june 2013 realtors confidence index

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1 REALTORS® CONFIDENCE INDEX Report and Market Outlook June 2013 Edition Based on Data Collected June 24 through July 3, 2013 NATIONAL ASSOCIATION OF REALTORS® Research Department Lawrence Yun, Senior Vice President and Chief Economist

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1

REALTORS® CONFIDENCE INDEX Report and Market Outlook

June 2013 Edition

Based on Data Collected June 24 through July 3, 2013

NATIONAL ASSOCIATION OF REALTORS®

Research DepartmentLawrence Yun, Senior Vice President and Chief Economist

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2

Table of Contents

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

REALTOR® Confidence in Current Market Conditions Held Steady ......................................................... 3

Demand Moderated While Supply Conditions Slightly Improved ............................................................ 4

Prices Continued to Pick Up and Dayon Market Drops Further ................................................................... 4

REALTOR® Confidence in the Market Outlook in Next 6 Months Kept in Check ..................................... 5

I. Market Conditions ..................................................................................................................................... 7

Confidence Remained Strong but Moderated in June ............................................................................. 7

Prices Expected to Increase ...................................................................................................................... 9

Shorter Days on the Market: 37 Days .................................................................................................... 10

Distressed Sales Continue to Fall: 15 Percent of Sales ........................................................................... 12

II. Buyer and Seller Characteristics ............................................................................................................. 14

Cash Sales: 31 Percent of Residential Sales ........................................................................................... 14

First Time Buyers: 29 Percent of Residential Buyers ............................................................................. 14

Residential Sales to Investors: 17 Percent of Residential Market ......................................................... 15

Second Home Buyers : 10 Percent of Residential Market ...................................................................... 16

Relocation Buyers : 14 Percent of Residential Market ........................................................................... 16

International Transactions: About 2.3 Percent of Residential Market ................................................... 17

Mortgages With Down Payment of 20 Percent or More : 37 Percent of Mortgages ............................. 17

Rising Rents for Residential Properties ................................................................................................... 18

REALTORS® Also Reported Commercial Rentals .................................................................................... 19

III. Current Issues ........................................................................................................................................ 19

Tight Credit Conditions and Slow Lending Process ................................................................................. 19

IV. Articles and Comments .......................................................................................................................... 20

Latest Mortgage Applications Data......................................................................................................... 20

Basel III Down: The Specter of Regulation Eases .................................................................................... 21

International Sales at $68.2 Billion in 12 Months Ending March 2013 ................................................... 23Comments From REALTORS® .................................................................................................................. 23

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SUMMARYJed Smith and Gay Cororaton

The REALTORS® Confidence I ndex (RCI)  Report provides monthly information aboutmarket conditions and expectations, buyer/seller traffic, price trends, buyer profiles, and issues

affecting real estate. The current report is based on the responses of 3,447 REALTORS® to asurvey conducted during June 24 through July 3, 20131. All real estate is local: conditions inspecific markets may vary from the overall national trends presented in this report.

In June , REALTORS® reported that buyer demand remained broadly robust. Therecent increase in interest rates was reported as deterring some potential buyers from purchases, but also inducing other potential buyers to move forward quickly in anticipation of possibleadditional interest rates increases. Tight underwriting standards coupled with protracted bank approval processes continued to frustrate homebuying activity, especially for first-timehomebuyers . Inventory was reported to be low compared to demand although there has beensome easing in recent months. REALTORS® also raised concerns about the dampening effect

of new regulations such as the increase in mortgage insurance premiums and lifetime paymentunder certain conditions.

REALTOR® Confidence in Current Market Conditions Held Steady

REALTORS® generally continued to view current conditions in the single – familyhomes market as “strong” , with the Index-Current Conditions2 at 71. The Index for townhouseswas unchanged at 51. The Index for condominiums has been approaching the 50 level.REALTORS® ascribed the low volume of condominium sales to problems in FHA financing.  

1  The survey was sent to a random sample of about 50,000 REALTORS®.2 The Index is calculated as a weighted average of the responses, evaluated at 0-Weak, 50-Moderate, and100-Strong. 

0

10

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70

80

     2     0     0     8     0     1

     2     0     0     8     0     4

     2     0     0     8     0     7

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

REALTORS® Confidence Index - Current Conditions

June 2013

SF Townhouse Condo

SF: 71 TH: 51 Condo: 46

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Demand Moderated While Supply Conditions Slightly Improved

The Buyer Traffic Index dipped slightly to 69 (71 in May), possibly on account of theimpact of rising prices and higher mortgage interest rates. Meanwhile, inventory/supplyconditions were reported to be improving, as reflected in the increase in Seller Traffic Index to46 (43 in May). Notwithstanding, REALTORS® reported that not enough inventory was stillcoming on the market from both REOs and homeowner listings as current homeowners wait for  prices to move up further. About 47 percent of REALTORS® reported having potential sellerswaiting for further price appreciation.

Prices Continued to Pick Up and Properties Sell Faster

Amid tight inventory conditions, most REALTOR® respondents reported higher sales prices and shorter days on the market. About 88 percent of respondents reported constant or increasing prices, while median days on the market for residential sales dropped further to 37days.

20

30

40

50

60

70

80

     2     0     0     8     0     1

     2     0     0     8     0     4

     2     0     0     8     0     7

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

Indexes of Buyer and Seller Traffic

Buyer Traffic Index

June 2013: Buyer: 69 Seller : 46

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REALTOR® Confidence in the Market Outlook in Next 6 Months Kept in Check 

Confidence about the outlook for the next 6 months was strong although confidence

declined slightly relative to May. REALTORS® reported a confluence of factors that temperedtheir optimism: rising interest rates, low inventory, rising prices, and stringent credit conditions.

54%58% 62% 64% 64%

69% 71% 73% 73%

79% 83% 83% 86% 86% 87% 88%

     M    a    r  -     1     2

     A    p    r  -     1     2

     M    a    y  -     1     2

     J    u    n  -     1     2

     J    u     l  -     1     2

     A    u    g  -     1     2

     S    e    p  -     1     2

     O    c    t  -     1     2

     N    o    v  -     1     2

     D    e    c  -     1     2

     J    a    n  -     1     3

     F    e     b  -     1     3

     M    a    r  -     1     3

     A    p    r  -     1     3

     M    a    y  -     1     3

     J    u    n  -     1     3

Percentage of Respondents Reporting Constant or

Higher Prices Today Compared to a Year Ago

96 97 9892

10196 98 99 99 9791

8372 70 69 70 70 71 70 73 71 74

62

4641 37

0

20

40

60

80

100

120

     2     0     1     1     0     5

     2     0     1     1     0     6

     2     0     1     1     0     7

     2     0     1     1     0     8

     2     0     1     1     0     9

     2     0     1     1     1     0

     2     0     1     1     1     1

     2     0     1     1     1     2

     2     0     1     2     0     1

     2     0     1     2     0     2

     2     0     1     2     0     3

     2     0     1     2     0     4

     2     0     1     2     0     5

     2     0     1     2     0     6

     2     0     1     2     0     7

     2     0     1     2     0     8

     2     0     1     2     0     9

     2     0     1     2     1     0

     2     0     1     2     1     1

     2     0     1     2     1     2

     2     0     1     3     0     1

     2     0     1     3     0     2

     2     0     1     3     0     3

     2     0     1     3     0     4

     2     0     1     3     0     5

     2     0     1     3     0     6

Median Days on Market

Source: NAR, RCI Survey

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Approximately 95 percent of REALTORS® reported that they expect constant or higher  prices in the next 12 months, the same percentage since April.

 NAR forecasts continued sales and price increases as are indicated by REALTOR®

responses.

0

10

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50

60

70

80

     2     0     0     8     0     1

     2     0     0     8     0     4

     2     0     0     8     0     7

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

REALTORS® Confidence Index - Six Month Outlook

June 2013

SF Townhouse Condo

SF: 72 TH: 54 Condo: 49

0%

20%

40%

60%

80%

100%

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

REALTORS'® Price Expectations for Next 12 Months

Constant/Rising Prices Falling Prices

June 2013: 95% expect constant/higher prices in next 12 months

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What Does Thi s Mean For REALTORS®? 

The real estate markets continues with upward momentum in terms of sales and price.Continued restrictive mortgage availability and tight underwriting standards are a problem, butREALTORS® report that loans are frequently available at smaller banks and credit unions.Tight inventories are reported as making markets increasingly competitive.

I. Market Conditions

Confidence Remained Strong but Tapered in June

REALTORS’® view of current conditions in the single-family market remained strong(71, the same as in May) although confidence about the outlook in the next six months appearedto have moderated (72 in June compared to 75 in May). The effects of rising prices and interestrates, coupled with the continued tightness in inventory as well as stringent credit standards andthe effect of new regulations such as higher FHA mortgage insurance premiums might accountfor the dampened expectations.

100000

120000

140000

160000180000

200000

220000

240000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

     J    a    n     /     0     0

     J    u     l     /     0     0

     J    a    n     /     0     1

     J    u     l     /     0     1

     J    a    n     /     0     2

     J    u     l     /     0     2

     J    a    n     /     0     3

     J    u     l     /     0     3

     J    a    n     /     0     4

     J    u     l     /     0     4

     J    a    n     /     0     5

     J    u     l     /     0     5

     J    a    n     /     0     6

     J    u     l     /     0     6

     J    a    n     /     0     7

     J    u     l     /     0     7

     J    a    n     /     0     8

     J    u     l     /     0     8

     J    a    n     /     0     9

     J    u     l     /     0     9

     J    a    n     /     1     0

     J    u     l     /     1     0

     J    a    n     /     1     1

     J    u     l     /     1     1

     J    a    n     /     1     2

     J    u     l     /     1     2

     J    a    n     /     1     3

     J    u     l     /     1     3

     D    e    c     /     1     4

Home Sales and Prices: Actual and Forecast

EHS-Actual EHS-Forecast

Median Prices-Actual Median Prices- Forecast

Sales Prices

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0

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     2     0     0     8     0     1

     2     0     0     8     0     4

     2     0     0     8     0     7

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

REALTORS® Confidence Index--June 2013

Current and Six Month Outlook: Single Family Properties

Current Conditions 6-Month Outlook

Current: 71 Outlook: 72

0

10

20

30

40

50

60

     2     0     0     8

     0     1

     2     0     0     8

     0     4

     2     0     0     8

     0     7

     2     0     0     8

     1     0

     2     0     0     9

     0     1

     2     0     0     9

     0     4

     2     0     0     9

     0     7

     2     0     0     9

     1     0

     2     0     1     0

     0     1

     2     0     1     0

     0     4

     2     0     1     0

     0     7

     2     0     1     0

     1     0

     2     0     1     1

     0     1

     2     0     1     1

     0     4

     2     0     1     1

     0     7

     2     0     1     1

     1     0

     2     0     1     2

     0     1

     2     0     1     2

     0     4

     2     0     1     2

     0     7

     2     0     1     2

     1     0

     2     0     1     3

     0     1

     2     0     1     3

     0     4

REALTORS® Confidence Index--June 2013

Current and Six Month Outlook: Townhouse Properties

Current Conditions 6-Month Outlook

Current: 51 Outlook: 54

0

10

20

30

40

50

60

     2     0     0     8     0     1

     2     0     0     8     0     4

     2     0     0     8     0     7

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

REALTORS® Confidence Index--June 2013

Current and Six Month Outlook: Condo Properties

Current Conditions 6-Month Outlook

Current: 46 Outlook: 49

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Prices Expected to Increase

With strong buyer demand and tight inventory, 95 percent of respondents expectedconstant or rising prices in the next 12 months. Among all respondents, the median of theexpected price change was about 5 percent.

The map below shows the median expected price change based on the reported price

expectation of the respondents in the June RCI. The states are divided into the lower (white),middle (yellow), and upper (red) groups, with each group representing 33 percent of the data.REALTORS® in the West, South, and some Midwest states have the highest expected priceincreases of about 5 – 8 percent. Price expectations appear to have improved in the Northeaststates such as in New York and Massachussetts.

0.01.0

2.0

3.0

4.0

5.0

6.0

     2     0     1     0     1     1

     2     0     1     0     1     2

     2     0     1     1     0     1

     2     0     1     1     0     2

     2     0     1     1     0     3

     2     0     1     1     0     4

     2     0     1     1     0     5

     2     0     1     1     0     6

     2     0     1     1     0     7

     2     0     1     1     0     8

     2     0     1     1     0     9

     2     0     1     1     1     0

     2     0     1     1     1     1

     2     0     1     1     1     2

     2     0     1     2     0     1

     2     0     1     2     0     2

     2     0     1     2     0     3

     2     0     1     2     0     4

     2     0     1     2     0     5

     2     0     1     2     0     6

     2     0     1     2     0     7

     2     0     1     2     0     8

     2     0     1     2     0     9

     2     0     1     2     1     0

     2     0     1     2     1     1

     2     0     1     2     1     2

     2     0     1     3     0     1

     2     0     1     3     0     2

     2     0     1     3     0     3

     2     0     1     3     0     4

     2     0     1     3     0     5

     2     0     1     3     0     6

REALTORS'® Median Expected Price Change for Home Prices

in the Next 12 Months (in %)

Source: NAR RCI Surveys

%

June 2013: 4.9%

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

Based on REALTORS Confidence Index Survey, June 2013

Shorter Days on the Market: 37 Days

REALTORS® continued to report properties selling briskly in June.The median days onmarket dropped to 37 days (41 in May). Short-sales had the longest days on market at 68 days(79 days in May) while foreclosed properties were on the market for 39 days (43 in May) . Themedian days on the market for non-distressed properties was 35 days (39 days in May ).

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Approximately 47 percent of REALTORS® reported that properties were on the marketfor less than a month when sold compared to 33 percent in the same month last year. The percentage of REALTORS® reporting that the house sold had been on the market for 6 monthsor longer was down to 15 percent from 24 percent a year ago.

0

20

40

60

80

100

120

140

160

180

     2     0     1     1     0     5

     2     0     1     1     0     6

     2     0     1     1     0     7

     2     0     1     1     0     8

     2     0     1     1     0     9

     2     0     1     1     1     0

     2     0     1     1     1     1

     2     0     1     1     1     2

     2     0     1     2     0     1

     2     0     1     2     0     2

     2     0     1     2     0     3

     2     0     1     2     0     4

     2     0     1     2     0     5

     2     0     1     2     0     6

     2     0     1     2     0     7

     2     0     1     2     0     8

     2     0     1     2     0     9

     2     0     1     2     1     0

     2     0     1     2     1     1

     2     0     1     2     1     2

     2     0     1     3     0     1

     2     0     1     3     0     2

     2     0     1     3     0     3

     2     0     1     3     0     4

     2     0     1     3     0     5

     2     0     1     3     0     6

Median Days on Market by Type of Sale

Foreclosed Short Sales Not distressed AllSource: NAR, RCI Survey

June 2013: Foreclosed: 39; Shortsale: 68 ; Not distressed: 35; All: 37

47%

14%

9% 7%4% 4% 5% 4%

6%

0%5%

10%15%

20%25%

30%35%

40%45%

50%

<1 mo 1-2 mo 2-3 mo 3-4 mo 4-5 mo 5-6 mo 6-9 mo 9-12 mo >=12

mo

Distribution of Reported Sales by Time On Market 

201206 201305 201306

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Distressed Sales Continue to Fall: 15 Percent of Sales

With foreclosure rates easing, distressed sales are accounting for a smaller share of themarket. Approximately 15 percent of respondents who reported a sale sold a distressed property, substantially down from levels a few years ago, and also lower than in May (18 percent). REALTORS® continued to report strong demand for REOs from investors whoreportedly win with significant frequency when bidding against first time homebuyers.

Foreclosed property sold at a 16 percent average discount to market , while short salessold at a 13 percent average discount.3 Data from July 2012 thru June 2013 shows that “below

average” foreclosed homes were discounted by20 percent, with “below average” short salesdiscounted by 16 percent.

3The estimation of the level of discount is based on an estimate of what the property would have sold for if 

it had not been distressed (possibly in better condition, absent any taint of being distressed).

0%

10%

20%

30%

40%

50%

     2     0     0     9     0     5

     2     0     0     9     0     7

     2     0     0     9     0     9

     2     0     0     9     1     1

     2     0     1     0     0     1

     2     0     1     0     0     3

     2     0     1     0     0     5

     2     0     1     0     0     7

     2     0     1     0     0     9

     2     0     1     0     1     1

     2     0     1     1     0     1

     2     0     1     1     0     3

     2     0     1     1     0     5

     2     0     1     1     0     7

     2     0     1     1     0     9

     2     0     1     1     1     1

     2     0     1     2     0     1

     2     0     1     2     0     3

     2     0     1     2     0     5

     2     0     1     2     0     7

     2     0     1     2     0     9

     2     0     1     2     1     1

     2     0     1     3     0     1

     2     0     1     3     0     3

     2     0     1     3     0     5

Percent of Respondents Reporting

Distressed Sales

Foreclosed As % of Sales Short Sale As % of Sales

June 2013: Foreclosed: 8 % Shortsale: 7 %

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13

5

10

15

20

25

30

     2     0     0     9     0     2

     2     0     0     9     0     4

     2     0     0     9     0     6

     2     0     0     9     0     8

     2     0     0     9     1     0

     2     0     0     9     1     2

     2     0     1     0     0     2

     2     0     1     0     0     4

     2     0     1     0     0     6

     2     0     1     0     0     8

     2     0     1     0     1     0

     2     0     1     0     1     2

     2     0     1     1     0     2

     2     0     1     1     0     4

     2     0     1     1     0     6

     2     0     1     1     0     8

     2     0     1     1     1     0

     2     0     1     1     1     2

     2     0     1     2     0     2

     2     0     1     2     0     4

     2     0     1     2     0     6

     2     0     1     2     0     8

     2     0     1     2     1     0

     2     0     1     2     1     2

     2     0     1     3     0     2

     2     0     1     3     0     4

     2     0     1     3     0     6

Mean Percentage Price Discount of 

Reported Distressed Sales (in %)

Foreclosed Shortsale

June 2013: Foreclosed: 16%; Shortsale: 13%

%

13 15

20

2730

12 1216

22

15

0

510

15

20

25

30

35

Above average Average Below average Well below

average

Bottom 1%

Percent Price Discount by Property Condition (%) of 

Reported Distressed Sales

Unweighted Average for July 2012 to June 2013

Foreclosed Shortsale

%

11 10

11 10

15 13

34 28

Mean Percent Below Market Value of Reported

Distressed Sales, June 2013 RCI Survey

Below average

Well below average

Above average

Average

House Condition Foreclosed Short Sale

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II. Buyer and Seller Characteristics 

Cash Sales: 31 Percent of Residential Sales

Approximately 31 percent of REALTORS® who made a sale reported a cash sale (33

 percent in May ). International homebuyers and investors typically paid cash.

First Time Buyers: 29 Percent of Residential Buyers

Approximately 29 percent of respondents made a sale to a first time home buyer (28 percent in May). Normally, first time buyers are in the neighborhood of 40 percent.4 Of thosereporting a sale to a first time home buyer, approximately 12 percent reported a cash sale.

4  Based on data from NAR’s Profile of Homebuyers and Sellers.

0%

5%

10%

15%

20%

25%

30%

35%

40%

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

Cash Sales as Percent of Market

June 2013: 31%

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15

Residential Sales to Investors: 17 Percent of Residential Market

Approximately 17 percent of respondents reported making a sale to investors who wereactive in buying distressed properties and paying cash. Of respondents reporting a sale to aninvestor, 68 percent reported a cash sale.

0%

10%

20%

30%

40%

50%

60%

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

First Time Buyers as Percent of Market

June 2013: 29%

0%

5%

10%

15%

20%

25%

30%

     2     0     0     8     1     0

     2     0     0     9     0     1

     2     0     0     9     0     4

     2     0     0     9     0     7

     2     0     0     9     1     0

     2     0     1     0     0     1

     2     0     1     0     0     4

     2     0     1     0     0     7

     2     0     1     0     1     0

     2     0     1     1     0     1

     2     0     1     1     0     4

     2     0     1     1     0     7

     2     0     1     1     1     0

     2     0     1     2     0     1

     2     0     1     2     0     4

     2     0     1     2     0     7

     2     0     1     2     1     0

     2     0     1     3     0     1

     2     0     1     3     0     4

Sales to Investors as Percent of Market

June 2013: 17%

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16

Second Home Buyers : 10 Percent of Residential Market

Relocation Buyers : 14 Percent of Residential Market

0%

2%

4%

6%

8%

10%

12%

14%16%

     2     0     1     0     0     9

     2     0     1     0     1     0

     2     0     1     0     1     1

     2     0     1     0     1     2

     2     0     1     1     0     1

     2     0     1     1     0     2

     2     0     1     1     0     3

     2     0     1     1     0     4

     2     0     1     1     0     5

     2     0     1     1     0     6

     2     0     1     1     0     7

     2     0     1     1     0     8

     2     0     1     1     0     9

     2     0     1     1     1     0

     2     0     1     1     1     1

     2     0     1     1     1     2

     2     0     1     2     0     1

     2     0     1     2     0     2

     2     0     1     2     0     3

     2     0     1     2     0     4

     2     0     1     2     0     5

     2     0     1     2     0     6

     2     0     1     2     0     7

     2     0     1     2     0     8

     2     0     1     2     0     9

     2     0     1     2     1     0

     2     0     1     2     1     1

     2     0     1     2     1     2

     2     0     1     3     0     1

     2     0     1     3     0     2

     2     0     1     3     0     3

     2     0     1     3     0     4

     2     0     1     3     0     5

     2     0     1     3     0     6

Second-Home Buyers as Percent of Market

June 2013: 10%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%Relocation Buyers as Percent of Market

June 2013: 14%

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17

International Transactions: About 2.3 Percent of Residential Market

Approximately 2.3 percent of respondent who had a sale reported it to be a U.S.residential real estate to foreigners not residing in the U.S. Of those reporting an internationalsale, 90 percent reported a cash sale.

Mortgages With Down Payment of 20 Percent or More: 37 Percent of Mortgages

Approximately 37 percent of respondents whose clients obtained a mortgage during thesale reported a down payment of 20 percent or more.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

     2     0     1     0     0     3

     2     0     1     0     0     4

     2     0     1     0     0     5

     2     0     1     0     0     6

     2     0     1     0     0     7

     2     0     1     0     0     8

     2     0     1     0     0     9

     2     0     1     0     1     0

     2     0     1     0     1     1

     2     0     1     0     1     2

     2     0     1     1     0     1

     2     0     1     1     0     2

     2     0     1     1     0     3

     2     0     1     1     0     4

     2     0     1     1     0     5

     2     0     1     1     0     6

     2     0     1     1     0     7

     2     0     1     1     0     8

     2     0     1     1     0     9

     2     0     1     1     1     0

     2     0     1     1     1     1

     2     0     1     1     1     2

     2     0     1     2     0     1

     2     0     1     2     0     2

     2     0     1     2     0     3

     2     0     1     2     0     4

     2     0     1     2     0     5

     2     0     1     2     0     6

     2     0     1     2     0     7

     2     0     1     2     0     8

     2     0     1     2     0     9

     2     0     1     2     1     0

     2     0     1     2     1     1

     2     0     1     2     1     2

     2     0     1     3     0     1

     2     0     1     3     0     2

     2     0     1     3     0     3

     2     0     1     3     0     4

     2     0     1     3     0     5

     2     0     1     3     0     6

Sales to International Clients as Percent of Market

June 2013: 2.3%

28%

30%

32%

34%

36%

38%

     2     0     1     1     0     4

     2     0     1     1     0     5

     2     0     1     1     0     6

     2     0     1     1     0     7

     2     0     1     1     0     8

     2     0     1     1     0     9

     2     0     1     1     1     0

     2     0     1     1     1     1

     2     0     1     1     1     2

     2     0     1     2     0     1

     2     0     1     2     0     2

     2     0     1     2     0     3

     2     0     1     2     0     4

     2     0     1     2     0     5

     2     0     1     2     0     6

     2     0     1     2     0     7

     2     0     1     2     0     8

     2     0     1     2     0     9

     2     0     1     2     1     0

     2     0     1     2     1     1

     2     0     1     2     1     2

     2     0     1     3     0     1

     2     0     1     3     0     2

     2     0     1     3     0     3

     2     0     1     3     0     4

     2     0     1     3     0     5

     2     0     1     3     0     6

Percent of Mortgage Sales With Downpayment of 

At Least 20 Percent

>=20%

June 2013: 37%

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18

Rising Rents for Residential Properties

Demand for rental units appears to remain strong based on rental price trends.Approximately 53 percent of REALTORS® reported higher residential rents compared to 12months ago. About 24 percent of REALTORS® reported conducting an apartment rental.

0%

10%

20%

30%

40%

50%

60%

     2     0     1     0     1     2

     2     0     1     1     0     2

     2     0     1     1     0     4

     2     0     1     1     0     6

     2     0     1     1     0     8

     2     0     1     1     1     0

     2     0     1     1     1     2

     2     0     1     2     0     2

     2     0     1     2     0     4

     2     0     1     2     0     6

     2     0     1     2     0     8

     2     0     1     2     1     0

     2     0     1     2     1     2

     2     0     1     3     0     2

     2     0     1     3     0     4

     2     0     1     3     0     6

Percent of Respondents Reporting Changing Rent Levels

as Compared to 12 Months Ago

Rising Rents Lower Rents Constant

June 2013: Rising rent: 53%

0%

5%

10%

15%

20%

25%

30%

35%

Percent of Respondents Conducting

An Apartment Rental

June 2013: 23%

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19

REALTORS® Also Reported Commercial Rentals

III. Current Issues

Tight Credit Conditions and Slow Lending Process

REALTORS® continued to express concern over unreasonably tight credit conditions.Mortgage lenders appear to continue to display an unnecessarily high level of risk aversion. Inthe 2001-04 time frame approximately 40 percent of residential loans went to applicants withcredit scores above 740. Currently the percentage is in the 50 percent range. Estimates by NAR economists have indicated that an additional 500,000 to 700,000 additional sales could be madeif credit conditions returned to normal.

3%4%

3%4% 4%

4%

3%

4% 4%

3%3%

3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%4.5%

Percent of Respondents Conducting

A Commercial Rental

0%

10%20%

30%

40%

50%

60%

70%

80%

FICO Scores: Recent Scores vs. 2005

lt 620 740+ Fannie/Freddie 740+

June 2013: 57% of reported credit scores are 740+

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20

The meaning f or REALTORS® is clear:  In many cases lenders are not making loans to potential 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, try

again” at a different financial institution.

Home Sellers Wwaiting For Further Price Appreciation

Although house prices have been rising, it appears that potential sellers continue to waitfor further price increases before selling. In this month’s survey,

  47 percent of REALTOR® respondents reported that they had potential sellers waiting for  prices to pick up further.

Previously Underwater Homeowners

  About 16 percent of REALTORS® reported working with a previously underwater homeowner who is now selling their home.

  Among REALTORS® who reported working with an underwater homeowner seeking to sella home, about 53 percent reported that the homeowner was also seeking to buy a home, about22 percent reported that the homeowner was going to rent, and another 25 percent reported“don’t know.”

IV. Articles and Comments

Latest Mortgage Applications DataLawrence Yun, Chief Economist

   No surprise. Mortgage applications for refinances are collapsing with a rise in mortgagerates. They fell 16 percent in one week and are down 43 percent from this time last year.

  Mortgage applications to buy a home, however, are holding their ground despite the higher interest rates. Though down slightly from the prior week, they are up 11 percent from oneyear ago. The increased consumer confidence about home buying is simply too strong at themoment to be neutered by higher rates.

  Expect further steep declines in refinance activity. If mortgage rates rise by another 50 basis points – from current 4.5% to 5.0% – then expect a slide in home buying in coastal regions of the country where home prices are very high. In the vast middle of the country and in theSouth, the rise in mortgage payments will be slight and will therefore not be a big hindranceto home buying.

  One positive of falling refinance activity is that mortgage brokers and banks will nowincrease staffing resources to process home purchase applications. Last year when mortgagerates were at unimaginable lows, significant resources had to be dedicated to refis. Nowthose resources can be redeployed to process home purchase applications. Your home buyer should get quicker responses now. Moreover, commercial loans may also receive their duediligence, rather than being ignored, even though regulatory compliance remains quite burdensome for these type of construction and commercial real estate investment loans.

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Basel III Down: The Specter of Regulation EasesKen Fears, Manager, Regional Economics

Yesterday marked an important turning point for housing finance. The Federal Reserve voted ona final Basel III rule that is significantly friendlier to residential housing finance than the earlier  proposal. While the FDIC and OCC must still vote on it, the finalization of this rule is importantas it opens the door for completion of the qualified residential mortgage rule. The completion of this set of rules will in turn provide clarity to the banking and capital markets, allowing them to pursue expanded mortgage lending as interest rates and profitability rise with the improvingeconomy.

The initial proposal for Basel III would have created a new structure of risk weights onresidential mortgages, creating variation in how much capital, a cushion against losses, banksmust hold against mortgages based on the size of downpayments. Mortgage insurance could not be used as a compensating factor for low downpayment loans. Thus, banks would have to holdadditional capital against loans with downpayments less than 20% as compared to earlier standards. This extra regulatory capital creates a cost for banks as the return is less than would beachieved if it were invested. Banks would pass this cost onto the consumers in the form of higher mortgage rates. One estimate put the cost at an additional 80 to 85 basis points on top of theretail rate for a prime mortgage with 5% downpayment (e.g. if today’s rate on a 30-year FRMwith 5% down is 4.5%, then the rate under Basel III would be 5.3%). An increase of that sizewould have a significant impact on affordability; an impact that would increase over the decadeas we move into an environment of higher mortgage rates. Under the finalized rule, there is nochange to the capital requirements for mortgages; an important change for the housing industry!Another important change from the proposed rule is how Basel III will impact smaller banks andcommunity lenders. These entities will be largely exempt from the more onerous regulationsimposed on larger and systemically important banks.

However, there remain issues that might affect residential mortgages. Banks will be limited inthe amount of mortgage servicing rights that they can hold, reducing its value to banks. Servicingmortgages, collecting payments and passing them onto investors, can be a lucrative business for  banks. This change will likely shift much of the servicing to non-bank financial companies and

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to smaller banks, thus reducing the high concentration of mortgage servicing among the largest banks and enhancing competition and thereby lowering the price of servicing which should resultin lower mortgage rates. However, this change could raise the cost in the short term if the non- bank sector cannot expand to match the supply during the transition. The Fed extended the phase-in period for smaller banks, which should help to ameliorate this impact.

In addition, the largest banks which are deemed systemically important financial institutions(SIFI) will still be subject to enhanced accounting and capital requirements. Thus, this changemay cause them to shy away from holding assets such as higher LTV mortgages. This couldreduce demand for these assets in the near term putting upward pressure on mortgage rates, butshift them to smaller banks in the long term. This change could raise the cost marginally assmaller banks will need to improve oversight to monitor these loans in accordance with Basel IIIand many have a higher cost of capital than the large banks. However, it might also sync wellwith efforts to improve and expand the number of securitizers. One academic study found thatmortgages which were originated and securitized by the same institutions had lower delinquencyrates during the subprime crisis. The authors of the study suggested that the closeness in the

 production chain allowed for soft information about the borrower or the loan to be passed ontothe securitizer, which enabled more accurate pricing and a better ability to manage default risks.Thus, expanding the number of small banks that originate and securitize loans following theFHA-Ginnie Mae model could improve the performance of securitized mortgages without theneed for risk retention as suggested in the QRM rule. This model would dovetail with somesuggestions for reform of the GSEs.

Finally, the regulators indicated that one reason for not adopting the new risk weighting schemeis the other forthcoming regulations that will impact the housing finance industry. This referenceis to the qualified mortgage (QM), which is largely complete, and the qualified residentialmortgage (QRM) rules which define the underwriting and origination of loans and thesecuritization of mortgages, respectively. The QM rule significantly improves underwriting of mortgages and bars several risky product features such as interest only, negative amortizationloans, and amortizations longer than 30 years. However, the yet to be decided QRM rule wouldrequire a 20% downpament requirement for mortgages that are securitized, which would have alarge impact on the home purchase market as 85% of first time buyers who finance their  purchase put down less than 20% for downpayment. A Basel III rule with risk weights wouldeffectively have the same impact on low downpayment loans, forcing the QRM rule to do thesame or create distortions in the market. Since the Federal Reserve is one of the regulatorsinvolved in deciding the QRM regulation, this change to Basel III suggests that regulators may be coming around to recognition of the dangers of a system that requires high downpayments inlieu of stronger underwriting and product controls. Comments by Fed staff suggested that theyare leaving this open until after the QM and QRM are decided.

Yesterday’s vote on a final Basel III rule by the Federal Reserve is a second important step inconjunction with the QM rule to bringing clarity to housing finance. The final Basel III rule asvoted on by the Fed avoids raising the cost of low downpayment mortgage, though it couldmodestly raise some rates. Still the change is a boost to the housing industry and bodes well for the final major regulatory hurdle, the QRM rule.

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International Sales at $68.2 Billion in 12 Months Ending March 2013

Jed Smith, Managing Director, Quantitative Research

The recently released 2013 Profile of International Home Buying Activity reports that totalresidential sales dollar volume to international clients was at its second highest level in recent

years for the 12 months ending March 2013. International clients are estimated to have purchased $68.2 billion of residential property in the U.S., approximately 6.3 percent of the totaldollar value of the U.S. Existing Homes Sales (EHS) market of $ 1.08 trillion. The informationcovers property sold by REALTORS® through the Multiple Listing Services and is based onresponses by over 3,300 REALTORS®.

Although sales dropped from the previous level of $82.5 billion, the dip is believed to be due totransitory economic conditions. Slower growth in a number of major economies, rising U.S. prices for residential real estate, the strengthening of the dollar against other currencies resultingin higher effective prices for foreign buyers, a slow recovery of the U.S. economy, tight creditstandards, and lower housing inventories are believed to have contributed to the decline.

What Does This Mean to REALTORS®? There is significant major foreign interest in U.S. properties. None of the conditions that slowed international transactions in 2012 appear to be permanent and should dissipate over time.

Comments From REALTORS®

Jed Smith, Managing Director, Quantitative Research

REALTORS® continued to report that rising interest rates, lack of inventory, tightfinancing, regulatory/economic issues, and appraisal issues are constraining the current housingrecovery.

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1.  Low Inventory/multiple bidding

Inventory generally remains tight, with increased multi-bidding. REOs do not appear to becoming to the market sufficiently to meet demand. Sellers are reported as waiting for prices to pick up further. There are reports of homes selling above asking prices. Investors who pay cash

frequently win over first time home buyers.

  A sudden increase in inventory from drasticallly reduced levels has moderated the "fever"

somewhat and will continue to do so. Combined with a recent uptick of almost 5/8ths in

interest rates, this will dampen demand as local employment and disposable income is still not

rising significantly enough to offset these headwinds.

  Multiple offers on most new listings in my market area. Seems like a shortage of inventory but

everything sells as fast as it comes on. Buyers are bidding well over asking. Rising interest rates

are the main reason in my opinion.

  Home Owners are reluctant to list, awaiting the 2005 pricing levels to occur.

2.  Tight Financing/Credit

Access to financing continues to be reported as tight and overly stringent even for those withreasonably good credit scores. The process of obtaining a mortgage remains protracted,especially for short sales, causing delayed closings and risking cancellations.

  We have seen an increase in buyers but also an increase in turn downs from banks. Banks and

mortgage companies have gotten more difficult.

  Lenders are still difficult - and taking longer then wanted to get the job done but at least it is

happening. The practice of collecting offers which seems to be encouraged by FNMA and many

banks is off-putting to many buyers.

  Lending institutions have to loosen up about criteria to qualify for a mortgage. Credit scores to

be greater than 700 score is tough for people in this market. Debt to equity values have to beeased.

  Loan Underwriting is taking longer than I've ever experienced

3.  Regulatory and Economic Issues

REALTORS® expressed concern about the adverse effects of fiscal/financial regulation, thestate of the economy.

  Rates are increasing and buyers are moving faster to contract. Recent jump in interest rate got

some off the fence.  The recent rise in the interest rates has slowed the buying down tremendously. I feel this is

temporary on the buyers end, but should cause more sellers to list their homes.

  The FHA changes are not promoting home ownership. We were hoping for more lenient

guidelines, not higher fees.