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• Foot traffic and future home sales have a strong correlation.  SentriLock, LLC. provides NAR Research with monthly data on the number of showings.
• Foot traffic in the area covered by the Scenic Coast Association of REALTORS®, Inc. (CA) for March jumped 24% compared to a year earlier.
• That year-over-year gain reversed the 2% year-over-year decline registered in February.
• Foot traffic in this area was strong last spring, but surged in late summer, the typical pattern for this market.  This trend would mark an early and more balance sales path for the year.

Demand Pulled Forward, Or Breakout Growth?

On April 20, 2012, in Economist Commentaries, by Ken Fears, Manager, Regional Economics

The housing market in the Washington metro area eased in March, but fundamentals remain strong. Because of distortions in recent years, it is difficult to know definitively if sales for the entirety of 2012 will outpace 2011. However, demand is likely to continue to grow in the near term, posting stronger figures in April.

Home sales in the Washington metro area as reported by Real Estate Business Intelligence (RBI) jumped 33.4% from February to March, but eased 3.8% in March of 2012 compared to March of 2011. The year-over-year change in sales is important as it tells us how the trend compares to a typical spring or at least the most recent. If the year-over-year trend is rising, it bodes well for the market. While the year-over-year pace of sales in March eased 3.8%, it was up 1.8% in February. News reports are rife with concerns that this year’s strong spring market is a reflection of demand being pulled forward from the late spring or summer, when it would typically peak. Mortgage rates rising from record lows, higher fees at the FHA, and a warmer winter have all been cited as factors. So, which way is the Washington metro area headed?

Home sales typically rise through the late spring due to the end of the school year and the surge of families delving into the housing market. Families tend to require more bedrooms and square footage. As a result, the absolute number and the share of homes sold in the 1,200 to 2,999 square foot range tend to rise during the spring and summer and decline slowly thereafter. As pictured below in the bars to the left of the green line, the share of home in this range indeed followed this pattern in 2010 and 2011. Note that both the winter markets of 2010 and 2011 were atypically strong. The pattern for the spring of 2012 is depicted to the right of the green line in the chart below and contrasted with the spring of 2011. It shows that there was a surge in demand in the family-sized homes during January and February, the type of demand that typically occurs later in the spring. However, this pattern might also suggest that there was a large group of buyers with the ability to move during the school year; couples planning to have children, families with pre-school aged children, families moving within their neighborhood, or families with enough income to pay two mortgages simultaneously. Sales of homes smaller than 1,200 square feet or larger than 2,999 fell in January and March relative to last year, so they were not a contributor to this springs’ strength.

The important question is whether sales of family-sized homes will decline in late spring giving back the early gains, or if they will continue to grow through the spring, outpacing last year’s sales levels. A look at the pattern for new pending sales provides insight. The share of new pending sales in March that were in the 1,200 to 2,999 square foot range rose in December and January, pictured below, which translated into stronger sales in January and February. The share of new pending sales in this range eased in February, but jumped again in March. This pattern suggests that sales of family-sized homes are likely to climb in April in the typical pattern and will outpace last year’s figures extending the strong spring sales pattern that has occurred to date.

Market fundamentals support a pattern of growth. The unemployment rate in the Washington metro area averaged 6.0% in February of 2012, which is above the 5.9% level from a year ago. However, there were more than 70,000 additional employed persons in March than a year earlier, suggesting that the market’s strength has drawn more people back into the labor market to look for work. While the unemployment rate can impact confidence and perception, for home sales, the number of employed persons is what matters. Employment has been trending upward and is likely to continue.

Finally, total new pending sales jumped in March of this year compared to February as depicted in purple below and they are 19.0% stronger than in March of last year. Some may be alarmed by the rise in pending short-sales in the area, which tend to sit in pending status longer. However, pending short-sales rose only 8.9% over the 12-month period ending in March and have a smaller share of new pending sales, which implies that the bulk of new pending growth was non-distressed and will likely translate into new sales in the near future. Furthermore, Bank of America as well as both Fannie Mae and Freddie Mac announced new programs to streamline and speed up short sales, drawing down timelines. Faster responses would reduce the number of short-sales hung up in pending status or those that roll into foreclosure and add them to completed sales. If the programs are success, other banks would likely adopt similar programs, speeding up these transactions, which would in turn reduce the price discount on short-sales relative to the non-distressed portion of the market and reduce the flow of properties into foreclosure. As this pattern catches on nationally, it would take stress of lenders, allowing them to lend more easily.

The Washington metro area has experienced a strong, early spring market. Fundamentals remain strong in the area and the dynamics within the market suggest that sales should remain robust in the near term, outperforming last year.

[1] The Washington metro area is defined by RBI as Alexandria City (VA), Arlington County (VA), Fairfax City (VA), Fairfax County (VA), Falls Church City (VA), Montgomery County (MD), Prince George’s County (MD), and Washington, DC

[2] This range was selected as typical of a family with children. Homes greater than 2,999 square foot require an income that may not be representative of a typical family household and who may therefore not be budget constrained to owning just one home during the school year.

In this week’s housing news roundup, short sales flex some muscle while regulators and legislators debate changes to mortgage loan rules.

For the first time since the housing crisis began, short sales are becoming more prevalent than foreclosures. In addition, new rules are coming that would speed up the drawn-out short sale process. That’s good news for home owners underwater on their mortgages as well as the economy in general: Short sales put less of a hit on borrowers’ credit than foreclosures, and they reduce the number of foreclosures flooding the market, which negatively affect nearby home values. These stories and more in this week’s housing news roundup.

Bloomberg: Short Sales Surpass Foreclosures as Banks Agree to Deals

The number of U.S. home short sales surpassed foreclosure deals for the first time as banks became more agreeable to selling houses for less than the amount owed on their mortgages, according to Lender Processing Services Inc. Short sales accounted for 23.9% of home purchases in January, the most recent month available, compared with 19.7% for sales of foreclosed homes, data compiled by the Jacksonville, Fla.-based company show.

CNN Money: New Rules Will Speed Up Short Sales

The Federal Housing Finance Agency laid out new rules, which go into effect June 1, aimed at speeding up the short sale process, a move that could keep many homes from falling into foreclosure. In a short sale, the bank that holds the mortgage must agree to accept a price for the home that is less than what is owed. Even though short sales are considered a better alternative to foreclosure, banks often take so long to review and approve short sales that the deal falls apart and homes get repossessed.

HouseLogic: FHA Changes May Harm Home Ownership

Recent and pending changes to FHA-backed loans may increase barriers to home ownership and hamper the housing market recovery. Right now, sellers can pay 6% of the buyers’ closing costs. That helps first-time home buyers who often struggle to come up with enough cash for a down payment and closing costs. FHA is considering limiting closing costs to 3% or $6,000, whichever is greater, under the belief that putting up more cash makes buyers less likely to default later on their mortgages. The problem is that seller concessions are critical in many markets with high closing costs.

Wall Street Journal: Lenders Fear Impact of New Mortgage Rule

In recent weeks, after meetings with consumer bureau officials, several real estate industry groups and some consumer advocacy organizations have grown worried about how the Consumer Financial Protection Bureau could interpret qualified mortgage lending rules, which it aims to finish this summer. The rules are intended to protect consumers from the kind of risky loans that spurred the housing bust, but the lobbying groups believe the rules will make lenders overly cautious in their lending practices, hampering the recovery.

U.S. News & World Report: The Political Fight Over Principal Reduction

This year, Washington housing wonks have been fighting over principal reduction: reducing mortgage loan balances for underwater borrowers to help them stay in their homes. The Federal Housing Finance Agency allows Fannie Mae and Freddie Mac to modify loans under the federal HAMP program by lowering the interest rate, extending the term of the loan, and deferring principal interest free, but not by reducing principal. Other mortgage servicers use principal reduction as a tool to modify non-Fannie or Freddie loans. And that’s the crux of the fight — getting FHFA to add principal reduction to the list of approved tools in HAMP loan modifications.

By Meghan Smith: A communications assistant at QGA Public Affairs in Washington, D.C., Meghan Smith works with clients to provide outreach in the media and on the Hill.

Seems like all the green talk today is about buying things: buy Energy Star, buy solar panels, buy tankless water heaters, buy new sustainable building products. Buy, buy, buy. What’s a budget-minded home owner to do? Follow these five easy, cheap green nuggets of advice, of course.

1. Resist the temptation to buy.

If you’ve read this far, you’re probably already on board the no-buy boat. This first piece of advice is simply to provide validation (replacing something that isn’t broken isn’t green, and it’s not too budget-savvy either, and so on) and to encourage you to stay on board.

So give yourself a pat on the back every time you tell temptation to take a hike.

2. When you do need to buy, buy wisely.

Read product labels. You might need reading glasses to accomplish this, but it’s worth it.

Don’t try to figure out each ingredient — it’s much too hard to do that. Besides, a great many product-makers don’t even bother to list every ingredient.

Instead, train your eye to spot terms such as non-toxic, biodegradable, and petroleum-free, all of which give you the all-clear signal to go ahead and buy.

That helpful tidbit comes from WebMd, as well as this one: Beware of products that list a few specific terms, and then use non-specific terms such as “inactive ingredients” for the rest. And be leery of any products that list “fragrance” without telling you what ingredients make up the fragrance.

Be careful, though — label-reading can be addictive. Before you know it, you’ll be perusing the National Library of Medicine’s Household Product Database.

3. Dust off your Crock-Pot.

Yep, your Crock-Pot is an energy saver.

An electric oven at 350 degrees burns 2.0 kWh in just one hour. But a slow cooker at 200 degrees uses only 0.70 kWh over seven hours. And, besides, it’s nice to come home to delicious aromas and a meal that’s ready to eat.

4. Go crazy for power strips.

The most pragmatic way to save electricity is to turn off electronics when you’re not using them. But seriously, who does that?

Smart strips, which sense when a device is idle and shut off its power supply, are a good compromise. And they’re not that pricey. You can get one for about $25, although there are some pricier models.

If you do make the effort to hook up your computer and media equipment to a smart strip, it will pay for itself eventually.

How long will that take?

Depends on how much of a bad dog you were pre-smart strip, and how religious you become about using the smart strip, which is a perfect segue to the final piece of advice:

5. Just use less.

Turn off your lights, turn down your heat, turn off the water when brushing your teeth.
Obvious? Yes. But it’s really one of the simplest, easiest, cheapest things you can do to be
green.

Ask yourself (and answer honestly): Are you really paying attention to your electric and
water consumption? Awareness is half the battle. Maybe you need an energy monitor to
goose up your efforts.

Make yourself think about it day in and day out. That’s the hard part.

Bonus tip: How to be a better recycler.

Courtney Craig and Kathryn Hawkins contributed to this piece.

By Lara Edge Lara Edge has bought four homes, sold three, and recently downsized into an urban home less than half the square footage of her old suburban one. She’s a trained journalist with 20 years of editing experience, most recently at HGTV, which inspired her to try some DIY projects that gave her an invaluable lesson: Sometimes it pays to hire a professional.

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