Can we get a sense of the early-2014 market by how this year is winding up?
We thought mortgage rates dipping back into the 3%-range again would be a boost, and it looked like we were headed that way. Two weeks ago, the 30-year fixed rate was 4.10%.
Today’s 30-year fixed rate? 4.42%.
Sales are a precursor to the direction of prices. The second half of 2012 was spectacular, with both the NSDCC sales and average pricing skyrocketing – and the frenzy was on.
Statistically, the frenzy conditions have carried through the third quarter of 2013, but it looks like we’re going to experience some drop off, at least in the sales counts:
| Year | ||||
| 2009 | ||||
| 2010 | ||||
| 2011 | ||||
| 2012 | ||||
| 2013 |
*Quarter-to-date
We are off to a good start this quarter, though currently 16% below the sales closed in the same period last year (we will still have late-reporters).
If we close the same amount of sales between today and 12/31/13 as we did in the same period last year, the 4Q13 total will only be 769, which would be an 8% decline. It’s not that suprising that sales could falter, with the Y-O-Y average pricing up 25% and a huge bump lately.
Will 4th quarter sales this year be able to match last year?
We will need 511 more closings by 12/31/13 to tie last year’s 4Q sales count.
Current pendings: 308
Current contingents: 55
Number that went pending after 11/12/12 and closed by 12/31/12: 154
Total: 517
Of the 308 pendings, 119 of them are still in their 17-day inspection period. If 25% of them fail, ten percent of the remaining pendings drag into 2014 before closing, and half of the contingents fail to close by year-end, then we will close around 430 sales the rest of the 4th quarter.
321 + 430 = 751 closings in 4Q13, or roughly 10% less than 4Q12.
No one is going to mind that small of a dip in sales, especially those who compare to any previous year besides 2012. We should sail into 2014 in relatively good shape.
Yesterday we saw that the current inventory is in a slight seasonal decline. What could screw up a boisterous Spring-2014 selling season? If the inventory spikes higher with OPTs, or we run out of buyers who are willing to pay $500/sf. We will see!
I will break down the sales and $/sf by zip code later.
While we are on forecasts, here’s Yunnie’s:
Mr. Yun outlined his housing-market forecast for 2014 at NAR’s annual conference here, predicting that existing home sales will remain flat at roughly 5.1 million units, prices will rise by 6% and interest rates, currently at 4.16%, will jump to 5.4% by the end of next year.
http://blogs.wsj.com/developments/2013/11/08/nar-sees-home-prices-rising-in-2014-rates-jumping-to-5-4/?mod=WSJBlog&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Fdevelopments%2Ffeed+%28WSJ.com%3A+Developments+Blog%29
I think interest rates are they key. If they stay low the party continues for awhile.
Every major purchase is all about the payment since the money supply has been expanded so much.
Looks at cars and trucks. Basically the working man cannot afford a 30 – 40k vehicle by paying cash. That’s why leasing is also becoming very popular.
Basically everyone has to get a loan to buy a house at these price levels. Most people do not have 20k cash to their names.
I think Yunnie just makes random guesses. He doesn’t even bother to calculate the monthly payment if his prediction comes true. For those wondering. 5.4 interest rate plus 6% appreciation means the monthly payment goes up 22%. On a 500K loan the payment goes from 2433 to 2976. I guess every has an extra $6K per year because the stock market is going up.
I disagree livinincali. Not everyone lives in Cali like we do and most do not. Mr. Yun is speaking to a nation with average prices less than half of what they are here. His statistics take that into consideration.
Doesn’t matter what the value of the home is the monthly payment still goes up 22% if his predictions come true. Say a 200K loan at 4.12%. That is a 968/mo payment. A 212K loan at 5.4% is 1190/mo. That’s a used car payment difference. Do buyers really have that extra $200/mo laying around?
Assume a 28% front end ratio and the current buyer (968/mo) needs an income of 41500. Next year to buy that same house at 1190/mo the buyer needs an income of 51000.
Personally I think his interest rate prediction is likely to be really wrong and he might get the appreciation figure. But if he is right about the interest rate there’s no way he’s going to get the appreciation figure.
Agreed, and it shows how incompetent he and NAR are about their predictions.
They are picking numbers out of a hat.
But I agree with Karlsgood that NAR isn’t speaking about or to anyone in California. They couldn’t hack it here.