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REALTORS® Expect “Strong” Housing Market Conditions Over the Next Six Months

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members, “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?

REALTORS® are generally optimistic about the existing homes market in the next six months. The REALTORS® Confidence IndexSix-Month Outlook for single-family homes, townhomes, and condominiums each registered above 50, indicating that more REALTOR® respondents expected market conditions to be “strong” than “weak” over the next six months.[1]

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The index for condominiums was at 61 in February 2017 (58 in January 2017; 53 in February 2016), the highest level since this NAR generated this index in 2008. The approval of H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016,” appears to be bolstering homebuying in the condominium market.[2] Among other measures, the law eases access to FHA condominium financing by reducing the FHA condominium owner occupancy ratio from 50 to 35 percent, directing the FHA to streamline the condominium re-certification process, and providing more flexibility for mixed-use buildings.

In the single-family homes market, the outlook in the next six months is “moderate” to “very strong” in nearly all states and in the District of Columbia.[3] Only North Dakota registered a “weak” outlook. In the townhomes market, the outlook is mostly “moderate” to “strong” with only five states registering “weak” and three states plus the District of Columbia registering “very strong.” In the market for condominiums, only nine states registered a “weak” outlook, while 23 states plus the District of Columbia registered a strong outlook. Post-election factors may boost the outlook in the District of Columbia.[4]

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[1] The survey asks, “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?” NAR compiles the responses into a diffusion index. An index of 50 indicates a balance of respondents having “weak” (index=0) and “strong” (index=100) expectations or all respondents having moderate (=50) expectations. The index is not adjusted for seasonality.

[2]The bill, which was championed by NAR, passed the House of Representatives 427-0 and the Senate under unanimous consent on July 14, 2016 and was signed by President Obama on July 29, 2016. See http://www.realtor.org/articles/president-obama-signs-hr-3700

[3] To increase the number of observations for each state, the index is based on data for the last three months. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” NAR compiles the responses into a diffusion index. A diffusion index greater than 50 means that more respondents rated conditions as “Strong” than “Weak.” For graphical purposes, index values 25 and lower are labeled “Very Weak,” values greater than 25 to 45 are labeled “Weak,” values greater than 45 to 55 are labeled “Moderate,” values greater than 55 to 75 are labeled “Strong,” and values greater than 75 are labeled “Very Strong.” The range of +/-5 around 50 approximates the historical margins of error at the 95 percent confidence level for small states.

[4] See for example this review: http://economistsoutlook.blogs.realtor.org/2016/10/05/do-elections-affect-the-housing-market-in-washington-dc/