Metro Area Home Prices Continue to Increase

Metro areas continued to post price gains in the first quarter, rising alongside national median price increases, the National Association of Realtors ( NAR ) reported.

Out of 150 metro areas the NAR tracks, 133 displayed price growth in the first quarter of this year compared to the same quarter a year ago.
In the last quarter of 2012, 133 metro areas also experienced price increases from the year before.

“Some of the previously hard-hit markets like Phoenix, Sacramento and Miami continue to experience a dramatic turnaround, while a new set of areas like Atlanta, Minneapolis and Seattle have begun to show strong signs of upward momentum,” noted LawrenceYun, NARchief economist.

The association also provided first quarter data on national median prices and sales.

During the first three months of this year, the median price for an existing single-family home rose 9.3 percent from the year before to $176,600. The year-over-year improvement represents the biggest annual gain since the fourth quarter of 2005, according to the NAR .

At the same time, existing-home sales, including single-family and condo, rose to a seasonally adjusted annual rate of 4.94 million, a slight 0.8 percent increase from the previous quarter, but a 9.8 percent gain compared to the first quarter of 2012. First-quarter sales stood at their highest level since the fourth quarter of 2009 when they hit 4.95 million as a result of the homebuyer tax incentive, NAR explained.

Distressed homes, which NAR defines as foreclosures and short sales generally sold at discounts of up to 20 percent, continued to account for a smaller share of sales. Distressed sales represented 23 percent of first quarter sales, down sharply from 32 percent a year ago.

Even though prices are on the rise, Gary Thomas, NAR President and broker-owner of Evergreen Realty in Villa Park, California, says conditions remain favorable for buyers.

“Historically low mortgage interest rates and home prices that remain well below their peak mean most buyers can purchase well within their means, assuming they meet ongoing stringent credit standards,” he said.

According to the NAR report, to purchase a home at the national median price, a buyer making a 5 percent down payment would need an income of $36,500, yet the national median family income was $62,200 in the first quarter. The calculation assumes 25 percent of gross income would go toward principal and interest and a mortgage interest rate of 3.5 percent.

Despite affordability, the transition into homeownership is still a challenge.

“While we expect the single-family housing recovery to continue trudging along, the still-dropping homeownership rate and hot multifamily market suggest that the shift from ownership to rental is not quite over,” said Julie Zisfein, of Auction.com research.

On a regional basis, the NAR found the West led with the biggest annual jump in prices after the median price rose to $247,800, up 24.4 percent from a year ago. With low inventory continuing to limit sales, the region experienced 1.1 percent decline in sales from the previous quarter, while sales were up by just 0.6 percent from the year before.

In the South, the median price for an existing home rose 9.3 percent from a year ago, while existing-home sales grew by just 0.7 percent in the first quarter, but are up by 13.3 percent from a year ago.

Midwest experienced an 8.2 percent gain from the year before, while sales were up quarterly and yearly by 1.2 percent and 15 percent, respectively.

In the Northeast, prices rose by 2.9 percent from the year before, and sales posted a stronger 4.4 percent increase from the previous quarter and a 9.1 percent gain from the year before.

REO and Short Sale Fraud Continue to Change

Most mortgage fraud takes place in the short sales and REO space, according to Rob Hagberg, associate director of fraud investigations at Freddie Mac. “This area is ripe with fraud,” he said during a webinar hosted byCoreLogic.

While servicers and others in the industry have adapted to some fraud schemes and put measures in place to detect and prevent fraud, schemes continue to evolve as fraudsters find new ways to manipulate sales.

For example, many fraudulent REO and short sale transactions involved the use of a straw buyer who temporarily purchased a home at an undervalued price and then sold it to a third party at a higher price.

These transactions would be immediately suspicious to anyone reviewing property records, which would show a home was sold for one price one day and then almost immediately resold at a higher price.

Savvy perpetrators are now eliminating the second buyer. Property records will not reveal a middle buyer, but they will reflect a higher price than the servicer agreed to.

Another growing trend in short sale fraud is what Hagberg calls the “short sale and stay.” This occurs when an underwater homeowner wishes to keep his or her home but wants to lower his or her loan amount.

The homeowner will recruit someone—often a friend or family member—to purchase the home through a short sale, and the original owner will remain in the home.

Sometimes, a wife will use her maiden name to purchase the home from her husband, and the couple will stay in their home.

Both short sale and REO fraud often require fraudsters to convince servicers a home is worth less than it actually is.

To accomplish this, fraudsters have attempted to bribe REO brokers, manipulate MLS data to lower the prices of comparable properties, and have engaged in reverse staging to make a property appear in worse condition than it is.

In cases of reverse staging, Hagberg has seen cabinet doors removed from kitchen cabinets, garbage left lying around the home, and sometimes old fish hidden behind refrigerators to create pungent scents.

Sometimes BPOs include false property stigmas such as high crime rates, and in a few instances Hagberg has seen properties undervalued by as much as $40,000 under inaccurate statements that the home had been a meth lab and would need to be entirely gutted.

Four Reasons Your Home May Not Be Selling

There are exceptions to every rule under the sun.  So, even though the current market climate is hot in most places, every neighborhood, town and county has those homes that simply sit on the market for days, weeks, even months longer than average. 

These are the outliers.  And being the outlier, in this particular context, is not a fun place to be. When all the other listings seem to be flying off the market and yours seems to be stuck, it’s easy to delve into fear, panic and even depression.  

Here’s a glimmer of hope:  there is a pretty short list of reasons that most slow-to-sell homes lag on the market. You’ve probably heard at least a couple of them before, maybe even from your real estate agent. But sometimes hearing things a few times, from different people and at the right moment in time can cause the shift in position that will power a shift in the situations that are keeping your home sale stuck - and your life plans stuck with it.

1.  You’re stuck on a too-high price. If your home has been sitting on the market for significantly longer than average, the market has spoken. And it’s saying: the price is too high vis-a-vis the current condition of the market and the property.  Period.

There are only three variables in this equation - which is helpful, because it means there are really only three ways to fix this situation:

• change the condition of your property
• wait until your market conditions change to support a higher price
• change the list price.

That’s it. That’s all there really is. For most sellers the simplest, most sensible of these three variables is to modify is the list price. This is especially so in cases where the home is in good basic condition, is well-staged, and other homes nearby are flying off the market.  The fact that you don’t want to hear that your home is overpriced doesn’t mean it’s not the truth. 

Today’s market is ascending in most areas, which simply means that prices are on the rise. Some sellers are waiting to list their homes, hoping that prices will be higher in the years to come. But if you want and need to sell your home sooner than later or you are hoping to sell in time to buy your next home before prices rise much higher, holding out for a higher price probably doesn’t make sense. 

In fact, your resistance to making a necessary price cut could backfire. Buyers often keep their eye on overpriced but otherwise nice homes, waiting until they suspect the seller’s desperation will make them more receptive to a lowball offer. 

2.  Your home is not be fully exposed to the market.  So the truth that the market has spoken on the matter of overpricing does have one caveat: it assumes the market has actually been exposed to your home.  If your home’s marketing plan has been limited to that red-and-black For Sale sign you got at the hardware store and stuck in the lawn, chances are good that your home is lagging because your area’s community of buyers and brokers have no idea it is on the market!  

Other common conditions of home sale-preventing underexposure include:

• Homes that are not listed on the area’s Multiple Listing Service or MLS
• Homes that are not listed on major real estate search engines, like Trulia
• Homes that are very difficult to show or are rarely made available for viewing
• Homes that are listed online with no, few or poor quality property photos.

If your home is lagging on the market and any of the above apply to your listing, they could be the culprit. If you chose a listing agent who has a strong track record of success selling homes, these sorts of listing issues can sometimes reflect a glitch in the system.  So, do a double check - Google your address and see how your home is represented online. If you find any of these issues, work with your agent to get them fixed.  

If you didn’t engage a listing agent at all and your home is simply not moving, it might be time to reconsider and course-correct your home-selling plan. 

3.  Your home has a glaring issue that needs resolving.  Many times, a big condition issue can cause a home to sit on the market unless and until the seller either (a) fixes the issue, (b) offers a credit or incentive to offset the issue or (c ) reduces the price so low that a buyer thinks the bargain is worth the hassle.  Some situations are too costly for a seller to fix (e.g., foundation needs replacing), and others are not fix-able (nuclear power plant next door).  In these situations, reducing the price might be the only resolution.

But other listings are sabotaged by highly fixable issues the seller simply might not be willing to admit are at the root of the problem.  You might love the highlighter yellow you chose to paint all of your home’s interior walls, the wall-to-wall powder blue sculpted carpet or the “rustic” look of the weathered paint, fences and trims on the exterior.  Or maybe you don’t love them, but you think buyers should just look past these issues.  

Your home’s slowness to move is a wake-call.  The average buyers’ tastes might simply differ from yours. Or maybe in your area and price range, buyers don’t have to look past issues to find a home that is move-in ready.  To concern yourself about what buyers “should” be willing to do is to live in a fantasy world - and as long as you’re there, your home won’t move in real life. 

4.  You’re not really ready to move on.  If none of your agent’s advice about how to shift your home’s fate makes sense, if everything on this list strikes you as outrageous, if even your friends’ and family members’ urgings to cut the list price makes you think the whole world must be crazy, ask yourself this question:  are you really, truly ready to move on?