common for a teardown residence on a beachfront lot in California to sell for $10,000,000, or more, in today s market. Companies in the San Francisco Bay area s Silicon Valley are finding a limit to the number of people willing to move into the area because of the high cost of living, especially housing, in California. Despite the high housing costs in some markets in the West, the data shows likely homebuyers are moving out of the Midwest and Northeast, heading to the West and South, which has resulted in home prices appreciating at a greater percentage in those regions. At what point these home price increases create unaffordable housing conditions remains to be seen, however mild climates and well-paying jobs continue to attract new residents to these regions. It appears likely the price increase trend will continue into the near future. Page 12 of 12