Looking back on 2015 housing market, forecasting 2016

As we begin 2016 and reflect on the last 12 months, we would ultimately characterize 2015 as having been a very solid year for housing.  Early year-end numbers indicate that year-over-year sales nationally are up by about 10%, equating to roughly 5.3 to 5.4 million units of inventory (and compared to about 4.9 million in 2014).  The strong spring selling season in 2015 was indicative of the market’s overall strength, even while luxury sales activity appeared to have slowed slightly over the course of the last four months. Furthermore, as has been evident in the wake of the Fed’s December announcement, the long-anticipated interest rate increase is not predicted to have a large impact on home-buying activity in the year to come.

Locally in our Nebraska market areas, we saw a nearly flat year. Woods Bros Realty closed 3,157 total units, compared with 3,200 in 2014. However, the company’s closed volume is up 5 percent year over year. The luxury market, defined as homes $400,000 and up in the Lincoln market, was down in 2015 overall. Lincoln, Seward/York, Grand Island and Beatrice are all still experiencing a sellers’ market with fewer than six months of inventory available for sale.

residential market review 2015Looking ahead, here are some of the trends we’ll be watching:

  • 2016 will be a continuation of the housing market’s recovery: This will not be a “boom” or a “bust” year, but a “normal” one with reasonable expectations.
  • Millennials forming new households: This key segment of the consumer population has largely delayed purchasing homes; however, we are starting to see a shift from rentals to ownership among the demographic … and we expect 2016 to be a “break-out year” for these buyers.
  • Washington recognizes the need for affordability: We are seeing a move toward more normalized credit standards versus more risk-averse standards, essentially giving more qualified buyers the opportunity to own a home.  The banks, Fannie Mae and Freddie Mac have furthermore seen fewer foreclosures in the recent year, and we expect that trend to continue in 2016.
  • Boomerang buyers bounce back: Homeownership continues to be a very important dream among American consumers. While a number of people weathered the hardships of short-sales or foreclosures in the downturn, over the last five years, we have seen a gradual return of these buyers to the marketplace – another indication that the market has been successfully working through prior challenges.  People who may have been forced into rentals are now re-entering the market with home purchases.
  • By that same token, even with the dollar strengthening against other global economies, the American housing market will maintain its standing as a very safe place to park assets.

All that said, as the recovery continues and the strength of the industry grows, 2016 will be another important year for housing and its steady move toward normalcy.

HomeServices and Brookfield Partner in New Franchise Brand

Berkshire Hathaway affiliate HomeServices of America, Inc.™ and Brookfield Asset Management announced today that they have partnered to introduce Berkshire Hathaway HomeServices®—a new franchise brand that joins the existing brands and affiliate networks of Prudential Real Estate and Real Living Real Estate.

In addition to being the nation’s second largest, full-service residential real estate brokerage firm, HomeServices is now a majority partner in one of the largest residential franchise networks in the United States. This transaction reinforces HomeServices’ status as a leading real estate company with an impressive record of financial strength, profitable growth and operational expertise.

Woods Bros Realty remains a Berkshire Hathaway affiliate and wholly owned subsidiary of HomeServices of America.

“The new HomeServices Franchise will have little impact on our company here, but will expand our national footprint,” HomeServices of Nebraska CEO Gene Brake said. “Woods Bros Realty is a trusted, long-standing brand in the local community, and we will continue to provide our agents and clients with the same great service. The new franchise just increases the strength and influence that Woods Bros has backing them. It is exciting to be with a growing organization that has great vision.”

For more information about Berkshire Hathaway HomeServices®, visit www.BerkshireHathawayHS.com.

About HomeServices of America, Inc.™

HomeServices of America, Inc. is the nation’s second largest, full-service residential brokerage firm and one of the largest U.S. providers of integrated real estate services. HomeServices is owned by MidAmerican Energy Holdings Company, a consolidated subsidiary of Berkshire Hathaway Inc. Since it became a MidAmerican affiliate in 1998, HomeServices has grown from 4,000 agents in three markets to more than 16,000 agents in 21 states. HomeServices is comprised of some of the industry’s most respected real estate firms, specializing in brokerage, mortgage, title and escrow services, insurance and relocation. Each of the HomeServices’ companies has been serving clients for an average of more than 60 years and is regarded for unparalleled service.
For more information, visit www.homeservices.com.

Prudential Northwest Properties joins HomeServices of America

On behalf of HomeServices of America, we are pleased to announce that Oregon-based Prudential Northwest Properties is joining the HomeServices family of companies. Founded in 1948, Prudential Northwest is one of Portland’s largest and most respected real estate brokerage firms. Prudential Northwest has nearly 500 agents throughout 21 offices serving the Portland metropolitan area; Southwest Washington, including Vancouver and Longview; Central Oregon; and the Oregon coast. In 2011, they had nearly $900 million in sales.

Prudential Northwest is HomeServices’ entry into the Pacific Northwest market, and they have chosen to take this step with a company who has long-term ties to the community, decades of experience and an unparalleled reputation for consistently providing outstanding services to their homebuyers and sellers.

Please join us in welcoming Prudential Northwest Properties to our family.

What in the world is a QRM …

What in the world is a QRM and why does it matter to the typical home buyer?

With the 2010 Dodd – Frank bill the U.S. Congress attempted to establish a vehicle to require mortgage generating banks to retain a portion of the securitized loans (loans that are bundled together and sold to investors) that they generate. Simplistically speaking the theory is that if you require the banks to retain say 5% of the loans that they securitize they will be more diligent in assuring that they originate quality loans to quality borrowers thus reducing the likelihood of default. By Congress’s definition exempt from this 5% “skin in the game” rule are FHA loans and Qualified Residential Mortgages or QRMs the definition of which was left up to the country’s six banking regulators.

Discussion to date suggests that a QRM would be defined as a loan based on 80% loan to value, or 20% down-payment, made to a borrower with a minimum FICO score of 690 whose ratio of income to mortgage payment and overall debt is no more than 28% and 36% respectively. While on the surface one might accept that that does in fact describe a qualified borrower and loan the concern is what such a definition does to the mortgage market as a whole.

Banks that are forced to assume additional risk and maintain additional reserves will do what banks always do and that is they will pass the cost of the risk on to the borrower in the form of higher rates and expenses or will raise the bar for qualifying to the point where the only real options are as a QRM or a FHA borrower. Playing out this scenario one can easily project that FHA down payment and qualification requirements would necessarily be raised to manage an already larger than ever intended market share.

With available statistics suggesting that 80+% of first time home buyers put down less than 20% this scenario does not bode well for maintaining the affordability factor so important in that market segment and as we well know, as goes the first time buyers so goes the market. The National Association of Realtors has and is following these developments very carefully and is advising both the regulatory agencies and Congress itself as to what it is sees as the impact of such actions. We will keep you posted…

HomeServices of America, Inc., TM a Berkshire Hathaway Affiliate, Announces Acquisition of Greensboro-Based Yost & Little Realty

Yost & Little will merge with Prudential Carolina Realty, expanding the company’s footprint in the Greensboro residential real estate market

HomeServices of America, Inc., a Berkshire Hathaway affiliate, today announced the acquisition of Greensboro-based Yost & Little Realty, one of North Carolina’s most respected residential real estate brokerage firms.

One of the nation’s long-standing residential real estate firms, 82 year-old Yost & Little Realty has three offices and more than 140 real estate professionals in Greensboro and High Point, North Carolina. The company’s volume of closings for 2009 was $230 million.

HomeServices will merge Yost & Little with its existing residential real estate firm, Prudential Carolinas Realty. The new company in the Greensboro market will be re-branded Prudential Yost & Little Realty. Prudential Carolinas Realty will continue to operate as the HomeServices brand in the Winston-Salem, Kernersville and Charlotte markets.

Both Prudential Yost & Little and Prudential Carolinas have long-standing reputations for providing excellent customer service within the high-end residential market. With the merger, PruYost & Little will further its position within the Triad as the market leader in dollar sales volume, unit sales and average sales price.

The HomeServices business model focuses on companies that are market leaders, such as Yost & Little, with long-standing traditions for excellence. The average age of a HomeServices operating company is more than 54 years.

“Yost & Little is a pioneer within the residential real estate brokerage arena in North Carolina,” says Ron Peltier, chairman and CEO of HomeServices. “This transaction exemplifies our vision of joining with companies that share our core values and strengthening those brands through our affiliation. Our business model leaves the people who built the companies in place and gives them the freedom to operate in local markets they know best.”

“This merger creates the premier real estate company within the Triad,” adds Yost & Little president Eddie Yost. “We are combining two strong firms within the Triad into an even stronger organization. By joining forces with HomeServices, we will be unmatched in our ability to serve the real estate and corporate relocation needs of new and existing clients. Our commitment is to make this merger seamless for our customers, who will continue to be served by their existing agents.”

Yost will serve as Chairman of Prudential Yost & Little Realty and will be joined in leading the company by managing brokers, Dean Little and Mark Yost. Tommy Camp, Prudential Carolinas Realty’s president and CEO will continue to oversee HomeServices’ operations in the Triad, Charlotte and Triangle regions.

“I have every confidence that this combination of two high-quality companies in the Carolinas real estate market is truly the best of both worlds,” said Camp, president and chief executive officer of Prudential Carolinas Realty. “We have the strong corporate backing of HomeServices – a Berkshire Hathaway affiliate and a leading national home services provider – and two deeply rooted local companies with intimate knowledge of the Triad, one of the most sought-after addresses in America.”

About HomeServices of America

HomeServices of America, Inc. (www.homeservices.com), based in Minneapolis, Minn., is the second-largest homeownership service provider and the most financially sound real estate company in the United States. Owned by MidAmerican Energy Holdings Company, a consolidated subsidiary of Berkshire Hathaway Inc., HomeServices’ operating companies offer integrated real estate services, including brokerage services, mortgage originations, title and closing services, property and casualty insurance, home warranties and other homeownership services. HomeServices Relocation, LLC is the full-service relocation arm of HomeServices of America, which provides every aspect of domestic and international relocation to corporations around the world. HomeServices operates in 20 states under the following residential real estate brand names: Carol Jones REALTORS; CBSHOME Real Estate; Champion Realty Inc.; Edina Realty; EWM REALTORS; Harry Norman, REALTORS; HOME Real Estate; Huff Realty; Iowa Realty; Koenig & Strey Real Living; Long Companies; Prudential California Realty; Prudential Carolinas Realty; Prudential First Realty; Prudential York Simpson Underwood; RealtySouth; Rector-Hayden REALTORS; Reece & Nichols; Roberts Brothers Inc.; Semonin REALTORS; and Woods Bros. Realty. Information about HomeServices and the locations of its subsidiary companies is available at www.homeservices.com.

Help on the way for short sale sellers

We know that more and more of today’s sellers are upside down in their homes. To get out from under the weight, they may need to consider a short sale, which is a term used when the seller owes more than the sale of the house will bring.

Trouble with short sales is that the banks are swamped with them, and getting a response from the bank on a short sale offer usually takes forever (think several months!) With a lack of response like that, it’s easy for the seller to get discouraged, and easier for the seller to make the decision to simply abandon the house or let the bank foreclose.

Today Congress introduced a bill that would offer some relief to those sellers. The bill would require banks to respond to short sale requests within 45 days.

That’s great news … but don’t expect it to happen anytime soon. Congress is considering leaving DC three weeks early, to give its members a chance to return home to campaign for the November election. Anyone else see the irony? Priorities …

Lincoln’s steady economy featured in USA TODAY

Dennis Cauchon of USA TODAY recently reported on Lincoln’s steady economy. Read the excerpt of the article below, or the full article here.

To understand why some places are winning and others losing, USA TODAY examined a pair of No. 2s — the metropolitan areas of Lincoln, Neb., which has the second-lowest metro area unemployment rate in the United States, and Merced, Calif., which has the second-highest.

Lincoln symbolizes a swath of the central USA with economies that didn’t have wild highs and lows during the last decade.

Lincoln: Steady as she goes

Lincoln’s economy has been good for so long that it’s hard for many there to remember bad times.

The unemployment rate in the vibrant metropolitan area of 296,000 is just 4.1%, second-lowest in the nation.

The rate has never been above 5% since the Bureau of Labor Statistics starting tracking it 20 years ago.

“It’s like we’re on our own island out here,” says Jason Perry, a Wisconsin-born rental car manager who moved to Nebraska in 2008, when his wife, Robin, got a job in nearby Omaha, which also has low unemployment.

Lincoln is home to a major research university and national and regional headquarters for several substantial companies. It is surrounded by farms that export worldwide.

The metro area — built on the edge of the Great Plains — has the good fortune of being at the convergence of several positive trends in a dangerously weak national economy. Lincoln is:

• A college town, home to 24,000 students at the University of Nebraska-Lincoln. Nine of the 10 metro areas with the lowest unemployment rates have major universities.

• A state capital, benefiting from a stable workforce of government jobs.

• Part of a farm economy at a time when farm income has been at or near record highs.

Just as important, Lincoln missed the real estate bubble, so it’s not suffering withdrawal from a construction boom caused by too-easy credit.

Tom Henning, chief executive of Assurity Life Insurance of Lincoln, can’t recall any significant speculative office buildings or shopping centers getting built in Lincoln during this decade’s national real estate boom that ended in 2007.

During an interview, Henning calls the company’s head of real estate lending on a speaker phone to check his memory.

Investment chief Bill Schmeeckle pauses for a long time as he recalls what’s been built in Lincoln during the past several years.

“No. None,” he says.

Henning says a real estate developer who approached Assurity Life about financing a speculative building would have been met with the common-sense question: “You mean you want to build it, but you don’t have any tenants yet?”

Construction in Lincoln proceeded at a steady, moderate pace during the last decade — and that continues today.

Assurity Life is building a new $53 million corporate headquarters. The university is developing a new research park. In May, voters will decide whether to approve bonds to start a $334 million arena for the university’s basketball team.

The city’s historic Haymarket District continues to slowly but steadily add new businesses.

The Bar & Grill has hung a sign at its future location: “Now Accepting Applications for All Positions.”

Trent Taylor, 28, who recently quit his job as a cook, says he’s not worried about finding work.

“There’s work around, just not always what you want,” says Taylor, smoking a cigarette outside a government career center in downtown Lincoln.

Lincoln hasn’t been immune to the recession. A total of 6,800 people were unemployed in December in a labor force of 167,000. That’s an increase of 1,150 from a year earlier.

“We’ve absolutely had job losses,” says Eric Thompson, a University of Nebraska economist. “It just doesn’t feel like the worst recession in 30 years or longer.”

One reason: Nebraska has among the nation’s highest rates of people holding multiple jobs, Thompson says. That means people can lose one job or be employed below their skill level, yet not count as unemployed.

Nebraska, with its high level of education, and Lincoln, in particular, have a labor force that’s attractive to employers.

“We might have someone with an economics degree working as a clerk,” Henning says.

Lincoln’s diversified economy has more than 100 companies and agencies that employ 250 or more workers, including a robust manufacturing sector. Kawasaki makes New York subway cars here, along with all-terrain vehicles and Jet Skis.

Nick Cusick, chief executive of IMS Corp., says manufacturing has been helped by electricity rates 25% below the national average.

A key reason for the low rates: Nebraska is the only state that generates all its power from government-owned utilities.

Thriving entrepreneurship and the lack of a major union presencealso have helped keep Nebraska manufacturers competitive, says Cusick, who started his company with a high school buddy in 1974.

Today, Cusick and his friend are still 50-50 partners in a company that employs 200, down from a peak of 275 in 2008.

IMS makes football goalposts, basketball hoops and electronic signs and scoreboards. The PGA Tour’s electronic leader board is one of its products.

Cusick thinks his region’s “common sense” culture helps Lincoln avoid economic peaks and valleys.

Nebraska companies typically are reluctant to take on debt because of this conservative culture, he says. Nebraska’s constitution even prohibits the state from borrowing money.

“The Nebraska sensibility — whether it’s in the public sector or the private sector — is to be cautious,” Cusick says.

Cusick vacations in Scottsdale, Ariz., every March and November. Between visits there, new shopping centers would appear there during the boom years. “Lot of vacancies now,” he says.

Lincoln was different that way. No boom, no bust. Still hiring.

Local home sales, new and used, boom during October, November

BY MATT OLBERDING / Lincoln Journal Star

November was a month to remember for local home sales.

Existing home sales were up 76 percent over the same month last year. Sales of new homes were up more than 60 percent.

Doug Rotthaus, executive vice president of the Realtors Association of Lincoln, attributed the numbers largely to the $8,000 tax credit for new homebuyers, which was extended last month, and the new $6,500 tax credit for buyers who already own a home.

“Tax credits are playing a big part in this, along with low interest rates,” Rotthaus said.

Kent Obrist, a Realtor with Woods Bros. in Lincoln, said about one-third of his buyers this year have been first-time homebuyers.

He said that helped lead to a “really good” October and November.

Nationally, half of home sales in October and November were to first-time buyers, according to the National Association of Realtors.

Sales of existing homes were up 44 percent nationally and 53.5 percent in the Midwest compared with November 2008, although those numbers are measured differently from the local ones. The national sales figures are reported as an annual rate, rather than as raw numbers of sales.

“This clearly is a rush of first-time buyers not wanting to miss out on the tax credit,” said Lawrence Yun, the national Realtor group’s chief economist.

National figures for new home sales were not available from the Realtors.

Even with the strong showing in November, sales of new homes locally for the year to date are slightly below where they were last year, but Rotthaus said existing home sales are approaching record numbers.

The local record for existing home sales was set in 2005, and “we’re real close to beating ‘05 year-to-date,” he said.

Rotthaus said he’s looking forward to this year’s success continuing at least into the first half of 2010.

” I think the expanded tax credit will have a good impact on our market,” he said.

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