Property Managers Face Housing Slowdown as 2015 Begins

by admin on January 20, 2015

The year 2014 ended with the U.S. housing market appearing on the verge of a downturn. Sales of new homes in November slipped almost 2% from the previous year according to the Commerce Department.

Existing homes sales for November also were down 6.1%. A more disturbing trend came from a survey of U.S. home builders revealing that the per-community sales pace contracted by an average of 20% in November, year over year.

This shouldn’t be a surprise to property managers who are witnessing a surprising increase in the number of rental applications they’re processing. Residents are giving up on the so-called “American Dream”.

This is also reflected by the fact that real estate loans held by commercial banks in the U.S. stopped increasing back in August 2014, this according to Federal Reserve data. Seasonally adjusted, loans held declined slightly in November, the first month-to-month drop since October 2013.

The other symptom of a slowing housing market involves a decline in the Case-Shiller/S&P Home Price Index. It’s the leading measure of U.S. home prices.

Data released on Dec.30 for October 2014 showed that the pace of home prices across the country continued to decelerate although eight cities did see prices rise faster. Both year-over-year and month-over-month figures reflected a pricing slowdown.

Both the 10-City and 20-City Composites saw year-over-year declines in October compared to September.  The 10-City Composite gained 4.4% year-over-year, down from 4.7% in September.  The 20-City Composite gained 4.5% year-over-year, compared to 4.8% in September.

The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.6% annual gain in October 2014 versus 4.8% in September.

Miami and San Francisco saw prices rise 9.5% and 9.1% over the last 12 months. Eight cities, including San Francisco, Denver, and Tampa saw prices rise faster in the year to October than a month earlier.  Las Vegas led the declining annual returns with a decrease of -1.2%.

No wonder the interest rate on the benchmark 10-year Treasury bond which determines mortgage rates has plunged. In the last 6 months it has declined from 2.6% to 1.96% as of January 6, 2015. To put that drop in perspective it equals a 25% decline in the interest rate for the bond and mortgages.

This augurs well for the possibility that home sales may soon be bottoming followed by an upturn later in 2015.  “After a long period when home prices rose, but at a slower pace with each passing month, we are seeing hints that prices could end 2014 on a strong note and accelerate into 2015,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

He went on to comment, “Two months ago, all 20 cities were experiencing weakening annual price increases. Last month, 18 experienced weakness. This time, 12 cities had weaker annual price growth, but eight saw the pace of price gains pick up.  Seasonally adjusted, all 20 cities had higher prices than a month ago.”

Despite optimism the trend does not favor a burst of new home sales anytime soon. If mortgage rates stay low coupled with easing in the qualifying process perhaps more buyers will emerge.

For the time being property managers should seize the opportunity to attract those who can’t afford to buy a house. Vacancies should fill faster, processing applicants should be state-of-the art and your clients should be smiling all the way to the bank in 2015.



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