realtor confidence index 2012-12

7/29/2019 Realtor Confidence Index 2012-12

1/29

1

REALTORS CONFIDENCE INDEXReport and Market Outlook

December 2012 Edition

Based on Data Collected December 27, 2012 through January 4, 2013

NATIONAL ASSOCIATION OF REALTORSResearch Department

Lawrence Yun, Senior Vice President and Chief Economist


2/29

2

Table of Contents

SUMMARY.................................................................................................................................................. 3

Executive Summary--Current Conditions: Major Indicators................................................................... 3

Market Outlook......................................................................................................................................... 6

I. Market Conditions .................................................................................................................................... 8

REALTORS Confidence Index Is Up in December .............................................................................. 8

Seventynine Percent of REALTORS Reported Constant or Higher Prices on Recent Transactions

Compared to a Year Ago .......................................................................................................................... 9

Eighty-seven Percent of REALTORS Expect Constant or Higher Residential Prices ........................ 10

Twelve percent of REALTORS Reported Selling at a Premium Over the List Price ......................... 10

Thirty-One Percent of Houses Sold in One Month ................................................................................. 12

Median Days on Market at 73 Days........................................................................................................ 12

Distressed Sales: 24 Percent of Sales ...................................................................................................... 13

II. Buyer and Seller Characteristics ............................................................................................................ 15

Cash Sales: 29 Percent of Residential Sales .......................................................................................... 15

Residential Sales to Investors: 21 Percent of Residential Market.......................................................... 16

Second Home Purchases: 12 Percent of Residential Market .................................................................. 17

Buyers Due to Relocation/Job Changes: 13 Percent of Residential Market ........................................... 18

International Transactions: Two Percent of Residential Market ............................................................. 18

Thirty-six Percent of Sales with Mortgages Had Down Payments of 20 Percent or More.................... 19

Fifty-two Percent of Responding REALTORS Report Rising Rents for Residential Properties ........ 19

III. Current Issues........................................................................................................................................ 20

Tight Credit Conditions and Slow Lending Process ............................................................................... 20

AppraisalsA Continuing Problem ....................................................................................................... 21

IV. Comments: Straight from the REALTORS ....................................................................................... 22

V. NAR Recent Articles ............................................................................................................................. 25

Employment by Lawrence Yun .............................................................................................................. 25

Housing Starts by Ken Fears27

Appendix. RCI Historical Data..28


3/29

3

SUMMARY

Jed Smith and Gay Cororaton

TheREALTORS Confidence Index (RCI) Report provides monthly informationpertaining to expectations about overall market conditions, buyer/seller traffic, price, buyer

profiles, and issues affecting real estate. Collection of this data began in January 2008 tosupplement information on existing home sales trends and provide timely feedback fromREALTORS on the real estate market (see the Data Appendix of this Report for the historicalseries).

The December edition is based on responses of 2,760 REALTORS to a surveyconducted during December 27, 2012 through January 4, 2013.1 All real estate is local:conditions in specific markets may vary from the overall national trends presented in this report.

Executive Summary--Current Conditions: Major Indicators

The year 2012 ended on a high notewith the Current ConditionsConfidence Index increasing for allproperty types. The index for singlefamily homes rose to 56 from 32 ayear ago, indicating a shift inexpectations from below moderateto above moderate. An index of 50delineates moderate conditions orexpectations. The index fortownhouses ended at 39 compared to

19 last year, while the index forcondominiums was at 31 compared to14 last year.

REALTORS generally reported brisker sales, rising home prices, and shorter days onthe market. However, the market recovery continued to be held back by low inventoryand a tight and drawn out underwriting process, especially for shortsales. Appraisalissues, the modest pace of economic recovery and job growth, and the potential adverseimpact of fiscal cliff measures and regulations on mortgage lending (e.g, QualifiedMortgage rules) were major concerns. REALTORS also reported reduced activity inthe areas affected by Hurricane Sandy and concerns over the potential dampening effect

of higher flood insurance rates (seeREALTORS comments in Section IV of this Report).

1 The survey is sent to approximately 50,000 REALTORS.

The REALTORS Confidence Index on

Current Conditions increased across all

property types. The index for single

family homes ended at 56 in December,

up from last years 32. The indexes for

townhouses and condominiums remain

below 50 but are up from last year.


4/29

4

Demand continued to expand faster thansupply. The Buyer Traffic Index rose to 56 from36 in the same period last year, while the SellerTraffic Index barely moved, ending at 38 from37 last year. REALTORS reported numerouscases of multibidding resulting in propertiesselling above the list/asking price ordistressed sales selling close to market price.The market has steadily moved towards asellers market with buyers more willing to bearclosing costs, in some cases paying for half ormore of the closing cost.

0.0

10.0

20.0

30.0

40.050.0

60.0

70.0

200801

200804

200807

200810

200901

200904

200907

200910

201001

201004

201007

201010

201101

201104

201107

201110

201201

201204

201207

201210

REALTORS Confidence Index--Dec 2012

Current Conditions

SF TH Condo

SF: 56 TH: 39 Condo 31

20.0

25.0

30.0

35.0

40.0

45.0

50.0

55.0

60.0

200801

200804

200807

200810

200901

200904

200907

200910

201001

201004

201007

201010

201101

201104

201107

201110

201201

201204

201207

201210

Indexes of Buyer and Seller Traffic -- Dec 2012

Buyer Traffic Index Seller Traffic Index

Buyer: 56 Seller : 38

Demand outstrips supply:

the Buyer Traffic Index is at

56 while the Seller Traffic

Index is at 39. An index of

50 indicates moderate

conditions .


5/29

5

Tight inventory conditions have boostedprices. About 79 percent of REALTORSreported constant or increasing pricescompared to their average home transaction ayear ago.

The median days on the market increased to 73 days in December (70 in November )but was wellbelow last years 99 days. The increase in median days is on account of

longer days on the market for short sales to 117 days (90 days in November).

54%58%

62% 64% 64%69% 71%

73% 73%79%

0%

10%

20%

30%

40%50%

60%

70%

80%

90%

Percentage of Respondents Reporting Constant or

Higher Prices Today Compared to a Year Ago

96 97 98 92101 96 98 99 99 97

9183

72 70 69 70 70 71 70 73

0

20

40

60

80

100

120

201105

201106

201107

201108

201109

201110

201111

201112

201201

201202

201203

201204

201205

201206

201207

201208

201209

201210

201211

201212

Median Days on the Market for All Sales

Source: NAR, RCI Survey

About 79% of responding

REALTORS reported constant

or increasing prices compared

to similar transactions a year

ago.


6/29

6

Market Outlook

Confidence about the outlook for thenext 6 months rose in December for allproperty types. The Six-Month Outlook

Confidence Index for single family salesended at 62, up from 40 a year ago. An indexof 50 indicates moderate expectations.The Six-Month Outlook Confidence Index fortownhouses and condos also improvedalthough expectations remain below moderate.

REALTORS responding to the survey generally expect to see improving prices for thenext 12 months. The median expected price change for the next 12 months is 3.2 percent .

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

200801

200804

200807

200810

200901

200904

200907

200910

201001

201004

201007

201010

201101

201104

201107

201110

201201

201204

201207

201210


Six-Month Outlook

SF TH Condo

SF: 62 TH: 44 Condo 37

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

201011

201012

201101

201102

201103

201104

201105

201106

201107

201108

201109

201110

201111

201112

201201

201202

201203

201204

201205

201206

201207

201208

201209

201210

201211

201212

REALTORS' Median Expected Price Change

for Next 12 Months (in %)

Source: NAR, RCI Survey

in %

Dec '12: 3.2%

The REALTORS Confidence Index

Six Month Outlook for single family

homes rose to an all-time high of 62

in December from 40 a year ago,indicating a shift in expectations

from below moderate to above

moderate.


7/29

7

NARs latest economic projection is for continued increases in residential home salesalong with continued price improvement (although sales and price trends will vary from marketto market). Existing home sales were at 4.65 million in 2012 ( and are projected at 5.08 millionin 2013).

The median price for existing home sales was $176,600 in 2012 (projected at $185,800 in2013). Decreases in months of inventory of homes for sale and a decline in percentages ofexisting home sales that are distressed are projected to lead to continued market improvement.In fact, the lack of available inventory is becoming a problem in some parts of the country.

NARs forecasts are based on an economy expected to grow at 2.3 percent in 2013 andwith 30-year mortgage rates at 3.3 percent in 2013.

3000000

4000000

5000000

6000000

70000008000000

Jan/00

Aug/00

Mar/01

Oct/01

May/02

Dec/02

Jul/03

Feb/04

Sep/04

Apr/05

Nov/05

Jun/06

Jan/07

Aug/07

Mar/08

Oct/08

May/09

Dec/09

Jul/10

Feb/11

Sep/11

Apr/12

Nov/12

Jun/13

Existing Home Sales: Actual and Forecast

Outlook Projects Continued Recovery

Twelve Month Roll Forecast

2013 Forecast: 5.08 Mil

0

50000

100000

150000

200000

250000

Jan/00

Aug/00

Mar/01

Oct/01

May/02

Dec/02

Jul/03

Feb/04

Sep/04

Apr/05

Nov/05

Jun/06

Jan/07

Aug/07

Mar/08

Oct/08

May/09

Dec/09

Jul/10

Feb/11

Sep/11

Apr/12

Dec/12

Jul/13

Median Prices by Month, Not Statistically Adjusted

Outlook Projects Improvement

EHS-Median Price Forecast

2013 Forecast: $185,800


8/29

8

What Does This Mean For REALTORS?

The real estate markets continue to recover both in terms of sales and price. Continuedrestrictive mortgage availability with tight underwriting standards is a problem, butREALTORS report that loans are frequently available at smaller banks and credit unions.Making sure that appraisers are qualified and that appropriate comps are used are important.Tight inventories of homes for sale are making markets increasingly competitive.

I. Market Conditions

REALTORS Confidence Index Is Up in December

The Current Conditions Confidence Index and the Six-Month Outlook ConfidenceIndex for single-family homes ended at peak levels in December 2012 (56 for currentconditions and 62 for 6-month outlook). Expectations notched up from below moderate in 2011to above moderate in 2012 (an index of 50 indicates moderate expectations). The indexes fortownhouses and condominiums remain below 50 but are on an upward trajectory indicating animproving outlook. The FHA certification process and regulations on condo occupancyrequirements for securing private mortage insurance were reported to be major factors holdingback the recovery of the condominium market .

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

200801

200804

200807

200810

200901

200904

200907

200910

201001

201004

201007

201010

201101

201104

201107

201110

201201

201204

201207

201210


Current and Six Month Outlook: Single Family Properties

Current Conditions 6-Month Outlook

Current: 56 Outlook: 62


9/29

9

Seventynine Percent of REALTORS Reported Constant or Higher Prices on Recent

Transactions Compared to a Year Ago

Home prices continue to firm up as demand for existing home sales is reported to beincreasing faster than the supply of available homes. About 36 percent of REALTORSreported constant home prices while 43 percent reported rising prices. As the graph below

shows, there are increasingly more REALTORS reporting rising prices compared to year agolevel since the March 2012 survey. Many REALTORS noted a significant increase in multi-bidding on properties, especially for lower priced and ready- to-move- in houses .

0.0

10.0

20.0

30.0

40.0

50.0

200801

200804

200807

200810

200901

200904

200907

200910

201001

201004

201007

201010

201101

201104

201107

201110

201201

201204

201207

201210


Current and Six Month Outlook: Townhouse Properties



0.0

10.0

20.0

30.0

40.0

20

0801

20

0804

20

0807

20

0810

20

0901

20

0904

20

0907

20

0910

20

1001

20

1004

20

1007

20

1010

20

1101

20

1104

20

1107

20

1110

20

1201

20

1204

20

1207

20

1210

REALTORS Confidence Index--Dec 2012Current and Six Month Outlook: Condo Properties




10/29

10

Twelvepercent of REALTORS Reported Selling at a Premium Over the List Price

In the face of tight inventory and multibidding on most properties, some properties areselling at above the asking price2. About 12 percent of respondent REALTORS whocompleted a sale reported a net premium. About 16 percent were sold at the asking price, whileabout 72 percent continued to be sold at a discount. The average (median) selling pricecompared to the asking price was a discount in the range of 4-7 percent .

2The December 2012 Survey included a new question comparing the actual price with the asking price.

5% 8%7%

36%

26%

12%5%

0%

10%

20%

30%

40%

Prices on Recent Transactions Relative to a Year Ago

Mar-12 Apr-12 May-12 Jun-12 Jul-12

Aug-12 Sep-12 Oct-12 Nov-12 Dec-12

4.8%

4.0%3.5%

7.5%

13.3%

21.3%

17.3%

16.0%

6.1%

3.6%

2.1%

0.5%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

net discount of greater than 23%

net discount of 20-23%net discount of greater than 16-19%

net discount of 12-15%



net discount of greater than 0 to 3 %

0% net discount or net premium

net premium of greater than 0 to 3%

net premium of 4-7%

net premium 8-11%

net premium of 12% or more

Percent of REALTORS Reporting

Net discount or Net Premium Of the Asking Price- Dec 2012


11/29

11

Eighty-seven Percent of REALTORS Expect Constant or Higher Residential Prices

Tight inventory has bolstered prices. Eighty-seven percent of respondents expectedconstant or higher prices in the next 12 months. Price expectations are most upbeat in the West,including the states of California and Arizona, which saw steep falls in property values. Texas

and Florida are also in the top group of states where price expectations are the most upbeat.However, the price outlook of REALTORS in New York, North Carolina, and Illinoisremains subdued . New York prices continue to be weighed down by its longer foreclosureprocess. The median expected price increase is 3. 2 percent nationally.

State Median Price Expectation for Next 12 Months (in%)

REALTORS Confidence Index Survey, December 2012

0%

20%

40%

60%

80%

100%

REALTORS Price Expectations for Next 12 Months

Dec 2012 RCI Survey

Constant/Rising Prices Falling Prices

87% ex ect constant/hi her rices in next 12 months


12/29

12

Thirty-One Percent of Houses Sold in One Month

Multiple offers have led to shorter time on the market for a property to sell. About 31percent of REALTORS noted that recently sold properties were on the market for less than amonth when sold compared to only 22 percent in the same month last year. The percentage of

REALTORS reporting that the house sold had been on the market for 6 months or more isdown to 22 percent from 29 percent a year ago.

Median Days on Market at 73 Days

Despite the protracted loan approval process, properties were on the market for fewerdays in 2012 than in 2011 as a result of tight supply and multibidding. The median days on

market in December was 73 days (99 days last year). Short sales had the longest days onmarket with a median of 117 days (160 days last year). Foreclosures were on the market for 45days (60 days last year), while the median days on the market for non-distressed properties was74 days (106 days last year).

31%

14% 13%9%

6% 6% 8% 5%9%

0%

10%

20%

30%

40%

=12

mo

Time On Market When Sold

201204 201205 201206 201207 201208201209 201210 201211 201212

Data shown are for Dec 2012.

0

50

100

150

200

201105

201106

201107

201108

201109

201110

201111

201112

201201

201202

201203

201204

201205

201206

201207

201208

201209

201210

201211

201212

Median Days on Market

Short Sales Foreclosed Not distressed All

Dec'12: Shortsale: 117; Foreclosed: 45; Not distressed: 74


13/29

13

Distressed Sales: 24 Percent of Sales

About 24 percent of respondents reported selling distressed property, down from the levelsseen a year or two ago. The lower share of distressed sales, along with tight supply hasbolstered prices. REALTORS reported strong demand for REOs from investors, who typicallypay cash and who are willing to renovate the properties and turn them into rentals. Cash salesaccounted for roughly 43 percent of distressed sales (46 percent in November 2012).

Distressed Real EstateBelow Market Prices

Distressed properties typically sell below the market price of similar property in non-

distressed condition. The level of discount fluctuates depending on sales location, type ofproperty, and property condition. Foreclosed property sold on the average at a 17 percentdiscount, while shortsale properties sold at a 16 percent average discount.

0%

10%

20%

30%

40%

50%

200905

200907

200909

200911

201001

201003

201005

201007

201009

201011

201101

201103

201105

201107

201109

201111

201201

201203

201205

201207

201209

201211

Percent of Respondents Reporting

Distressed Sales

Foreclosed As % of Sales Short Sale As % of Sales

Dec'12: Foreclosed: 12% Shortsale: 12%

0

5

10

15

20

25

200902

200904

200906

200908

200910

200912

201002

201004

201006

201008

201010

201012

201102

201104

201106

201108

201110

201112

201202

201204

201206

201208

201210

201212

Mean Percentage Price Discount of

Distressed Sales (in %)

Foreclosed Shortsale

Dec'12: Foreclosed: 17%; Shortsale: 16%


14/29

14

Property Condition Affects the Selling Price of Distressed Properties

The discount to market experienced by distressed property is affected by the propertysphysical condition. Well maintained properties tend to sell at a lower discount than is the casefor properties in poor condition. The un-weighted average price discounts to market arepresented for the current survey month as well as the 12 month period from January throughDecember 2012. REALTOR respondents reported price discounts for distressed houses withabove average condition at about 1315 percent, and price discounts of 18-32 percent forproperties in the poorest condition.

14.7

31.9

21.7

28.7

36.8

13.6 13.4

16.6

22.4

35.7

0.0

20.0

40.0

1-Above

average

2-Average 3-Below

average

4-Well below

ave

5-Bottom 1%

Percent Price Discount by Property Condition (%)

Unweighted Average for Jan 2012 to Dec 2012

Foreclosed Shortsale

1-Above average 15.0 13.5

2-Average 15.4 14.5

Mean Percent Below Market Value

Dec 2012 RCI Survey

House Condition Foreclosure Short Sale

5-Bottom 1% 31.6 17.8

3-Below average 22.3 16.5

4-Well below ave 25.0 20.0


15/29

15

II. Buyer and Seller Characteristics

Cash Sales: 29 Percent of Residential Sales

Approximately 29 percent of REALTORS who made a sale reported a cash sale in

December (30 percent in November ). By type of borrower, international homebuyers andinvestors had the highest share of cash sales, followed by second home buyers. About 8 percentof first-time homebuyers paid cash. REALTORS have reported that investors who are seekingREOs and distressed properties typically win against first time home buyers who need to securea mortgage in a tight and stringent credit market. About 43 percent of distressed sales are cashsales.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Cash Sales as Percent of Market

Dec '12: 29%

8%

66%

49%

18%

81%

43%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Percent of Cash Sales by Type of Buyer- Dec 2012


16/29

16

First Time Buyers: 30 Percent of Residential Buyers

Approximately 30 percent of responding REALTORS reported making a sale to firsttime home buyers (also 30 percent in November ). Normally, first time buyers are in theneighborhood of 40 percent.3 The decrease in participation of first time buyers from the market

reflects to some extent the difficulty of securing mortgage financing, delays with distressed sales,and purchases of lower priced properties by investors. REALTORS have noted that investorsoffering all-cash sales to sellers have crowded out first-time buyers in some cases, particularly inthe case of distressed properties. Most first time buyers obtain a mortgage: about 8 percent ofREALTORS who made a first time home buyer sale reported cash sales (9 percent inNovember ).

Residential Sales to Investors: 21 Percent of Residential Market

Investors accounted for 21 percent of total residential sales in December (19 percent inNovember). Approximately 66 percent of respondents who reported a sale to an investorreported a cash sale (70 percent in November ). REALTORS reported that these cashinvestors generally win against first time homebuyers who need to secure a loan.

3Based on data from the Profile of Homebuyers and Sellers which surveys homebuyers and homesellers,

first-time buyers typically account for about 40 percent of all homebuyers. In the 2012 Survey,homebuyers accounted for 39 percent of buyers.

0%

10%

20%

30%

40%

50%

60%

First Time Buyers as Percent of Market

Dec '12: 30%


17/29

17

Second Home Purchases: 12 Percent of Residential Market

Second home sales accounted for 12 percent of responses (relatively unchanged sinceAugust). Approximately 49 percent of second home sales were for cash (52 percent inNovember ). Respondents noted an active market for luxury homes.

0%

5%

10%

15%

20%

25%

30%

200810

200812

200902

200904

200906

200908

200910

200912

201002

201004

201006

201008

201010

201012

201102

201104

201106

201108

201110

201112

201202

201204

201206

201208

201210

201212

Sales to Investors as Percent of Market

Dec '12: 21%

0%

2%

4%

6%

8%

10%

12%

14%

16%

201

009

201

010

201

011

201

012

201

101

201

102

201

103

201

104

201

105

201

106

201

107

201

108

201

109

201

110

201

111

201

112

201

201

201

202

201

203

201

204

201

205

201

206

201

207

201

208

201

209

201

210

201

211

201

212

Second Home Buyers as Percent of Market

Dec '12: 12%


18/29

18

Buyers Due to Relocation/Job Changes: 13 Percent of Residential Market

About 13 percent of residential sales were to buyers for relocation purposes, i.e., a jobmove, retirement, etc. (15 percent in November). About 18 percent of sales were cash (22percent in November).

International Transactions: Two Percent of Residential Market

Approximately 2.1 percent of REALTORS reported sales of U.S. residential real estateto foreigners not residing in the U.S (1.6 percent in November ). Approximately 81 percent ofrespondents who reported transactions with international clients reported cash sales (70 percentin November). REALTORS noted that qualified first time buyers are finding it hard tocompete with international investors paying cash. Most of the international buyers are reportedlycoming from Canada and China.

0%2%

4%

6%

8%

10%

12%

14%

16%

18%

201104

201105

201106

201107

201108

201109

201110

201111

201112

201201

201202

201203

201204

201205

201206

201207

201208

201209

201210

201211

201212

Relocation Buyers as Percent of Market

Dec '12: 13%

0.0%

0.5%

1.0%

1.5%2.0%

2.5%

3.0%

3.5%

4.0%

201003

201004

201005

201006

201007

201008

201009

201010

201011

201012

201101

201102

201103

201104

201105

201106

201107

201108

201109

201110

201111

201112

201201

201202

201203

201204

201205

201206

201207

201208

201209

201210

201211

201212

Percent of Sales to International Clients

Dec '12: 2.1%


19/29

19

Thirty-six Percent of Sales with Mortgages Had Down Payments of 20 Percent or More

Approximately 36 percent of mortage sales involved a down payment of 20 percent ormore (compared to 37 percent in November ). Down payments of 11-19 percent were at lessthan 5 percent.

Fifty-two Percent of Responding REALTORS Report Rising Rents for Residential

Properties

About 52 percent of responding REALTORS reported higher residential rents (54percent in November) . Rising rental costs make homeownership more attractive especially at a

time when mortages are low and owning a home is very affordable.

0%

5%

10%

15%

20%

25%

30%

35%

40%

201104

201105

201106

201107

201108

201109

201110

201111

201112

201201

201202

201203

201204

201205

201206

201207

201208

201209

201210

201211

201212

Percent of Sales by Downpayment Levels

11-19% >=20%

Dec '12: At least 20% D/P: 36%

0%10%

20%

30%

40%

50%

60%

201012

201101

201102

201103

201104

201105

201106

201107

201108

201109

201110

201111

201112

201201

201202

201203

201204

201205

201206

201207

201208

201209

201210

201211

201212

Percent of REALTORS Reporting Changing Rent

Levels as Compared to 12 Months Ago

Higher Rents Lower Rents Constant rents

Dec '12: Rising rent: 52%


20/29

20

III. Current Issues

Tight Credit Conditions and Slow Lending Process

One of the most frequent and continuing comments by REALTORS was a concern over

unreasonably tight credit conditions. Respondents indicated that credit conditions continue to beextremely tight, that lenders are taking too long in approving an application, and that informationand documentation requirements are excessive and not requested in a timely manner.Respondents expressed frustration that some financial institutions appear to lend only toindividuals with the highest levels of credit scores.

There appears to be an unnecessarily high level of risk aversion by mortgage lenders. Inthe 2001-04 time framea time of normal residential real estate markets before the GreatRecession--approximately 40percent of Fannie Maes and Freddie Macs loans went toapplicants with credit scores above 740. In contrast, REALTORS responding to theRCIsurvey indicated that over 50 percent of loans went to borrowers with credit scores above 740,

including Fannie, Freddie, and other lenders. In the case of Fannie and Freddiewhich are nowa smaller part of the marketin 2011 approximately 75 percent of loans had credit scores of 740and above.

Estimates by NAR economists have indicated that an additional 500,000 to 700,000additional sales could be made if credit conditions returned to normal. This increased level ofsales activity could generate an additional 250-350 thousand additional jobs on an annual basis,because existing home sales generate jobs across a wide spectrum of the economyi.e.,attorneys, painters, plumbers, landscapers, title companies, furniture manufacturers, etc. Theseare jobs that could be generated at no cost and almost immediately.

0%

10%

20%

30%

40%

50%

60%

70%

lt 620 620 - 659 660-699 700-739 740+

NAR-RCI Survey Credit Scores

RCI-Feb'12 RCI-Mar'12 RCI-Apr'12 RCI-May'12

RCI-Jun'12 RCI-Jul'12 RCI-Aug'12 RCI-Sep'12

RCI-0ct'12 RCI-Nov'12 RCI-Dec'12


21/29

21

The meaning for REALTORS is clear: In many cases lenders are not making loans topotential buyers with less than perfect credit scores but who are well qualified to buy a home.A potential home buyer who is rejected by one bank or financial institution should try, try, tryagain at a different financial institution. Rejection of a loan application may be more indicativeof the financial state of the lending institution than of the applicants credit worthiness. Thereare a variety of potential lending sources in addition to large banks and mortgage brokers. Forexample, a number of REALTORS noted that regional and community banks and credit unionscould be good potential alternative sources of mortgages.

Appraisals

A Continuing Problem

Appraisals continued to be a problem in moving transactions to closure. ManyREALTORS continue to report that appraisal values are not keeping pace with theappreciation in market values. In some cases REALTORS reported that appraisers were usingforeclosures as compswhich they clearly are not. REALTORS also reported encounters without-of-town appraisers who have little knowledge of the neighborhood/local conditions or ofusing comps not reflective of the local market. REALTORS also expressed frustration at theslow turn around time from appraisers and appraisal requirements that are an uncessary expenseon the buyer.

About 33 three percent of REALTORS reported having had a problem with anappraisal in the past 3 months (same as in September). Approximately 10 percent of therespondents reported that appraisal problems led to contract cancellation; about 10 percentreported a delay as a result of an appraisal problem, and almost 13 percent reported that theappraisal problems led to lower prices.

2% 2% 1% 1% 1% 1% 1% 3% 1% 2% 1%

49%

60% 57% 53%58%

54% 53% 53%57% 57% 57%

0% 1%5% 4%

75% 74%

42% 44%

FICO Scores: Recent Scores in 2012 vs.

Scores in 2005

lt620(RCI) 740+(RCI) lt620(Fannie/Freddie) 740+(Fannie/Freddie)


22/29

22

IV. Comments: Straight from the REALTORSJed Smith, Managing Director, Quantitative Research

Low inventories of available homes for sale, tight financing conditions, appraisal issues, anduncertain economic conditions and policies were reported as impacting the housing markets.Some REALTORS comments that typify most of the views expressed are presented below.

1. Low Inventory/multiple bidding

Inventory remains very tight, with increased multi-bidding, especially for well-priced homes.Investors, who typically pay cash, frequently win against first-time buyers. REOs do not appearto be coming aroud sufficiently to meet demand, while sellers are also waiting for prices to pickup further. There are reports of homes selling above asking prices. Here is what REALTORSare saying in the December 2012 survey:

Inventories are low. Ive seen multiple offers on a few properties and homes selling for close toasking price or over the asking price in a few cases. Homes are not staying on market for long, as

we have seen in the last 5 years. Real estate has seen the worst, now we are expecting normal

trend in the market for 2013.

Inventory is very low, and the law of supply and demand has impacted prices to move upward.Most bank owned transactions are multiple offers, but we are also experiencing that in a well

priced single family home. Buyers from out of area are paying cash. I am seeing a lot of 40-ish

career professional couples from Canada buying multiple investment homes.

Investor purchases and flips have skewed the marketplace. When they purchase properties at 40cents on the dollar, their profit margin is huge giving a misleading assessment of the average

buyer or investor.

0%

10%

20%

30%

40%

50%

201003

201004

201005

201006

201007

201008

201009

201010

201011

201012

201101

201102

201103

201104

201105

201106

201107

201108

201109

201110

201111

201112

201201

201202

201203

201204

201205

201206

201207

201208

201209

201210

201211

201212

Percent of REALTORS Reporting Appraisal

Problems in Past 3 Months

Contract Cancelled Contract Delayed Negotiated to Lower Price

Dec '12: 33%


23/29

23

Investors seem to still be interested in the foreclosure "deals". The general public is interested inthem, too, but not many can compete with the aggressive purchase-minded investors.

Traditional sellers seem to be in a wait-and-see mode, unless they have good equity and need to

sell--for job moves, health, etc.

Little inventory is available. Good homes that are priced well receive multiple offers within thefirst 24 hours, with many selling over the list price.

Many buyers-- but sellers reluctant to list. However, rising sale prices may persuade more to listnow in Spring.

2. Tight Financing Credit

Access to financing remains tight, benefting cash buyers. The process remains protracted,causing delayed closings and risking cancellations. There are reports that banks are disapprovingloan applications of those with reasonably good credit scores and are requiring largerdownpayments. Here is what REALTORS are saying in the December 2012 survey:

Tight lending restrictions are keeping a lot of buyers who are very qualified out of the housingmarket. The lending requirements need to be adjusted to make sense.

Banks have to lighten up on credit scores. Credit is more difficult to obtain with low down payments. Banks are requiring more information and delaying closings for things I have not seen in 24 years

of real estate business. Restrictions are getting tighter and information is getting slower. We are

extending closings every week sometimes out 2 to 3 months from original contract close date.

Get the lenders to improve their short sale approval systems. 4-6 months is TOO long for a cashbuyer to wait! Bank/lenders short sale process should be standardized like the foreclosure

process is! Too many variables between lenders. Lost a Short Sale to foreclosure during the

process!

Banks are reluctant to negotiate short sales because of MI guarantees and generally appraiseabove market in short sales and below market in purchases (loans). Banks will not expedite

loans.

Lack of FHA approval and/or rentals by condo associations are killing that market. The value willcontinue to drop unless that situation somehow changes


24/29

24

3. Appraisal issues

The most common reports are about out-of- area appraisers who have poor knowledge oflocal conditions. Another issue is the demand for unusual repairs by some appraisers. Here iswhat REALTORS are saying in the December 2012 survey:

Appraisers need to consider the market conditions more, and lenders need to stay out ofinspection issues. They keep changing their rules on a daily basis and put the transaction in

jeopardy until the very end.

Appraisers are taking 2-4 weeks after final acceptance of purchase agreement to complete theappraisals. This is delaying closings and on those where the appraisal comes in low, buyers are

losing market time to look at other properties they may wish to purchase.

Appraisers should not be given a copy of the purchase and sales agreement. They should have todo the appraisal based on the market data.

Appraiser seems to be getting specific pressure from lenders to keep appraised values lower thanwhat they should be.

4. Economic and policy uncertainty

REALTORS expressed concern about the effects of fiscal and financial regulations on themarket. The increase in flood insurance rates in the wake of Hurricane Sandy also appears to beaffecting buyers. Here is what REALTORS are saying in the December 2012 survey:

I'm very concerned with the current economic climate. The national deficit as well as the annualdeficit spending are going to catch up with us. These matters, along with tax hikes, are likely topush this country back into recession.

I work in an area that SuperStorm Sandy has affected. We don't know the true cost yet.However, with the new flood insurances and requirements, the market could be in severe

trouble.

The 3% cap on points/fees from the QM will be devastating. 70% owner occupancy for any condo insurance is outrageous and is going to kill the condo

market.

Condos that have not been FHA Certified are causing slower sales and lower sale prices.


25/29

25

V. NAR Recent Articles

Employment

Lawrence Yun, SVP and Chief Economist

Job creation continued in December with 155,000 net new payroll jobs. From one year ago,1.8 million new jobs have been added. From the cyclical low point nearly 3 years ago, there

are now 4.8 million more jobs. The unemployment rate held steady at 7.8 percent.

Still, we need to be mindful that 8 million jobs were cut during the Great Recession of fewyears ago, and hence we are still not out of the hole. It has not been a good time to be a

recent college graduate saddled with a large student loan debt.

Construction jobs are finally coming around with 30,000 additions in December. Jobs in thissector had not matched up with other trends of higher housing starts. So the lagging

employment data is likely to show more construction job creations in the upcoming months. Jobs in the profession business service sector have reestablished its prior peak and continue

to expand. That is very good news as demand will rise for commercial office spaces.

Local governments continue to shed jobs in order to balance the budget. State governmentjobs are no longer bleeding as the rising sales tax revenues are beginning help. Federal

government jobs are declining a bit, though the total number is substantially higher now

versus several years ago.

The average worker wage rose to $19.92 per hour and may be at the initial stage ofacceleration. Up only 1.7 percent from one year ago, the latest monthly gain on an

annualized pace was 3.7 percent. If wages do accelerate then overall consumer prices will

get pushed up. In such a case, the Federal Reserve could be in a conundrum as to what todo. Keep interest rate low and continue Quantitative Easing (printing money) to help lower

unemployment rate or begin to raise interest rates in order to cool off inflation.

Irrespective of the Fed, the bond market will quickly factor in slightly higher inflationpotential and charge modestly higher interest rates. The rock-bottom low mortgage rates

may already be over. Though any rise will be not alarming, with the 30-year fixed rate

mortgage rising to maybe 4.2 percent by the year-end from the current 3.5 percent rate.

The labor force participation rate of those with job or seeking work continues to remain atvery low levels. Many adults have dropped out of the labor force in recent years, either out

of frustration in unable to find work, attending schools, took early retirement package or

disturbingly to obtain disability benefits. Had the labor force not fallen, the currentunemployment rate would be above 10 percent.


26/29

26
http://economistsoutlook.blogs.realtor.org/files/2013/01/10413F.pnghttp://economistsoutlook.blogs.realtor.org/files/2013/01/10413E.pnghttp://economistsoutlook.blogs.realtor.org/files/2013/01/10413D.pnghttp://economistsoutlook.blogs.realtor.org/files/2013/01/10413C.pnghttp://economistsoutlook.blogs.realtor.org/files/2013/01/10413B.pnghttp://economistsoutlook.blogs.realtor.org/files/2013/01/10413A.png


27/29

27

Housing Starts

Ken Fears, Manager, Regional Economics

The Census bureau reported 954,000 starts in December, an increase of 12.1% fromNovember which was revised modestly lower.

Single family construction, which has lagged for several years in the wake of the subprimecrisis and subsequent bloat in inventory, was up 18.5% over the 12-month period ending in

December.

Permits for construction of single family units were 27.3% higher over this period,suggesting confidence among builders for the future.

Despite the strong figures, starts remain well below the historic average and should not posea threat to inventories as much of the building is done in niche markets. Furthermore,

financing for construction has been tight in recent years, so new projects are vetted closely

by builders and lenders who search out good local information. Builder confidence in local

conditions is a positive indicator for inventories, sales volumes, and price trends in these

markets.

New construction adds to GDP and employment growth.
http://economistsoutlook.blogs.realtor.org/files/2013/01/Capture3.jpg


28/29

28

REALTORS Confidence Index Survey As of December 2012

National Association of REALTORS

Price Expectation

for Next 12

Months Rent Trends

Median Days

on the

Market

BuyerTraffic

SellerTraffic

As % of

REALTORSWho

Expect

Constant/RisingPrices

As % of

REALTORS

Who ExpectRising Rents

Year/Month

Current

Conditions

6-Month

Outlook

Current

Conditions

6-Month

Outlook

Current

Conditions

6-Month

Outlook

200801 27 38 16 23 14 19 31 58 - -

200802 27 38 17 24 15 21 31 57 - -

200803 29 39 19 25 15 21 35 56 - -

200804 28 37 19 25 16 22 30 56 - -

200805 31 38 21 26 17 23 34 55 - -

200806 29 37 20 23 18 21 31 57 - -

200807 29 33 20 22 17 19 31 54 - -

200808 26 33 18 22 15 20 33 52 - -

200809 25 28 16 19 14 16 28 48 - -

200810 22 29 14 19 12 17 27 46 48% -

200811 21 31 13 20 12 17 26 42 44% -

200812 19 28 11 17 10 14 25 46 40% -

200901 23 34 13 20 11 18 32 45 45% -

200902 25 35 14 22 12 18 36 46 46% -

200903 28 40 15 23 12 19 39 48 57% -200904 33 45 18 27 14 22 44 48 65% -

200905 34 44 20 27 16 23 44 48 65% -

200906 35 43 18 24 14 19 43 46 64% -

200907 34 40 18 22 14 18 41 47 64% -

200908 38 42 21 24 16 20 45 47 72% -

200909 35 41 19 22 15 19 41 47 70% -

200910 34 39 17 22 13 17 39 44 69% -

200911 35 41 19 23 15 18 38 43 70% -

200912 33 42 15 23 13 19 37 43 67% -

201001 36 43 18 24 14 18 41 44 66% -

201002 35 43 18 23 14 19 41 46 65% -

201003 36 42 18 22 14 18 42 47 65% -

201004 35 38 19 22 14 17 41 44 68% -

201005 36 40 19 22 17 19 37 43 67% -

201006 27 29 14 14 11 12 27 42 58% -

201007 24 27 11 13 10 11 26 40 55% -

201008 23 26 12 13 10 11 24 40 53% -

201009 21 25 12 15 9 11 23 41 49% -

201010 23 26 9 13 8 11 23 38 50% -

201011 23 28 11 15 10 13 25 37 52% -

201012 25 32 13 18 10 15 27 36 59% 39% -

201101 27 37 13 19 10 15 30 37 56% 42% -

201102 30 37 14 19 12 17 33 41 60% 44% -

201103 32 39 17 22 14 18 37 41 58% 46% -

201104 32 39 16 20 14 17 37 42 59% 48% -

201105 33 38 18 22 15 18 37 42 59% 55% 96

201106 31 34 16 19 14 16 33 41 54% 52% 97

201107 31 33 17 19 14 17 34 40 55% 49% 98

201108 31 32 17 18 14 15 32 38 54% 50% 92

201109 29 30 17 18 14 15 30 36 53% 47% 101

201110 30 32 18 20 14 16 33 36 58% 51% 96

201111 30 36 19 22 15 18 33 35 57% 47% 98

201112 32 40 19 24 14 19 36 37 62% 49% 99

201201 37 46 23 29 18 23 44 39 67% 47% 99

201202 43 52 26 32 21 27 51 40 73% 51% 97

201203 49 57 30 36 25 31 55 41 78% 53% 91

201204 50 55 31 36 25 30 55 41 81% 52% 83

201205 57 62 36 41 29 34 55 41 83% 54% 72

201206 58 61 38 42 31 36 54 40 86% 54% 70

201207 54 56 35 38 29 32 54 40 85% 57% 69

201208 54 56 35 38 30 34 55 40 87% 55% 70

201209 53 56 36 39 29 33 53 38 88% 57% 70

201210 53 58 36 41 31 36 54 37 87% 51% 71

201211 53 59 36 41 31 36 53 37 85% 54% 70

201212 56 62 39 44 31 37 56 38 87% 52% 73

/1 In the RCI Survey,a sale re fers to the REALTOR's last closed or completed sale/ transaction for the reference month.

Prepared by the Rese arch Division. For querries, ple ase contact the Research Division c/o Dr. Jed Smith, Manager, Quantitative Research.

Traffic Index

Singl e Family Townhouse Condominium

REALTORS Confidence Inde x (RCI)


29/29

REALTORS Confidence Index Survey As of December 2012

National Association of REALTORS *

Appraisal Issues

Foreclosed

As % of Sales

Short Sale

As % of

Sales

Total

Distressed

Sales As %

of All Sales

Mean Price

Discount of

Foreclosed

Property Sales

Mean Price

Discount of

Shortsale

Property Sales

All Cash

Sales as % of

All Sales

% of Mortgage Sales

with at least 20 %

Downpayment

First-

time

Buyer Investor

Second

home Relocation

International

Buyer

As % of

REALTORS Facing

Appraisal Issues

Year/Month

200801 - - -

200802 - - -

200803 - - -

200804 - - -

200805 - - -

200806 - - -

200807 - - -

200808 - - -

200809 - - -

200810 23% 11% 34% 15% 32% 14%

200811 25% 12% 37% 24% 27% 20%

200812 27% 13% 40% 16% 30% 14%

200901 28% 13% 41% 18% 38% 14%

200902 30% 18% 48% 19% 19% 30% 51% 25%

200903 31% 18% 49% 23% 21% 30% 53% 24%

200904 29% 17% 45% 14% 14% 20% 40% 18%

200905 21% 12% 33% 21% 17% 12% 47% 14%

200906 20% 11% 31% 21% 15% 13% 45% 14%

200907 20% 11% 31% 21% 17% 19% 31% 9%

200908 18% 12% 31% 21% 16% 20% 46% 12%200909 19% 10% 29% 21% 17% 21% 49% 13%

200910 18% 12% 30% 19% 18% 20% 50% 14%

200911 21% 12% 33% 21% 16% 19% 51% 12%

200912 22% 10% 32% 18% 15% 22% 43% 15%

201001 24% 14% 38% 15% 17% 26% 40% 17%

201002 23% 12% 35% 22% 19% 27% 42% 19%

201003 24% 12% 35% 21% 19% 27% 44% 19% 3% 39%

201004 21% 12% 33% 21% 19% 26% 49% 15% 2% 39%

201005 19% 12% 31% 19% 14% 25% 46% 14% 2% 39%

201006 17% 15% 32% 19% 12% 24% 43% 13% 1% 42%

201007 22% 10% 32% 19% 12% 30% 38% 19% 2% 42%

201008 22% 12% 34% 19% 12% 28% 31% 21% 2% 39%

201009 23% 12% 35% 19% 15% 29% 32% 18% 11% 2% 41%

201010 23% 11% 34% 22% 14% 29% 32% 19% 12% 2% 40%

201011 22% 11% 33% 20% 17% 31% 32% 19% 10% 3% 39%

201012 24% 12% 36% 20% 16% 29% 33% 20% 13% 3% 35%

201101 24% 13% 37% 22% 15% 32% 29% 23% 10% 2% 35%

201102 26% 13% 39% 22% 15% 33% 34% 19% 14% 3% 33%

201103 27% 13% 40% 19% 11% 35% 33% 22% 13% 4% 34%

201104 24% 13% 37% 20% 17% 31% 34% 36% 20% 13% 13% 3% 35%

201105 20% 11% 31% 21% 17% 30% 32% 36% 19% 13% 14% 3% 35%

201106 18% 12% 30% 20% 16% 29% 37% 31% 19% 14% 14% 3% 32%

201107 17% 12% 29% 21% 15% 29% 36% 32% 18% 13% 15% 3% 32%

201108 19% 12% 31% 20% 16% 29% 34% 32% 22% 11% 15% 2% 33%

201109 18% 12% 30% 22% 15% 30% 35% 32% 19% 12% 15% 3% 31%

201110 17% 11% 28% 20% 14% 29% 34% 34% 18% 12% 15% 2% 35%

201111 19% 10% 29% 19% 14% 28% 34% 35% 19% 10% 14% 2% 36%

201112 19% 13% 32% 22% 13% 31% 36% 31% 21% 13% 14% 2% 34%

201201 22% 13% 35% 21% 19% 31% 35% 33% 23% 13% 13% 2% 32%

201202 20% 14% 34% 22% 16% 33% 32% 32% 23% 12% 11% 2% 30%

201203 18% 11% 29% 19% 16% 32% 34% 33% 21% 11% 12% 2% 31%

201204 17% 11% 28% 21% 14% 29% 33% 35% 20% 12% 13% 2% 32%

201205 15% 10% 25% 18% 14% 28% 37% 34% 17% 11% 15% 3% 33%

201206 13% 12% 25% 18% 15% 29% 36% 32% 19% 12% 15% 2% 35%

201207 12% 12% 24% 17% 15% 27% 34% 34% 16% 11% 15% 2% 34%

201208 12% 10% 22% 19% 13% 27% 37% 31% 18% 12% 16% 2% 36%

201209 13% 11% 24% 21% 13% 28% 35% 32% 18% 12% 14% 2% 35%

201210 12% 12% 24% 20% 14% 29% 36% 31% 20% 12% 13% 2% 34%

201211 12% 10% 22% 20% 16% 30% 37% 30% 19% 12% 15% 2% 34%

201212 12% 12% 24% 17% 16% 29% 36% 30% 21% 12% 13% 2% 33%

/1 In the RCI Survey,a sale refers to the REALTOR's last closed or completed sale/transaction for the ref erence month.

Prepared by the Research Division. For querries, please contact the Research Division c/o Dr. Jed Smith, Manager, Quantitative Research.

FinancingDistressed Sales /1 Type of Buyer As % of All Buyers /1

realtor confidence index 2012-12

Documents