Negative equity rate falls below 20% for first time in US for years

In another sign that the US residential real estate market is recovering the national negative equity rate ended 2013 below 20% for the first time in years, according to the latest report from Zillow.

It fell to 19.4% of all home owners with a mortgage which means that nationally more than 9.8 million home owners remain underwater, owing more on their mortgage than their home is worth.

However, the good news is that negative equity has fallen for seven consecutive quarters as home values have risen, freeing almost 3.9 million home owners nationwide in 2013.

The national negative equity rate fell from 27.5% of all home owners with a mortgage as of the end of the fourth quarter of 2012, and 21% in the third quarter.

But while negative equity is slowly but surely receding, a number of factors will help ensure it remains a factor in the market for years to come and the report points out that the ‘effective’ negative equity rate, which includes those home owners with a mortgage with 20% or less equity in their homes, remains stubbornly high.

Some 37.6% of home owners with a mortgage are effectively underwater, unable to sell their homes for enough profit to comfortably meet expenses related to listing a home and purchasing a new one.

‘We've reached an important milestone as negative equity has fallen below 20% nationwide, which has helped free up marginally more inventory and contribute to further stabilization of the market,’ said Zillow chief economist Stan Humphries.

‘But a number of headwinds will prevent negative equity from falling at the kind of sustained, rapid pace we need before the market can completely return to normal, and it remains roughly four times what it is in a healthier market. High negative equity is just another sign of how distorted the market continues to be, and how far we still have to go on the road back to normal,’ he added.

Home values ended 2013 up 6.6% and this, according to Zillow, is the single largest contributor to the falling negative equity rate. But the pace of home value appreciation is slowing, with home values expected to rise just 3.4% in the next 12 months, according to the most recent Zillow Home Value Forecast.

As home value appreciation slows, the pace of negative equity improvement will slow too and nationwide, the negative equity rate is expected to fall to 17.2% by the end of 2014, according to the Zillow Negative Equity Forecast.

But in some local markets, negative equity could rise as homes lose value. Negative equity is expected to rise in 26 metro markets nationwide, including in St. Louis, the only market among the 35 largest that is expected to see its negative equity rate go up in the next year. Negative equity is expected to remain flat in another 227 metros.

Finally, at the end of the fourth quarter, the number of homes foreclosed nationwide fell to just over five homes per 10,000, from roughly 6.1 homes per 10,000 at the end of 2012.

The report points out that as foreclosure activity continues to fall, the pace of negative equity improvement will also slow, as home owners' debt is wiped from lenders' books following foreclosure.

Pending home sales in the US stalled in January, latest NAR index reveals

Pending home sales in the United States were essentially unchanged in January with gains in some states being offset by declines in others, the latest index report from the National Association of Realtors shows.

In particular monthly gains in the South and Northeast were offset by declines in the West and Midwest, according to the index which is a forward looking indicator based on contract signings.

Overall the index edged up 0.1% to 95 in January from an upwardly revised 94.9 in December, but is 9% below January 2013 when it was 104.4. The December index reading was the lowest since November 2011, when it stood at 94.6.

Lawrence Yun, NAR chief economist, said that factors which dampened December activity were also at play in January. ‘Ongoing disruptive weather patterns in much of the US inhibited home shopping. Limited inventory also is playing a role, especially in the West, while credit remains tight and affordability isn’t as favourable as it was a year ago,’ he explained.

The index in the Northeast rose 2.3% to 79 in January, but is 5.3% below a year ago. In the Midwest the index declined 2.5% to 92.9 in January, and is 9.3% lower than January 2013. Pending home sales in the South increased 3.5% to an index of 111.2 in January, and is 5.5% below a year ago. The index in the West fell 4.8% in January to 84.2, and is 17.5% below January 2013.

Existing home sales are expected to be weak in the first quarter, while prices continue to rise from limited inventory. ‘Increasing new home construction can quickly solve two problems, producing more inventory and taming price growth,’ Yun pointed out.

The pace of sales should pick up in the middle part of the year. Total existing home sales are projected at just over five million in 2014, slightly below the volume recorded last year.

The national median existing home price is forecast to grow in the range of 5% to 6% this year.

Report hits out at lack of transparency over fees among estate agents

A lack of openness by estate agents in the UK leads to home sellers often paying far higher fees than they need to, with contracts that often leave them thousands of pounds out of pocket, according to a new report.

Research by the HomeOwners Alliance found that only 2% of estate agents openly mention their fees on their website and 82% make no mention of fees at all.

This isn’t just smaller firms, no major regional or national estate agents make any reference to their rates or terms and conditions on their websites.

And even if a seller asks they will not always get an answer as the research also found that a third of estate agents refuse to give their fees out over the phone to sellers and two thirds of insist on doing an in-home valuation before even discussing fees.  However, most independent estate agents are upfront about the fees they charge.

Estate agent fees range from under 1% to 2.5% plus VAT for a sole agency contract but estate agents often fail to state whether VAT is included in their fee, despite a legal obligation to do so.

The report highlights some of the unfair practices it uncovered including hidden fees such as £99 registration fee,  a marketing incentive fee of £200, and hefty non-refundable deposits of up to £500 if the seller withdraws from the sale.

There were also examples of agents claiming they had the right to charge commission beyond the term of the contract with the seller, fees being charged upon exchange even if the sale falls through at completion, lengthy sole agency lock-ins of nearly half a year, compared to some agents that require no more than two weeks written notice and some charging fees to both seller and buyer.

Paula Higgins, chief executive of the HomeOwners Alliance, said that as estate agents are handling the biggest transactions in most people lives, they should be able to give a clear upfront answer on what their fees are and how much a sale will cost.

‘Estate agents are far too secretive about the fees they charge, and too often include blatantly unfair terms and conditions in their contracts. The result is that home owners routinely pay thousands of pounds more in fees than they need to, and too often end up in disputes with their agents, adding massively to the cost and stress of moving home,’ she  explained.

‘Estate agents do deals every day, putting them at a massive negotiating advantage to home sellers, who often have limited experience and don’t know what they should expect or what to watch out for. If estate agents were serious about cleaning up their industry, they would be more open and transparent, ensuring a more level playing field between themselves and their customers,’ she added.

One agency that is upfront is Emoov, which is a fixed cost agency. Chief executive officer Russell Quirk said that the firm is proud to promote its fees and terms and conditions on its website.
 
‘Vendors know exactly how much we cost and what they are getting for their money. We agree with the HomeOwners Alliance recommendation for home sellers to negotiate fees and contract terms. However, we feel that estate agency practice won’t change unless the commission only model becomes a thing of the past,’ he pointed out.

‘We believe that the no sale, no fee is damaging the reputation of the estate agency industry and promoting a wasteful approach where ‘successful sellers’ are the losers. In a system where only successful sellers are charged, one out of four people are paying for four out of four people’s marketing costs. Home sellers could be charged significantly lower fees if estate agents adopted a fixed cost approach. We are not saying that the entire fee needs to be paid up front. Part of it could be paid on completion, but that fee should be fixed and transparent so home sellers are clear on the costs,’ he added.

eMoov offers a flexible fee structure of £395 up front or £199 up front with £399 on completion, and no sole agency tie ins. According to eMoov’s own research, high street estate agents charge up to £774 an hour to sell a property, the highest hourly fees of all professionals providing consumer services, and more than three times the fee that top doctors charge.

UK house prices up for 11 month in a row, according to latest index

House prices in the UK in the three months February were 2.1% higher than in the three months November, according to the latest index from the Halifax.

The UK lender also says that that annual rate of price increase also rose again with prices in the three months of February 7.9% higher than in the same period last year.

On a monthly basis house prices increased by 2.4% in February, the eleventh monthly increase in the past 12 months, taking the average price to £179,872. But the average price is still 10% below the peak of the market in August 2007.

‘Several factors appear to have boosted demand, such as the improved economic outlook, unemployment falling faster than expected, improvements in consumer confidence and low interest rates,’ said Stephen Noakes, mortgages director at the Halifax.

‘However, continuing pressures on household finances, as earnings fail to keep pace with consumer price inflation, are expected to remain a constraint on the rate of growth of house prices. We are also seeing signs of a revival in house building, which should help bring supply and demand into better balance and curb upward pressure on prices over the medium and longer terms,’ he added.

The index report points out that sales are also rising and increased for the ninth successive month in January to 103,440, some 30% higher than in January 2013.

The number of mortgage approvals for house purchases, a leading indicator of completed house sales, was 11% higher in the three months to January than in the previous three months and 42% higher than in January last year.

The report suggests that market conditions are adding upward pressure on prices. While new buyer enquiries eased in January, this has been accompanied by a decline in the number of homeowners providing instructions to put their property on the market.

However, latest house building figures show signs of improvement which could help to bring demand and supply into better balance. The number of housing starts in England in 2013 increased by 24% to 98,610 from a year earlier.

RICS leads calls for stamp duty change in the UK

UK Chancellor George Osborne is being urged to look again at the nation's Stamp Duty thresholds with a view to announcing a change in his forthcoming Budget 2014.

The Royal Institute of Chartered Surveyors (RICS) is leading the calls, describing it as ‘an archaic tax structure which is distorting the housing market’.

RICS says that the existing ‘slab system taxes a percentage of a home's purchase price according to which value bracket it happens to fall into. For instance, a buyer purchasing a property for under £250,000 would pay 1% of the price in tax, while a home sold for just one pound more would generate a tax bill of 3%.

This means that many buyers are financially unable to venture above the threshold and vendors may have to price their home below what they may otherwise have sold it for.

RICS believes that the government should consider a fairer, marginal rate to replace the current structure which sees few homes come onto the market at between £250,00 and £275,000 whether or not they are worth that price.

RICS also says that the government should consider adapting the hugely successful Help to Buy to suit individual regions' needs. Some 60% of RICS members surveyed believe that adjusting the scheme on a regional basis would make the market more sustainable. Furthermore, half of those who are in favour believe that the funding should be limited purely to first time buyers. RICS would like to see the government reassess the scheme with a view to providing the relevant help according to an individual region's needs.

There has been much talk recently in the property industry about the creation of garden cities to help meet the huge housing shortfall in the country and RICS says in its pre-Budget statement that they could prove a good means of boosting the supply of homes on the market.
 
However, it adds that these cities need to be located in places where people are able and willing to live, close to sources of employment and the houses need to be affordable housing. To make the garden cities a reality the government needs to publish its outline prospectus to test the market by giving potential developers, communities and investors clarity and certainty.

‘This is a very important Budget for the Chancellor and one which will shape the economy in the run-up to the general election,' said Jeremy Blackburn, RICS head of UK policy.

'A major area of concern in the property sector, at present, is the current Stamp Duty system which is both out of date and distorts the market by taxing buyers disproportionately high amounts should they go just one pound over the pre-set thresholds. A more intelligent, modern way of taxing property sales is needed for a market which is changing at a rate of knots,’ Blackburn explained.

‘We would also like to see George Osborne provide more detail as to exactly what is meant by new garden cities and precisely how they would benefit communities and the economy,’ he added.

UK landlords have small portfolios and tend to live near their investments

Some 56% of landlords in the UK live within 10 miles of their rental property and they often have small portfolios with only 6% owning more than one, new research shows.

They are also seeing positive growth with the average monthly rent up 3.1% year on year to £861 per calendar month, according to the latest monthly lettings index from property lettings agency Countrywide.

The biggest increase was in Scotland where rents were up 9.6% year on year to £626 per calendar month, followed by Central London up 8.5% to £2,630 per calendar month.

The West Midlands and Yorkshire and Humberside saw a year on year decrease in average monthly rents, down 6.2% and 0.7% respectively.

The index also shows that the region where most landlords live near their rental properties is in the North East where 72% are within 10 miles. The number of landlords living within 25 miles of their properties is also highest in the North East at 83%, followed by the North West at 81%, East Midlands at 71% and London at 60% of landlords.
London also has the largest proportion of landlords living more than 100 miles away, with more than one in five landlords doing so, which is nearly twice the UK average.

In more rural areas such as Wales and the East of England, the low proportion of landlords living within 10 miles of their rental property is explained by a sparse population. Instead of investing in the same village or town, landlords choose to live further away whilst still remaining close enough to keep an eye on their asset.

The proportion of landlords living between 10 and 25 miles away in Wales and the East of England is the largest in the country.

The size of landlord’s portfolios tends to be small with only 6% of landlords owning more than a single rental property. Landlords in London have the smallest average rental portfolio size with only 4% of landlords owning more than a single property.
 
The report suggests that the cost of purchase and size of deposit required is a significant barrier to increasing portfolio size.

On a monthly basis the average rent was up 0.2% but seven out of 10 regions saw a month on month decrease with Yorkshire and Humber seeing the greatest decrease, down 6%, followed by the North East, down 3.1%.
 
Of those regions that saw an increase in average monthly rents, Central London and the South West saw the greatest month on month increase, up 4.1%.

And arrears are falling. They were down year on year in all regions apart from Scotland and the East of England which saw arrears up by 2.7% and 0.1% respectively. The North East saw the greatest year on year fall in arrears, down 1.8%.

‘Location is key to buy to let investment and as the findings show, landlords tend to purchase in areas they are knowledgeable of in terms of property prices, monthly rents and the local amenities that attract tenants to an area,’ said Nick Dunning, group commercial director at Countrywide. 
 
‘Given 94% of UK landlords own a single rental property, many choose to take a hands on approach in regards to management, so favour being closer to their rental accommodation,’ he added.

He also pointed out that the latest English Housing Survey published by the Department of Communities and Local Government shows that in 2012/2013 the private rented sector overtook the social rented sector to become the second largest tenure in England after owner occupiers. 

‘With the private rented sector continuing to grow, there is increasing need for more good quality rented accommodation. Current economic and property market conditions are encouraging for both current and potential investors,’ he explained.

‘Towns and cities always prove particularly popular with tenants due to their range of amenities and facilities. Locations with good road and rail links are also high on the list of desirables for tenants, making these types of places reliable for buy to let investment,’ said Dunning.

‘Growing average monthly rents across the UK shows the increasing attractiveness of regions outside London. London still remains a good place to buy property given exceptionally strong capital growth over the last 12 months but investors are venturing further afield for investment opportunities,’ he concluded.

Calls for streamlined eviction process for UK buy to let landlords

A swifter and more streamlined eviction process in the buy to let sector in the UK would encourage more landlords to enter the market and provide a greater choice of properties for reliable tenants looking for private rental accommodation, it is claimed.

Landlord Assist, a tenant eviction and rent recovery firm, is backing calls for fast track evictions amid speculations that the government is planning to put measures in place to speed up the eviction process for private landlords following concerns that pressures on the courts are leading to lengthy delays.

It is understood that landlords and some housing charities have been asked to attend a government working group to discuss proposals and possible options to speed up the eviction process for private landlords.

For many landlords launching eviction proceedings against troublesome tenants can result in them going months without receiving any rent. Stories of possession claims taking between six and 12 months from start to finish are not uncommon and, at a time when a tenant may not be paying the rent, landlords can go a long time without receiving any income from their properties.

For some landlords this can result in them falling behind with mortgage payments and have a detrimental impact on their credit rating.

Graham Kinnear, managing director at Landlord Assist, believes that amendments to eviction procedures would be welcomed by landlords in their efforts to remove nuisance tenants who refuse to pay rent or have anti social behaviour issues, and replace them with good ones.

But he says that good reliable tenants would also benefit from an accelerated eviction process as it will help to weed out unscrupulous tenants, who often keep them out of the best properties. Moreover, Kinnear believes a quicker eviction process may encourage more landlords to enter the market which would provide tenants with a greater choice of properties too.

‘We do not feel that there is a real need to alter the grounds of securing a vacant possession or the methods by which a landlord can gain possession of their property. What we would like to see is a swifter possession service which will reunite the landlord with their property in a timelier manner. This will help to minimise the losses incurred by many landlords and may even encourage further landlords to enter the market place, which would help to address the current housing shortage in the UK,’ explained Kinnear.

‘At the same time introducing a swifter eviction process will also support decent tenants looking for rented accommodation as they will be able to replace troublesome tenants much quicker than is currently the case,’ he added.

Stephen Parry, commercial director at Landlord Assist, pointed out that the current housing shortage in the UK means there are many good tenants looking for rented accommodation who would be in a position to replace evicted tenants. He advises landlords that the best way to protect themselves from rent arrears is by carrying out reference checks prior to the tenancy agreement.

‘Referencing is a key part of the letting process and remains a simple and affordable way for landlords to paint a vivid image of their tenant. Background checks on tenants are essential and should, as a minimum, include a credit report plus references from previous landlord and employers,’ he said.

‘Only with this type of information can landlords be confident that tenants can afford rental payments and meet their tenancy obligations,’ he added.

Rising UK house prices making city properties more expensive

Two popular cities, Oxford and Winchester, have been named as the least affordable in the UK as rising property prices make many locations are still out of reach of ordinary buyer

Affordability has improved since the property price peak in 2008, but last year affordability deteriorated due to rising house prices, according to the latest Lloyds Bank Affordable Cities Review.

Home affordability in UK cities has improved in 51 of 62 cities in the last five years but there is also a distinct north-south divide remains and the average price for a city home in the UK stands at £184,215, some 5.8 times gross annual average earnings, down from 6.1 in 2009 and just under 20% below the peak of 7.2 in 2008.

The past year has seen deterioration in affordability in cities, driven by rising house prices across the country. The average UK city house price has risen by just over 5%, from £175,060 in 2013 to £184,215 in 2014. This has resulted in overall affordability slightly worsening in the last 12 months from 5.6 to 5.8 times gross average earnings.

Over the last five years, the slight increase in affordability across UK cities as a whole is caused by an average house price decline of £827, and an increase in the gross average annual earnings in those cities of £1,292.

The top 15 most affordable cities for home buyers are in Scotland, Northern Ireland or the North of England, and the next five on the list are in the Midlands or Wales. At the other end of the spectrum, the 17 least affordable cities are all in southern England, with Lichfield, Leicester and York completing the top 20.

However, the top 10 UK cities with the highest house price growth in the last decade, eight are in Scotland or the north. Scottish cities top the list, with Aberdeen at 94%, Dundee at 60% and Inverness at 46%, seeing the biggest changes. In England, Carlisle, Hull and Bradford all saw their house prices rise by 40% or more since 2004.

Rising property prices in the last 12 months mean that cities in southern England dominate the least affordable rankings. Oxford’s average house prices are now 11.25 times the gross average earnings in the city. At an average price of £340,864, houses in Oxford are relatively more expensive than the average earnings in the city, partly due to Oxford’s attractiveness to commuters working in London. Last year, Oxford’s affordability was 9.8.

Winchester is next at 9.65, followed by Truro at 8.57, Bath at 8.05 and Brighton and Hove at 7.94, making up the top five least affordable cities. Lichfield at 6.13, Leicester at 6.07 and York at 5.98 are the least affordable cities outside southern England.

Stirling has overtaken Londonderry as the UK’s most affordable city, with an average property price of £132,734 that is 3.3 times gross average annual earnings. As a result of lower house prices, cities in Northern Ireland also continue to rank as among the most affordable in the UK, with Londonderry at 3.56, Newry at 3.9 and Belfast at 4.12, following Stirling in the list. The most affordable city in England is Bradford at 4.15.

But city affordability is now better than 10 years ago, the report also shows. City house prices are now lower than a decade ago as a multiple of earnings, at 5.8 times gross annual average earnings compared with 5.9 in 2004. In this time, average city house prices have increased by 22%, but average earnings in these cities have increased slightly more, by 23%.

Living in the city is also more affordable than across the UK as a whole, as the UK average house price to earnings ratio stands at 5.9, compared to 5.8 in UK cities. This is driven by higher wages earned in UK cities, as house prices in UK cities are on average 7% or £12,730,  higher than their respective county averages.

‘Over the last five to 10 years, affordability has marginally improved in most UK cities, as increases in earnings have kept up with house price rises in that time,’ said Marc Page, Lloyds Bank mortgages director.
‘However, the economic and lifestyle benefits often associated with residing in cities are continuing to drive demand, especially in the south of England. With city house prices continuing to rise, affordability deteriorated slightly last year, but the trend since 2009 is positive for the majority of UK cities,’ he added.

Approvals for new homes in Australia jump 6.8% to reach record level

Residential building approvals in Australia reached record levels in January 2014, up 6.8% in seasonally adjusted terms, according to the Housing Industry Association, the voice of Australia’s residential building industry.

Over the last 12 months approvals have totalled over 182,000, the highest 12 month total since 2004 and in the three months to January approvals were at an annualised level of over 200,000.

The figures shows that the strong performance recorded during the second half of 2013 is continuing into 2014, according to Shane Garrett, HIA senior economist.

‘This indicates that the pipeline of residential building work is looking particularly healthy. These approvals should translate into a boost in real activity on the ground over the coming months,’ he explained.

During January, total detached house approvals increased by 8.6% with multi unit dwelling approvals rising by 4.7%. In seasonally adjusted terms, total dwelling approvals during January numbered 17,514, the highest result for a single month in over 11 years.

‘These figures show that the housing activity may finally be reaching the kind of levels demanded according to market fundamentals. Over the past decade, Australia has outshone almost all developed economies in terms of economic growth and population increases, yet structural barriers largely impeded an adequate response in housing supply,’ Garrett pointed out.

‘We are now seeing a real opportunity to begin plugging the housing deficit that has opened up over the last decade and we urge policymakers right across Australia to ensure that planning systems, land supply and infrastructure delivery are streamlined further in order to ensure the long awaited supply response can continue,’ he added.

The strong result is consistent with the stronger forecasts outlined in the HIA’s latest series of outlook reports. This year the HIA expects about 165,600 commencements, followed by 168,000 starts in 2015.

There is, however, considerable variation from state to state. In New South Wales the number of building approvals increased by 5.4%, in Victoria they jumped 10.4%, and South Australia also saw a surge at 10.5%. Queensland saw a rise of 1.2% and Western Australia 5.6%.

But in the Northern Territory there was a huge drop, with new approvals falling by 28.3% while the ACT also saw a fall, down 2.3%.

Miami see blistering start to 2014 with sales, prices and listings all up

Following three consecutive record sales years and more than two years of appreciation, the Miami real estate market began this year with strong sales, prices and new listings.

In January, residential real estate sales increased 11.6% compared to January of last year, according to data from the Miami Association of Realtors. Single family home sales increased 9.8% year on year and condominium sales were up 12.9%, it also shows.

Median sale prices again increased significantly for both single family homes and condominiums in January. Family home prices were up 16% to $225,000 and condo prices up by 24.4% to $186,000.

Family homes have now experienced 26 months of growth and condos have seen 31 months in a row of price rises.
The average sale price for single family homes increased 32.3% from $308,978 in January 2013 to $408,626 last month and the average sale price for a condominium increased to $361,295 from $290,378 in January 2013.

‘Record demand for Miami properties continues to fuel significant appreciation despite much needed supply readily becoming available,’ said Liza Mendez, chairman of the board of the Miami Association of Realtors.

‘While the Miami real estate market continues to strengthen, rising inventory is fortunately creating a more balanced market between buyers and sellers. Such balance reflects the health of the local market,’ she added.

New listings of single family homes increased 13.8% year on year and condo listings surged 20.1%. The association believes that this reflects the success of its campaign to encourage home owners to sell during the severe housing shortage experienced in 2012 and 2013 as more inventory creates a more balanced market between buyers and sellers.

‘The current performance of the Miami market reflects seller confidence. Home owners in Miami have recovered value lost during the downturn and have realized it’s a good time to sell, which is bringing much needed supply to the local market after years of very limited housing inventory,’ explained Francisco Angulo, residential president of the association.

Active listings at the end of January increased 24% overall with inventory of single family homes up 17.1% and condominium inventory up 27.5%.

At the current sales pace, there is a 5.6 month supply of single family homes, a slight increase from 5.3 months in January 2013, and a seven month supply of condominiums, up from six months in January 2013, an increase of 20.9%.

Miami real estate continues to be sold quickly and almost at asking price. The median number of days on the market for single family homes sold in January 2014 was just 46 days, a decrease of 2.1% from the previous year. In addition, the average percent of original list price received was 95.4%, up 1% from 47 days a year ago, indicating that single family homes are being priced right and buyers realize they need to be competitive in the current market.

The median number of days on the market for condominiums sold in January was 56 days, an increase of 14.3% from the same period in 2013. The average sales price was 96.1% of the asking price, a negligible decrease of 0.7%.

The data also shows that the number of cash sales is falling. Some 62% of total closed sales in January were all cash sales, compared to 65% in January 2013, but is still significantly higher than the national average of 33%.

All cash sales accounted for 47.3% of single family home and 72.4% of condominium closings, compared to a year ago when cash sales were 50.1% of single family home sales and 75.4% of condominium sales.