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56 EXISTING HOME SALES DROP THANKS TO RISING RATES According to the latest Ten-X Residential Real Estate Nowcast, existing home prices saw a month-over-month decrease in December, largely due to rising mortgage rates. December sales fell between seasonally adjusted annual rates of 5.33 and 5.69 million, with a targeted number of 5.51 million—down 1.8 percent from November, but a 0.9-percent increase from 2015, according to Ten-X. Ten-X EVP Rick Sharga attributed the decline in home sales to the rising mortgage rates, which are expected to average about 4 percent this year. "It's possible that we're seeing the effect of rising mortgage rates slowing down existing home sales," he said. "It's also possible that we may see the numbers trend upwards as buyers decide to enter the market before interest rates go even higher. All things considered, 2016 has been a remarkably good year for both existing and new home sales. We've seen year-over-year sales increases despite home prices appreciating more rapidly than wage growth, tight credit, and limited supply. Clearly, demand remains fairly strong." e National Association of Realtors (NAR) reported that November existing home sales saw an increase to a seasonally adjusted rate (SAAR) of 5.61 million units in November, which validated the predictions from the previous Ten-X Nowcast. e increase marked a 0.7-percent gain from the descending 5.57 million October estimate and a 15.4-percent year-over-year increase. As demand increased, the median price of existing homes continued to increase as well. NAR also reported a 6.8-percent year-over-year increase in median existing home prices to $234,900 in November, marking 57 consecutive months of annual gains. Ten-X predicted that median existing-home prices will decrease to between $221,679 and $245,013 in December, with a target price point of $233,346—down 0.7 percent from November, but a 4.1-percent increase from 2015. Ten-X Chief Economist Peter Muoio explained that the housing market is gaining momentum thanks to various factors, but there is room for growth. "As we round out 2016, the U.S. housing market continues to benefit from a strong labor market, as solid job gains, low unemployment, and promising wage growth fuel a high level of underlying demand for homes," he said. "While there are still headwinds to sales growth in the way of tight inventory, low affordability, and the likelihood of mortgage rate increases, solid fundamentals continue pointing to the overall health of the housing market." HOUSING PRICES UP, BUT NOT FOR ALL THE RIGHT REASONS While rents largely stabilized in November, the acceleration of housing prices moved at its fastest clip since August 2006, according to Zillow's year-end look at the U.S. market. is acceleration, said Zillow's Chief Economist Svenja Gudell, is not completely a good thing because it is due less to natural economic growth than to tight inventories that drive up prices through competition. "As of November, there were 1,422,084 homes listed for sale nationwide," Gudell said. at's a 6-percent drop-off from a year ago; and inventory fell year-over-year in November in 27 of the largest 35 metros. According to Zillow, home values rose 6.5 percent year-over-year in November, to a median $192,500. ey rose half- a-percent from October for the 52nd consecutive month. At the same time, rents rose 1.5 percent over the past year, as the number of homes for sale nationwide fell 5.9 percent for the 22nd consecutive month. Eventually, Gudell said, the crush of renters looking to buy could create even bigger demand. Of course, not all markets in the country are shrinking. But even in those experiencing growth, the future isn't quite as clear as you might expect. "Even in those markets in which inventory rose," Gudell said, "it's likely more because it couldn't realistically fall much lower. Inventory in Las Vegas, for example, rose 26 percent year- over-year in November, to 13,659 homes for sale," she said. "at's a big jump, but even after that bump, Las Vegas inventory remains more than 44 percent below recent peak levels reached in mid-2011." In all 35 of the largest metros analyzed, she said, inventory in November was more than 25 percent below highs reached since January 2010. Apart from inventory shortfalls, a driver for accelerating home prices has been local dynamics in the market. "e U.S. housing market is really just a collection of dozens of smaller local markets that are all moving up and down to varying degrees," Gudell said. "[ese markets are] driven by various local factors, including the health of their local economy and local supply- and-demand dynamics." An improving national jobs picture, particularly in most large metros, has driven prices up as well, she said. Markets in which the pace of appreciation has picked up include Seattle, Detroit, Philadelphia, and Orlando, Florida. Areas growing at a slower pace include the Bay Area, Miami, Texas (Austin, Houston, and Dallas) and Denver. The GSE's standard modification rates increased to 4.25 percent in January, the highest level since July through September 2015, according to Freddie Mac. KNOW THIS

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