Keep YOUR fair share! Some frequently forgotten deductions....

FREE MONEY! A few easy tips to save you money!

NAR®: Economist's Commentary: Foot Traffic - Getting a Step Ahead

January 14, 2010

Ken Fears, Manager of Regional Economics

Many real estate practitioners are well familiar with the name SentriLock. They are the makers of the Lockbox NXT property access control system used by Realtors® to access and tour homes. In the past 5 years, SentriLock's products have steadily improved and today each Realtor® uses a unique code to open a SentriLock box. When opened, a lock box stores the unique user code and the number of times that the box has been used on a SentriCard, an industry exclusive smart card. This data can in turn be used to measure how many showings are being given in a specific area…foot traffic: data with significant potential for market analysts.

SentriLock, LLC. was kind enough to provide NAR Research with monthly data on the number of showings, number of cards (unique IDs used to access a lock box), and the number of showings per card for 161 real estate boards from 2005 through the present. A simple graph of the data for Indianapolis shows the strong relationship between the volume of showings and the volume of listings under contract or pending sale.

To analyze the data further, a weighted index was created to measure the percentage change in the number of showings from one month to the next. This index was then compared to the change in NAR's existing home sales and pending home sales each month. Not surprisingly, this showings index tracks NAR's pending home sales (PHS) index very closely as shown in the graph below. Statistical tests show that there is a strong correlation not just in the same month, but in the subsequent month meaning that an increase in showings in January would result in an increase in contracts in both January and February. In short, it may take a few weeks for people to find their dream home after starting the search.

Similarly, changes in the showings index preceded changes in the existing home sales figure by roughly two to three months. This finding makes sense as it normally takes six weeks to two months to close a contract. Thus, from the initial rise in showings to the increase in EHS, roughly three months elapse. Statistical tests were also run to confirm the power of these results.

The evidence suggests that showings data, like pending data or contract data, is a useful indicator of possible future sales. However, there are other factors that influence the relationship between showings and contracts. For instance, a drop in mortgage rates might cause buyers who are under contract to shop for better rates, extending the time between a showing and the sale of property.

Another limitation of the showings data is the geographic coverage. The data sample from SentriLock is well spread geographically, but only represents a small share of the total real estate boards in the United States. As SentriLock's market share increases and as a longer time-series of data is collected, this sample will improve to more accurately reflect market conditions for the entire United States. Still, the SentriLock data can provide valuable insights into the mechanics of a single market like Indianapolis.

Despite some limitations, showings data has the potential to be an indicator of future activity and a leading indicator for the industry. As time elapses, Sentrilock's repository of historical data will grow as its market coverage expands making this data more representative of national trends. Furthermore, a weekly index of showings data could provide a 2 to 3 week leading indicator for NAR's pending home sales index. Time will tell how the market uses this data or if it will choose to walk on by.

For more information on SentriLock and their products visit http://www.sentrilock.com/

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®.

Pending Home Sales Down from Surge but Higher than a Year Ago...

Washington, January 05, 2010

Contract activity for pending home sales fell after a surge of activity in preceding months to beat the original deadline for the first-time home buyer tax credit but remains comfortably above a year ago, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contracts signed in November, fell 16.0 percent to 96.0 from an upwardly revised 114.3 in October, but is 15.5 percent higher than November 2008 when it was 83.1.
Lawrence Yun, NAR chief economist, said a drop was expected. “It will be at least early spring before we see notable gains in sales activity as home buyers respond to the recently extended and expanded tax credit,” he said. “The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own. We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires.”

Buyers who have a contract in place to purchase a primary residence by April 30, 2010, have until June 30, 2010, to finalize the transaction to qualify for the tax credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
The PHSI in the Northeast dropped 25.7 percent to 74.4 in November but is 14.7 percent above a year ago. In the Midwest the index fell 25.7 percent to 82.0 but is 9.2 percent higher than November 2008. Pending home sales in the South fell 15.0 percent to an index of 97.8, but are 14.7 percent higher than a year ago. In the West the index declined 2.7 percent to 124.6 but is 21.4 percent above November 2008.

Yun projects an additional 900,000 first-time buyers will qualify for the extended tax credit in addition to about 2 million who have already purchased; 1.5 million repeat buyers also are expected to benefit from the credit.
“Many trade-up buyers, who have historically timed their purchase based on school-year considerations, will have to accelerate their buying plans if they need the tax credit to make a trade,” Yun said. Repeat buyers do not have to sell their existing home to qualify for the credit, but they must occupy the home they buy as their primary residence.

Yun added that mortgage interest rates cannot remain at rock-bottom levels for a sustained period and will likely inch higher in 2010. But the tax credit impact in the first half of the year and expected job growth impact in the second half will support home buying activity and absorb enough inventory to bring a rough balance between buyers and sellers. Home prices are expected to stabilize or even modestly rise as a result in 2010.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries

"Are You Ready For The Next Housing Boom?"

Existing-home sales rose again in November as first-time buyers rushed to close sales before the original November 30 deadline for the recently extended and expanded tax credit, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.4 percent to a seasonally adjusted annual rate1 of 6.54 million units in November from 6.09 million in October, and are 44.1 percent higher than the 4.54 million-unit pace in November 2008. Current sales remain at the highest level since February 2007 when they hit 6.55 million.

Lawrence Yun

, NAR chief economist, said the rise was expected. “This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” he said. “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline.”
An NAR practitioner survey shows first-time buyers purchased 51 percent of homes in November, compared with an upwardly revised 50 percent of transactions in October.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.88 percent in November from 4.95 percent in October; the rate was 6.09 percent in November 2008. Last month’s mortgage interest rate was the second lowest on record after bottoming at 4.81 percent in April 2009.

NAR President Vicki Cox Golder, said conditions are optimal for buyers in the current market. “Inventories have steadily declined and are closer to balanced levels, which indicate home prices in many areas are either stabilizing or could soon stabilize and return to normal appreciation patterns,” she said. “This means buyers still have good choices but are purchasing near the bottom of the price cycle with historically low mortgage interest rates. Throw a tax credit on top and it really doesn’t get any better for buyers with secure jobs and long-term ownership plans.”

Total housing inventory at the end of November declined 1.3 percent to 3.52 million existing homes available for sale, which represents a 6.5-month supply3 at the current sales pace, down from an 7.0-month supply in October.

Raw unsold inventory figures are 15.5 percent below a year ago. The last time there was a lower supply of homes on the market was April 2006 when it was at a 6.1-month supply.

“Nearly all markets experienced a solid sales gain from one year ago,” Yun said. “The only markets with measurably lower sales were in San Diego, Riverside, and Sacramento, where inventory shortages for lower priced homes are limiting sales.” For the second month in a row, sales have risen in all price classes from a year earlier. Prior to October, the only consistent gains were in the lower price ranges.

The national median existing-home price4 for all housing types was $172,600 in November, which is 4.3 percent below November 2008. Distressed properties, which accounted for 33 percent of sales in November, continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes in the same area.

Single-family home sales jumped 8.5 percent to a seasonally adjusted annual rate of 5.77 million in November from a level of 5.32 million in October, and are 42.1 percent above the pace of 4.06 million in November 2008. The median existing single-family home price was $171,900 in November, down 4.4 percent from a year ago.

Existing condominium and co-op sales in November were unchanged from a seasonally adjusted annual rate of 770,000 in October, but are 60.1 percent above the 481,000-unit pace a year ago. The median existing condo price5 was $178,000 in November, which is 3.1 percent below November 2008.

Regionally, existing-home sales in the Northeast rose 6.6 percent to an annual level of 1.13 million in November, and are 52.7 percent higher than November 2008. The median price in the Northeast was $223,400, down 13.1 percent from a year ago.
Existing-home sales in the Midwest increased 8.4 percent in November to a pace of 1.55 million and are 53.5 percent above a year ago. The median price in the Midwest was $140,800, a decline of 0.4 percent from November 2008.

In the South, existing-home sales rose 4.8 percent to an annual level of 2.39 million in November and are 44.8 percent higher than a year ago. The median price in the South was $151,400, down 1.4 percent from November 2008.

Existing-home sales in the West increased 10.6 percent to an annual rate of 1.46 million in November and are 28.1 percent above November 2008. The median price in the West was $231,100, which is 4.1 percent below a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Federal Tax Credit