Archives for August 2023

Pending Home Sales Rose 0.9% in July 2023: What Lies Ahead?

August 30, 2023 by Marco Santarelli

The Pending Home Sales Index is a leading indicator of housing activity. It measures housing contract activity and is based on signed real estate contracts for existing single-family homes, condos, and co-ops. When a seller accepts a sales contract on a property, it is recorded into a Multiple Listing Service (MLS) as a “pending home sale.” Most pending home sales become home sale transactions, typically one to two months later.

The Pending Home Sales Index Explained

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales.

Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues. According to the National Association of REALTORS®, the index is based on a sample that covers about 40% of multiple listing service data each month.

In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. An index of 100 equals the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

ALSO READ: United States Existing Home Sales Trends

Pending Home Sales Elevated 0.9% in July, Marking the Second Consecutive Monthly Increase

Key Highlights

Pending home sales improved in July, up 0.9% from June.
Month over month, contract signings increased in the South and West but decreased in the Northeast and Midwest.
Pending home sales fell in all four U.S. regions compared to one year ago.

Pending home sales increased 0.9% in July – rising for the second consecutive month – according to the National Association of REALTORS®. The Northeast and Midwest posted monthly losses, while sales in the South and West grew. All four U.S. regions saw year-over-year declines in transactions. The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – rose 0.9% to 77.6 in July. Year over year, pending transactions fell by 14.0%. An index of 100 equals the level of contract activity in 2001.

The Market Analysis

The small gain in contract signings shows the potential for further increases in light of the fact that many people have lost out on multiple home-buying offers,” said NAR Chief Economist Lawrence Yun. “Jobs are being added and, thereby, enlarging the pool of prospective home buyers. However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many.”

Pending Home Sales Regional Breakdown

The Northeast PHSI shrank 5.8% from last month to 63.2, a decrease of 20.2% from July 2022. The Midwest index fell 0.4% to 77.5 in July, down 16.0% from one year ago. The South PHSI lifted 2.0% to 95.3% in July, declining 10.9% from the prior year. The West index improved 6.2% in July to 61.3, dropping 12.8% from July 2022.

“Interestingly, the West region experienced a meaningful price decline in the past year and buyers are quickly returning as a result,” Yun added.

Implications for Existing Home Sales

Pending home sales often serve as a leading indicator for existing home sales, typically by one to two months. This rise in signed contracts aligns with the trend observed in new home sales during July. However, Danielle Hale, the chief economist for Realtor.com, noted that pending home sales are still lagging behind levels seen in the previous year. Existing home sales have only shown modest growth, which is partially attributed to persistently low housing inventory.

The Inventory Challenge

The shortage of available housing inventory remains a significant barrier to increased home sales across the nation. Many homeowners benefiting from historically low mortgage rates are hesitant to sell their homes and purchase new ones at higher rates. This dynamic has created an opportunity for new construction homes to supplement the limited inventory.

Challenges Ahead

While the recent data highlights the resilience of the real estate market, challenges such as limited housing options and affordability concerns are likely to continue impacting home sales in the coming months. The modest bounceback in existing home sales suggests that the market's recovery is still ongoing.

In summary, the July pending home sales data indicates a 0.9% increase in contract signings, marking the second consecutive monthly rise. While the Northeast and Midwest faced losses, the South and West regions experienced growth. The real estate market continues to show resilience despite challenges posed by rising mortgage rates and limited inventory. The National Association of REALTORS® remains committed to providing valuable insights and indicators for the housing sector.

ALSO READ: Will the Housing Market Crash Again?

Pending Home Sales Trends (Previous Months)

The table shows data from regarding pending home sales in four regions of the United States – Northeast, Midwest, South, and West. The data reveals interesting trends in pending home sales across the regions. The National Association of Realtors (NAR) publishes monthly data on pending home sales, which is seasonally adjusted and presented in the form of a seasonally adjusted annual rate (SAAR) in thousands.

June 2023 Figures

The data for June 2023 provides a snapshot of pending home sales in the various regions. In the Northeast, pending home sales stood at 67.1. Meanwhile, the Midwest saw a higher figure of 77.6, and the South recorded even stronger numbers at 93.3. The West region lagged behind with pending home sales at 57.7. In total, the overall pending home sales index rested at 76.8.

The month-over-month changes offer insights into the short-term shifts in pending home sales. The Northeast experienced a modest increase of 0.60%. On the other hand, the Midwest region saw a more substantial rise of 4.30%. However, both the South and West regions faced declines, with -1.17% and -1.20% respectively. Across all regions, the total change in pending home sales was 0.39%.

Comparing the pending home sales data from June 2023 with the same period of the previous year unveils the broader trend. The Northeast and Midwest both exhibited similar year-over-year drops, with -17.06% and -17.18% respectively. The South region experienced a somewhat milder decline of -13.85%. The West, while still affected, displayed a year-over-year change of -16.01%. When combining data from all regions, the total year-over-year change in pending home sales was -15.60%.

Here is the tabular data of pending home sales from June 2022 to June 2023. The units displayed are in thousands and are the seasonally adjusted annual rate.

Month	Northeast	Midwest	South	West	Total
June 2023	67.1	77.6	93.3	57.7	76.8
Change Month over Month	0.60 %	4.30 %	-1.17 %	-1.20 %	0.39 %
Change Year over Year	-17.06 %	-17.18 %	-13.85 %	-16.01 %	-15.60 %
Previous
May 2023	66.7	74.4	94.4	58.4	76.5
April 2023	59.1	78.4	99.6	62.2	78.9
March 2023	66.6	75.7	99.6	59.4	79.9
February 2023	72.5	84.8	99.4	64.6	83.2
January 2023	68.7	83.3	99.2	66.2	82.5
December 2022	64.8	77.2	91.6	60.1	76.3
November 2022	63.3	77.8	88.5	55.1	73.9
October 2022	68.7	83.5	90.6	55.6	77.1
September 2022	71.8	80.8	96.8	62.7	80.8
August 2022	76.6	88.4	105.4	71.0	88.4
July 2022	79.3	91.2	106.6	70.0	89.8
June 2022	80.9	93.7	108.3	68.7	91.0

Source:

https://www.nar.realtor/research-and-statistics/housing-statistics/pending-home-sales
https://www.nar.realtor/newsroom/pending-home-sales-elevated-0-9-in-july-marking-second-consecutive-monthly-increase

New Senate Bill Targets Executive Compensation Amid Bank Failures

August 29, 2023 by Marco Santarelli

The Senate Banking Committee recently achieved a significant milestone in response to this year's banking turmoil by approving a bipartisan bill in a 21-2 vote. The legislation, negotiated by Senate Banking Chair Sherrod Brown, Senator Tim Scott, and Senator Elizabeth Warren, aims to increase penalties for failed lenders' executives, enhance oversight of the Federal Reserve, and restrict megabank takeovers.

A Reasonable Compromise

Despite recent tensions between Senator Brown and Senator Warren, the final bill represents a “reasonable compromise” according to Warren. The legislation received widespread support from progressives, conservatives, and moderates on the committee, making it the most viable option for revamping the banking system. Notably, only two Republicans, Senators Thom Tillis and Bill Hagerty, voted against the bill.

Senator Brown emphasized the bill's significance for consumers, the banking system, honest bankers, and the entire country. The compromise achieved by Brown and Scott focuses on executive mismanagement and regulatory supervision failures, aligning with President Joe Biden's call for strengthened executive accountability.

Gaining Traction in the House

While House Republicans have not pursued similar legislation, the bill's provisions related to oversight of the Federal Reserve have caught their attention. Representative Andy Barr introduced a similar bill in the House, and House Financial Services Chair Patrick McHenry has expressed a willingness to review the Senate bill. With the level of support garnered in the Senate, it becomes challenging for House Republicans to ignore the need for reform.

Empowering Regulators and Holding Executives Accountable

The bill negotiated by Senators Scott and Brown aims to empower regulators to hold executives of failed banks accountable. It introduces measures to claw back compensation, increase civil penalties, and enforce bans on executives working in the industry. The compromise bill builds upon Senator Warren's proposal, which had garnered substantial support from the Banking Committee. Republican Senator J.D. Vance played a crucial role in building GOP support for Warren's proposal.

The compromise bill features a less-stringent clawback approach than Warren's original plan, covering a period of two years rather than three. Additionally, the clawback is an option for regulators rather than a requirement. The bill's scope expanded further with bipartisan amendments that broaden the types of compensation subject to clawbacks, require public reporting on bank supervision practices, and establish new hurdles for the acquisition of failed banks by large institutions.

Industry Concerns and Future Challenges

The banking industry's response to the bill remains uncertain. Major trade associations have refrained from taking a public position, but the Bank Policy Institute, representing large U.S. lenders, expressed concerns about potential actions against executives who were not significantly involved in their banks' failures. The institute also highlighted potential challenges in talent recruitment for banks.

Despite industry concerns, Senator Brown assured that most bankers he had spoken to acknowledged the need for accountability in light of recent banking scandals. He emphasized that the bill's purpose is to hold executives accountable for their greed and incompetence, rather than tarnishing the entire banking industry.

Senator Tillis, one of the two Republicans who voted against the bill, voiced his concerns about the legislation being too expansive and potentially stifling innovation. As the bill progresses through the legislative process, it is likely to undergo further refinement and face additional challenges.

Sources:

https://www.politico.com/news/2023/06/21/senate-advances-post-svb-bank-crackdown-00102855
https://www.cbsnews.com/news/senate-bill-bank-ceos-svb-collapse/

Connecticut Housing Market: Prices, Trends, Forecast 2023

August 25, 2023 by Marco Santarelli

The housing market in Connecticut has seen significant changes and trends in recent times. It is essential for homebuyers, sellers, and investors to stay informed about the current market conditions and forecasts to make informed decisions. In this blog post, we will explore the house prices and trends in the Connecticut housing market.

Median Sale Price Trends

According to the data from Redfin, the median sale price of homes in Connecticut has witnessed a notable increase. In July 2023, the median home price was $430,300, marking an 8.4% rise compared to the previous year. This upward trajectory signifies the robustness of the housing market and its potential impact on affordability. It's important to note that the median price of a home in the United States currently stands at $430,300, reflecting the broader trend in the housing sector.

Fastest Growing Sales Prices in Top Metros

Several cities within Connecticut have experienced impressive growth in sales prices. Among the top 10 metros, New Haven takes the lead with a remarkable 29.7% growth in sales prices. Glastonbury Center, Waterbury, and Wethersfield follow closely with growth rates of 28.4%, 25.0%, and 15.4%, respectively. This surge in sales prices highlights the attractiveness of these areas for potential buyers and real estate investors.

Housing Supply in Connecticut

The housing supply in Connecticut has undergone a significant shift. In July 2023, the number of homes for sale decreased by 47.2% compared to the previous year. Additionally, the number of newly listed homes dropped by 49.6%. These changes have led to an average of 2 months of housing supply, indicating a tighter market. This trend can impact buyer options and the speed at which homes are sold.

Housing Demand and Competitiveness

The level of competitiveness in Connecticut's housing market can be gauged by various factors, including the percentage of homes sold above list price and the sale-to-list price ratio. In July 2023, an impressive 65.9% of homes were sold above their list price, underscoring a highly competitive environment. Furthermore, the sale-to-list price ratio reached 104.4%, indicating strong demand and potential bidding wars.

Most Competitive Cities in Connecticut

Redfin's Compete Score™ ranks the most competitive cities in Connecticut based on various factors. Southwood Acres, Sherwood Manor, and Wethersfield emerge as the top three most competitive cities. This ranking takes into account elements such as multiple offers and fast-selling properties, providing valuable insights into the intensity of the housing market in these areas.

As the data shows the Connecticut housing market presents a dynamic landscape with fluctuating house prices, changing supply and demand dynamics, and evolving migration patterns. As the median sale price rises and certain cities experience impressive growth, buyers, and investors need to adapt to the competitive environment.

With shifting preferences influencing migration trends, it's essential for individuals to stay informed and make well-informed decisions in this ever-changing real estate market. Redfin's comprehensive data provides valuable insights that can guide individuals in navigating the complexities of Connecticut's housing sector.

Connecticut Housing Market Forecast 2023-2024

According to Zillow, as of July 31, 2023, the Connecticut housing market has exhibited promising trends, showcasing both stability and growth. With an average home value of $379,836, the market has experienced a noteworthy increase of 5.0% over the past year. This rise in home values is an indicator of the state's resilient real estate sector. Homes are swiftly moving off the market, typically going pending within an average of 7 days, reflecting the demand and competitiveness within the current market landscape.

Key Metrics at a Glance:

Average Home Value: $379,836
1-year Value Change: +5.0%
Median Sale to List Ratio (June 30, 2023): 1.029
Percent of Sales Over List Price (June 30, 2023): 66.5%
Percent of Sales Under List Price (June 30, 2023): 24.1%
Median Days to Pending (July 31, 2023): 7

The Connecticut Metropolitan Statistical Areas (MSAs) – Hartford, Bridgeport, New Haven, Norwich, and Torrington – each contribute to the diverse housing landscape of the state. The housing market forecasts for these regions reveal potential growth and opportunities over the coming months.

Connecticut MSA Housing Market Forecast:

The Connecticut Metropolitan Statistical Areas (MSAs) offer a glimpse into the anticipated trajectory of the state's housing market. In Hartford, CT, the forecast indicates a gradual yet steady increase in housing values: +1.1% by August 31, 2023, followed by a more pronounced growth of +2.5% by October 31, 2023, and an encouraging +5.5% by July 31, 2024.

Moving over to Bridgeport, CT, a similar pattern emerges with a slightly higher projected growth. By August 31, 2023, values are predicted to rise by +1.3%, a trend that is expected to intensify to +2.8% by October 31, 2023. The momentum continues, projecting a significant growth of +6.2% by July 31, 2024.

New Haven, CT joins the narrative with its own progression, albeit at a slightly more moderate pace. Forecasts here indicate an increase of +1.0% by August 31, 2023, followed by a steady growth of +2.4% by October 31, 2023. By July 31, 2024, the housing market in New Haven is projected to have grown by +6.6%.

Turning attention to Norwich, CT, the forecast showcases a promising upward trajectory. Values are expected to rise by +1.3% by August 31, 2023, followed by a more substantial +3.0% growth by October 31, 2023. The trend persists with a positive outlook, indicating an increase of +6.9% by July 31, 2024.

In Torrington, CT, the forecast remains optimistic as well. Housing values are anticipated to rise by +1.2% by August 31, 2023, and this growth is expected to continue at a stable pace of +2.7% by October 31, 2023. The market's upward journey is projected to culminate in a notable growth of +7.2% by July 31, 2024.

These forecasts suggest that the Connecticut housing market is poised for continued growth, with projected value increases across various regions. This growth aligns with the state's recent performance and reflects the broader nationwide trend of a robust real estate market.

Factors such as historically low mortgage rates, a healthy economy, and a competitive buying landscape are likely contributing to this optimistic outlook. As with any forecast, it's important to consider that unforeseen economic or market shifts could influence these projections.

Connecticut Housing Market Forecast — Source: Zillow

Will the Housing Market Crash in Connecticut?

Connecticut's housing market has been performing strongly in recent years, but with the current state of the economy and the ongoing pandemic, some are wondering if a crash is on the horizon. While no one can predict the future with certainty, here are some factors to consider when evaluating the likelihood of a housing market crash in Connecticut.

There is undoubtedly a slowdown in the pace of home sales in the Connecticut housing market, but it is more of a return to normalcy. This is neither a crash nor a bubble; housing demand is still present. The slowdown is ideal for buyers who are weary of being outbid in a hot Connecticut real estate market or who are experiencing buyer fatigue.

When there is a boom in the housing market, it is in part generated by an increase in job growth and a fall in the unemployment rate. The relationship between the economy and the housing market cannot be severed. The strength of the economy and the rate of job growth both have an impact on the purchasing power of prospective homeowners. Connecticut ranks among the top five wealthiest states in the country due to the number of residents who travel to well-paying jobs in New York City and the number of significant corporations with headquarters in the state.

Connecticut also has the fourth-highest percentage of college-educated residents (about 35.6%) and is home to Yale University, which U.S. News & World Reports rated third in the nation in 2015. According to Connecticut State Comptroller, the labor market remains strong. Nationally, there are nearly two job openings for every unemployed worker. Connecticut added 1,600 jobs in May and has now recovered 83% of the jobs lost during the pandemic, including 86% of private sector jobs.

Three sectors — construction, professional and business services, and trade, transportation, and utilities — have added jobs above pre-pandemic levels. Connecticut’s per capita income of $82,918 is the third-highest in the country and, today is increasing the state’s minimum wage to $14 per hour. The state has recovered 83% of the jobs lost during Covid-19 and 3 industry sectors have rescued over 100% of the jobs lost.

Home prices are directly affected by demand, which, according to real estate experts, isn't going away anytime soon. However, they are not rising as quickly as they once did, and Connecticut real estate agents predict that prices will level off or rise slightly this year. Some of this is most likely due to rising interest rates.