SOURCE: RealtyTrac


December 04, 2014 00:01 ET

21 Percent of U.S. Housing Markets Now Less Affordable Than Their Historical Averages According to New RealtyTrac Report Analyzing Early Warning Signs of Possible Home Price Bubbles

37 Percent of 475 Counties Analyzed Post Rising Foreclosure Rates on 2014 Vintage Loans; 48 Percent Still Affordable by Historical Standards With Flat or Falling Foreclosure Rates

IRVINE, CA--(Marketwired - Dec 4, 2014) - RealtyTrac® (, the nation's leading source for comprehensive housing data, today released a report identifying county-level housing markets with early warning signs of a possible home price bubble -- where prices overinflate and eventually decline. The report also identified markets with little risk for a home price bubble.

The report analyzed 475 U.S. counties with a combined population of more than 221 million -- accounting for more than 70 percent of the total U.S. population -- based on three early warning signs of a possible home price bubble: if the market was less affordable in October 2014 than its peak price during the 2005 to 2008 housing bubble; if a market was less affordable in October 2014 than its historical affordability average since January 2000; and if a market had a rising foreclosure rate on loans originated in 2014 compared to loans originated in 2013. See full methodology below.

In the 475 counties analyzed, buying a median-priced home in October 2014 required 26 percent of median income on average compared to an average of 41 percent of median income in each county's respective peak month during the housing bubble. The historical affordability average going back to January 2000 for all 475 counties was 28 percent of median income needed to purchase a median-priced home. Meanwhile the average foreclosure rate among the 475 counties on loans originated in 2014 was 0.25 percent, up from an average of 0.20 percent for loans originated in 2013.

"Affordability and foreclosure rates by loan vintage are two key metrics that will help consumers, investors, institutions and policy makers identify if a housing market is at risk for another price bubble," said Daren Blomquist, vice president at RealtyTrac. "While 99 percent of markets have not returned to the irrational affordability levels during the previous housing bubble, one in five markets have now exceeded their historical affordability norms, which is a strong sign that either a new home price bubble is forming in those markets or that home price appreciation will soon plateau until incomes can catch up.

"Meanwhile, foreclosure rates on loans originated in 2014 are still significantly lower than for loans originated during the previous housing bubble in most markets, but there was an uptick in foreclosure rates on 2014 vintage loans compared to 2013 vintage loans in more than one-third of the counties we analyzed," Blomquist continued. "This is concerning given that the 2014 loans are newer and have had less time to sour than loans originated in 2013."

21 percent of counties less affordable than their historical affordability averages
There were 98 counties (21 percent of all counties analyzed) with a combined population of nearly 62 million where the October affordability percentage was higher than the county's historical average affordability percentage, including Los Angeles County, Calif., Harris County, Texas in the Houston metro area, Orange County, Calif., in the Los Angeles metro area, Kings County (Brooklyn), N.Y., Dallas County, Texas, Bexar County, Texas in the San Antonio metro area, Alameda County, Calif., in the San Francisco metro area, Middlesex County, Mass., in the Boston metro area, Oakland County, Mich., in the Detroit metro area and Travis County, Texas, in the Austin metro area.

30 counties both unaffordable by historical standards and with rising foreclosure rates
There were 30 counties (6 percent of all counties analyzed) with a combined population of nearly 19 million where the October affordability percentage was above the historical average and where foreclosure rates on 2014 vintage loans were higher than foreclosure rates on 2013 vintage loans, including Kings County, N.Y. (Brooklyn), San Francisco, San Mateo and Alameda counties in the San Francisco metro area, Suffolk County in the Boston metro area, Orange County in Southern California, Honolulu County, Hawaii, Denver County, Colo., Washington County, Utah in the St. George metro area, and Deschutes County, Ore., in the Bend metro area.

"We expect prices to peak in Q2 2015 before leveling off in the Southern California coastal markets," said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market.

30 Counties Less Affordable Than Historical Averages with Rising Foreclosure Rates
County State   October 2014 Median Price   October 2014 Affordability Percentage   Historical (2000 to 2014) Affordability Percentage   2013 Loan Vintage Foreclosure Rate   2014 Loan Vintage Foreclosure Rate
Kings NY   $615,000   97.84%   95.16%   0.73%   1.89%
San Francisco CA   $975,000   97.44%   92.65%   0.05%   0.14%
San Mateo CA   $804,500   72.76%   71.18%   0.03%   0.06%
Suffolk MA   $423,000   60.70%   54.88%   0.03%   0.41%
Alameda CA   $565,000   58.65%   57.64%   0.06%   0.06%
Orange CA   $570,000   57.85%   57.42%   0.09%   0.20%
Honolulu HI   $475,000   48.18%   47.49%   0.08%   0.08%
Denver CO   $280,221   40.80%   39.56%   0.05%   0.30%
Washington UT   $218,950   36.87%   35.37%   0.04%   0.06%
Deschutes OR   $235,000   36.58%   35.09%   0.02%   0.04%
Middlesex MA   $400,000   35.47%   35.40%   0.08%   0.48%
Larimer CO   $249,950   33.10%   32.61%   0.03%   0.10%
Somerset NJ   $419,000   32.09%   30.26%   0.09%   0.54%
Ada ID   $219,900   30.20%   27.23%   0.05%   0.06%
Smith TX   $189,700   30.12%   28.82%   0.06%   0.06%
Anchorage Municipality AK   $295,000   29.72%   29.19%   0.06%   0.14%
Arapahoe CO   $235,000   28.84%   28.34%   0.04%   0.25%
Weld CO   $216,000   28.49%   28.41%   0.05%   0.30%
Mercer NJ   $256,000   27.65%   25.10%   0.40%   1.11%
Lubbock TX   $147,250   25.82%   24.55%   0.08%   0.09%
Brazoria TX   $229,460   25.69%   21.17%   0.05%   0.07%
Forsyth GA   $262,000   22.60%   21.30%   0.03%   0.03%
Pickens SC   $115,000   21.94%   21.64%   0.13%   0.23%
Kent MI   $132,000   19.37%   17.43%   0.04%   0.07%
Licking OH   $131,500   18.56%   18.09%   0.11%   0.38%
Stark OH   $112,000   18.22%   15.46%   0.21%   0.28%
Monroe NY   $120,000   17.46%   15.25%   0.72%   1.15%
Miami OH   $122,150   16.95%   13.03%   0.06%   0.09%
Lucas OH   $85,650   15.78%   14.94%   0.42%   0.77%
Bibb GA   $74,200   15.31%   12.48%   0.25%   0.34%

12 percent of counties with higher median prices than peak during 2005 to 2008 bubble
There were 58 counties (12 percent of all counties analyzed) with a combined population of more than 26 million where the median price of a home in October was higher than the peak during the housing bubble, including Kings County (Brooklyn) and New York County (Manhattan), N.Y., Travis County, Texas in the Austin metro area, Honolulu County, Hawaii, Fulton County, Ga., in the Atlanta metro area, Mecklenburg County, N.C., in the Charlotte metro area, Erie County, N.Y., in the Buffalo metro area, Wake County, N.C., in the Raleigh metro area, San Francisco County, Calif., and Monroe County, N.Y., in the Rochester metro area.

Six counties less affordable than during 2005 to 2008 housing bubble
Thanks to lower interest rates and higher incomes in some of the 58 counties, there were only six counties nationwide where a median-priced home in October 2014 was less affordable for median income earners than at the peak of the 2005 to 2008 housing bubble: Suffolk County, Mass., in the Boston metro area, Travis County, Texas, in the Austin metro, Jefferson County, Ala., in the Birmingham metro area, Brazos County, Texas in the College Station metro, Allegan County, Mich., and Montgomery County, Tenn., in the Clarksville metro area.

37 percent of counties with rising foreclosure rates on 2014 vintage loans
There were 178 counties (37 percent of all counties analyzed) with a combined population of nearly 100 million where the foreclosure rate on loans originated in 2014 was higher than the foreclosure rate on loans originated in 2013, including Cook County, Ill., in the Chicago metro area, San Diego and Orange counties in Southern California, Kings County (Brooklyn), N.Y., Miami-Dade County, Fla., Queens County, N.Y., Clark County, Nev. (Las Vegas), King County, Wash. (Seattle), Santa Clara County, Calif. (San Jose), and Broward County, Fla. (Miami).

"With the stiff competition for homes in Seattle, one might think that our market is well on its way to a bubble, but buyers have gotten more savvy and aren't overbidding at levels we saw a year or two ago," said OB Jacobi, president of Windermere Real Estate, covering the Seattle market. All three counties in the Seattle metro were more affordable than their historical levels in October despite a slight increase in foreclosure rate in two of the three counties. "We also have a strong job market with wages that are keeping up with appreciation -- especially in the growing tech sector. As a result, prices in Seattle are appreciating at a healthy pace, but they've slowed from the double digit increases we saw last year."

48 percent of counties still historically affordable with flat or falling foreclosure rates
There were 229 counties (48 percent of all counties analyzed) with a combined population of nearly 79 million where median home prices in October were more affordable than their historical averages and where foreclosure rates on 2014 vintage loans were flat or declining compared to foreclosure rates on 2013 vintage loans. Among these counties with a low risk of a home price bubble, the most affordable were in Lansing, Mich., Syracuse, N.Y., Buffalo, N.Y., Cincinnati, Ohio, and Atlanta, Ga.

"The Ohio markets have been fortunate through 2014 in showing continued modest gains regarding volume and prices reflective of a market in balance between home sellers and buyers, in contrast to concerns over a housing bubble being experienced in many other parts of the country," said Michael Mahon, executive vice president and broker at HER Realtors, covering the Columbus, Cincinnati and Dayton, Ohio markets. "Growing job markets within the fields of medical, finance, construction, and education continue to supply increased demand for housing across Ohio, although concerns over consumers with increasing debt issues, particularly in the fragile first time home buyer sector, could provide for a slight decrease in demand for 2015."

"We don't have huge swings up and huge swings down. We just kind of plod along," said Tom Hosack, President of Northwood Realty Services, covering Western Pennsylvania, including Pittsburgh, and Eastern Ohio, including Youngstown. Three counties in the Pittsburgh metro -- Fayette, Allegheny and Butler -- were among the markets still affordable by their historical standards and with flat or falling foreclosure rates. "And that's the way we like it around here. This is not the kind of place you're going to get rich on your home but it's also not the kind of place where you're likely to lose money on your home.

"People marvel that you can come here and buy a house for eight or 10 thousand dollars," he continued, noting those low prices previously attracted real estate investors to the region, especially since getting qualified for a loan in some of the lowest-priced areas can be challenging. "Certainly we had a fair amount of investors. People could buy 10 homes for $100,000. That has slowed down. What we see now is a fairly healthy market with balanced supply and demand."

Report methodology
To calculate affordability, RealtyTrac looked at the percentage of median monthly household income required to make a monthly house payment for a median-priced home in each month from January 2000 to October 2014. The median monthly household income was derived from U.S. Census data for 2000 to 2012, with 2013 and 2014 median household income estimated based on the 2000 to 2012 trend and adjusted for current market conditions. The median price of a home was based on the median sales price from sales deeds recorded each month for each county, except for in states with insufficient sales deed data and non-disclosure states where the full sales price is not required to be included on the sales deed. In those states, the median list price of homes listed for sale each month was used instead. The states where the list median price was used include Alaska, Idaho, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, New Mexico, North Dakota, Texas, Utah, and Wyoming. Also Massachusetts, Connecticut, New Hampshire, Vermont, Delaware and Hawaii all used list median prices.

The monthly house payment was calculated using a 10 percent down payment and a 30-year fixed loan and the average interest rate for each month according to the Freddie Mac Primary Mortgage Market Survey, with the inclusion of an additional 1 percent of the median price for private mortgage insurance and an additional 1.39 percent of the median price for property taxes and insurance divided among each year's 12 house payments.

The foreclosure rate used in the report is the percentage of homes with a mortgage that were actively in the foreclosure process -- based on default notices (NOD, LIS) and scheduled auction notices (NTS, NFS) collected from public records -- broken down by the year the mortgage was originated.

Report License 
The RealtyTrac U.S. Foreclosure Market Report is the result of a proprietary evaluation of information compiled by RealtyTrac; the report and any of the information in whole or in part can only be quoted, copied, published, re-published, distributed and/or re-distributed or used in any manner if the user specifically references RealtyTrac as the source for said report and/or any of the information set forth within the report.

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RealtyTrac is a leading supplier of U.S. real estate data, with nationwide parcel-level records for more than 129 million U.S. parcels that include property characteristics, tax assessor data, sales and mortgage deed records, Automated Valuation Models (AVMs) and 20 million active and historical default, foreclosure auction and bank-owned properties. RealtyTrac's housing data and foreclosure reports are relied on by the Federal Reserve, U.S. Treasury Department, HUD, numerous state housing and banking departments, investment funds as well as millions of real estate professionals and consumers, to help evaluate housing trends and make informed decisions about real estate.