Kingsport-Bristol FHFA HPI shows solid 2015 gains; other price reports show more balanced Tri-Cities performance

Now that the three primary reports are in it’s possible to get a broader picture of how Tri-Cities home prices performed across separate reporting platforms. All-in-all it was a year that saw historically typical price performance for this market with one exception.

5 yr HPIAlthough the year-to-year changes on the different models vary they show the same basic pattern with one exception. A notable take away is the region’s two MSA markets are moving in opposition on the Federal Housing Finance Administration 1-year HPI.

The FHFA 1-year and 5-year house price indexes also show a softer price gain than the Northeast Tennessee Association of Realtors’ Trends Report or the CoreLogic  All-Sales Home Price Index. That doesn’t mean there was a weakness in the overall Johnson City MSA market – only the component monitored by the FHFA reports.

1 year HPI

1-year FHFA House Price Index for last year

Here’s the data those three reports monitor:

  • NETAR Trends Report – this is a monthly report on the monthly, quarterly and annual average sales price of homes from the local Multiple Listings Service.
  • FHFA House Price Index – this index tracks changes in the average home prices by analyzing changes in home values for individual properties for mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. It uses a repeat-transaction methodology to construct indexes estimated by statistically evaluating price appreciation or depreciation for homes with multiple values over time. It’s also an all-transaction index so it includes refinancing.
  • CoreLogic All-Sales Home Price Index – this index is a measures for multiple market segments based on property type, price, time between sales, loan type (conforming vs. non-conforming) and distressed sales.

CoreLogic HPIHere’s how the year-to-year changes look for each report:

Kingsport-Bristol MSA

  • NETAR Trends Report – average annual price up 1.6%.
  • FHFA Q4 1-year HPI up 4.9%.
  • CoreLogic HPI year-to-year change up 2.6%.

 

Johnson City MSA

  • NETAR Trends Report, annual average sales price up 3%.
  • FHFA Q4 1 year HPI, down 0.7%.
  • CoreLogic HPI up 4.9%.

The FHFA also has a 5-year index for a little longer look at price performance. It shows the same core pattern of the 1-year index – the Kingsport-Bristol MSA index is showing stronger performance than the Johnson City MSA. The Q4 Kingsport-Bristol MSA is up 4.4% and the Johnson City MSA index is up 0.07%.

Kingsport-Bristol had stronger performance on this metric last year. It was up every quarter while the Johnson City MSA dropped into negative territory in the third quarter. There was fourth quarter growth but it has been softer in the Johnson City MSA than its neighbor to the north.

One mitigating factor for the FHFA is the refinancing volume compared to purchases.

The Q4 refinancing loan origination was 56.1% higher in the Johnson City MSA than it was in Q4 2014. In Kingsport-Bristol is was 27.7%.

During the same period the Johnson City loan origination rate for home purchases was up 123.3% compared to 29.8% increase for the Kingsport-Bristol MSA.

Total loan originations in the Johnson City MSA were up 8.9% while they were 13.7% higher in Kingsport-Bristol.

Residential real estate investors seeing higher vacancy rates in most local markets

  • Tightest rental markets for renters are Washington and Johnson counties TN and Washington Co. VA.
  • Bristol, VA has highest non-owner occupied vacancy rate in the area.
  • Greeneville has the highest non-owner occupied vacancy rate in NE TN.
  • Five local markets have non-owner occupied vacancy rates of 5% or higher.

 

While one part of the NE Tennessee housing market is contending with higher demand and fewer listings another is beginning to feel the pinch of too many vacancies.

Existing home sales have moved at a brisk pace for the past nine months while the inventory shortage has stubbornly stayed 6% to 7.5% below last year’s monthly levels. So far, increased demand and less supply has not moved the average sales price in proportion to sales. The average sales price was up 6.9% in January compared to January last year, according to the Northeast Tennessee Association of Realtors Trends Report. However, the current average sales price annual comparison shows it was 3% higher than it was in 2014. The small increase was despite record sales levels that began in May and continued until December.

The other side of the story emerged with RealtyTrac’s current residential vacancy analysis.

At the beginning of this month, the vacancy rates for non-owner occupied investor properties in six of nine local markets were running higher than the national rate. The exceptions are Johnson and Washington counties in NE Tennessee and Washington County VA.

According to the report, there are 97,540 non-owner occupied investment properties in the region. Of that, 4,352 were vacant at the beginning of the month.

Nationwide the vacancy rate for these type properties is 4.3%. In NE Tenn. it was 4.6%. The Bristol VA rate was 8.5% while Washington County VA had a 1.4% rate.

In the two largest counties offer different pictures for investors. It’s better than average in Washington County Tenn. and a little worse than average in Sullivan County.

Some Sullivan County landlords are complaining about poor showing for rentals that have been on the market for longer periods than past years. There are a couple of likely reasons at play.

The first is the supply in the multifamily and rental market has increased. Investor activity increased during the recession when there was an increased supply of foreclosures at attractive discount rates. A signal of that new supply coming on-line is this year’s reduction of fair market rents in Washington and Sullivan counties by The Department of Housing and Urban Development.  That contrasts with what happened with the fair market rents at the beginning of 2015.  Washington County saw the largest increase in Tennessee while Sullivan County was tied for the second largest.

The second is new large multifamily developments are coming online in Bristol and Kingsport this year while multifamily development growth in Washington County has slowed.

Here’s how the current non-owner occupied vacancy rates stacked up in NE Tennessee:

Greene – 5.7%.

Hawkins – 5.5%.

Unicoi – 5.4%.

Sullivan – 5%.

Carter – 4.4%.

Johnson – 3.4%.

Washington – 3.1%.

Methodology

RealtyTrac matched its address-level property data for nearly 85 million U.S. residential properties — including foreclosure status, owner-occupancy status, and equity — against monthly updated data from the U.S. Postal Service indicating whether a property had been flagged as vacant by the postal carrier. .

 

 

Most home owners expect equity gains this year, how to calculate your equity

-85 Percent Expect Home Equity to Rise As Much as 10 Percent in 2016

-Post-Housing Boom Buyers More Bullish on Equity Gains than Pre-Housing Boom Buyers

How to calculate your equity video 

IRVINE, Calif. – Nearly half (46%) of all U.S. homeowners with a mortgage expect their equity will increase in 2016, even though three out of five (60%) report equity in their homes has already increased during the last three years of the housing recovery, according to new research conducted for loanDepot, America’s lender.

RTOf those who expect their equity to change this year, 85 percent expect it to rise as much as 10 percent, with a quarter (27%) expecting it to rise between 6 to 10 percent. More than half (58%) are expecting an equity bump between one and five percent.Industry-wide reports forecast 2016 annual price gains to range between 2.3 and 4.7 percent.[1] Only 3 percent of homeowners expect their equity to fall in 2016, and 27 percent expect it to remain the same.

More than 100 U.S. housing experts forecast home values will reach an average annual growth rate of 3.65 percent through the end of 2016.[2]  Today, more than 49 million homeowners – or 66 percent of all homeowners – hold a mortgage on their home.[3]

 

EQUITY BOOM: PERCEPTION VS REALITY

 

The loanDepot research also found that while 57 percent of homeowners believe their home’s value has appreciated in the past three years, the majority (80%) underestimate the amount of value their home has gained throughout the housing recovery.  Of those who believe their home’s value has increased since 2013, one in four (27%) believe it increased between one and five percent since 2013. The Case Shiller 20-city index shows prices rose twice that much, in fact 10 percent from Nov 2013 to Nov 2015.[4]

“Homeowners who bought during the housing boom are regaining equity many thought was lost forever, yet too many are not aware of the equity they have gained or they are unclear about how to determine changes in their equity,” said Bryan Sullivan, chief financial officer of loanDepot, LLC. “People who bought after the housing boom when prices were low are realizing homeownership can be a great investment and an asset that they can now leverage through equity to realize many dreams. Whether they choose to leverage their home equity now or reserve it for future needs, millions of homeowners have choices today not available just a few years ago.

 

TIMING IS EVERYTHING – PRE- VERSUS POST-BOOM HOMEOWNERS

 

The 2001 – 2006 housing boom and subsequent 2007 – 2009 bust were watershed events that changed the way millions of homeowners think about equity. The loanDepot research reveals homeowners who bought before and during the boom – and watched their equity wash away from 2007 to 2009 – have very different views on equity compared to those who bought when prices were lower, post 2009. The research found:

 

  • More buyers who purchased after 2009 (64%) believe their home has gained value since 2013 compared to 58 percent of pre-2009 owners.

 

  • More buyers who purchased after 2009 (50%) expect to gain more equity this year compared to 43 percent of pre-2009 buyers. Newer buyers may be more bullish on equity gains because they did not experience drastic losses of equity like their pre-2009 counterparts.

 

  • More pre-2009 owners (65%) believe they have adequate equity nowto take out a home equity loan compared to just over half (52%) of post-2009 buyers.

 

  • Post-2009 owners are more conservative on using their equityA majority of owners from both periods say they have always been conservative about accessing their equity, but post-2009 buyers are more so by a margin of 62 to 55 percent.

 

HOW MUCH IS ENOUGH?

 

Three out of five homeowners (59%) report they now have enough equity to take out a home equity loan, while nearly one in seven (16%) do not know how much equity they would need to qualify for a loan. Another nine percent do not know how to calculate the equity in their home.  Only 16 percent of all owners with a mortgage, including 19 percent of post-2009 owners, say they do not yet have enough equity to take out a home equity loan.

Home remodeling (39%), consolidating high interest rate debt or credit cards (29%), and saving for retirement (18%) top the list of ways owners would use funds from a home equity loan. The Harvard Joint Center for Housing Studies projects annual spending growth for home improvements will accelerate from 4.3 percent in the first quarter of 2016 to 7.6 percent in the third quarter[5].

 

THE EQUITY CONSERVATIVES

 

When it comes to their equity, all homeowners tend to be conservative, knowing equity can help them weather downturn economic cycles. While more than half (58%) said they have always been conservative about their equity, 14 percent said the housing crisis has made them even more conservative about touching their equity.

At the same time, nearly one in five (19%) said they have no concerns about accessing their equity as long as they stay current on their mortgage. Just over five percent (5.7%) do not believe keeping a high level of equity in their homes would protect them from another housing crash, while three percent say they have waited a long time to get cash back from their homes.

 

About the survey
The survey was conducted by OMNIWEB using the KnowledgePanel™ in a national online omnibus service of GfK Custom Research North America. The KnowledgePanel™ is the only commercially available online probability panel in the marketplace making the sample truly projectable to the US population, which sets it apart from traditional “opt-in” or “convenience” panels. The survey is based on interviews conducted from January 15-17, 2016. A total of approximately 1,000 interviews were completed, with 500 female adults and 500 male adults. The margin of error on weighted data is +/- 3 percent for the full sample.

 

ABOUT LOANDEPOT

loanDepot, America’s lender, matches borrowers through technology and high-touch customer care with the credit they need to fuel their lives. As a fast-growing national marketplace lender, the loanDepot platform is disrupting finance by dissolving the lines between mortgage and nonmortgage credit. The company has funded over $60 billion in loans since inception. loanDepot is passionate about emerging financial technology and dynamic product delivery supported by excellent customer service to empower consumers. Headquartered in Southern California, loanDepot employs 5,000+ people across the country including 1,500+ licensed loan officers, and operates 140+ loan stores nationwide. The company operates under the brand names loanDepot, imortgage, Mortgage Master, LDWholesale and LDEscrow. NMLS # 174457

 

 

Washington Co. TN dominated 2015 Tri-Cities high-end home market

  • Tri-Cities year-to-year high-end home growth rate outpaces Knoxville and Chattanooga.

New high-end home construction in the Tri-Cities nearly doubled in 2015 and Washington County Tenn. dominated the market. At the same time, the Tri-Cities growth rate for luxury homes was higher than it was in the other East Tennessee regions.

canstockphoto11611621

Counties with five or more high-end permits were charted.

According to The Market Edge’s Q4 and annual report on new home permits there were 32 Washington County Tenn. high-end home permits in 2015, up from 18 permits the year before. A high-end home is defined by the report as one that’s 4,000 or more square feet or with $400,000, or more, construction costs.

Washington County Va. saw the second-best permit volume of 19, up from 12 the previous year.

Greene County had eight new high-end homes permitted compared to seven in 2014.

Every county in the region except Sullivan saw an increase of at least one high-end permit last year. Carter County had two permits, Hawkins and Scott Co. VA each had one high-end permit.

Sullivan County permitted eight high-end homes, down one from 2014.

The year-to-year growth for a luxury home in the Tri-Cities increased 52.2% in 2015. The annual total was 70  compared to 46 in 2014.

The Knoxville region saw a 20.2% increase while Chattanooga had an increase of 3.3%.

Jerry Petzoldt, General Manager of the TCI Group and developer of Old Island Homes in Kingsport, thinks the Tri-Cities demand for high-end homes demonstrates housing fear and uncertainty has passed and people are moving ahead with plans that were mothballed during the Great Recession.

Building material cost and financing cost are at an all-time low and with the sink in oil prices the petroleum-based materials like roofing, piping and the like will remain low, he said. “It’s a great time to build.”

The cost challenge is the competition for labor and subcontractors who left the building trade during the recession. “That has created an opportunity for young contractors to enter the subcontractor construction service business.”

“The other factor for the high-end home increase is the few local upscale neighborhoods have limited number of lots and no new lots are being developed. And if they were, the cost would be 50% higher than the existing limited inventory,” Petzoldt added.

%d bloggers like this: