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PAGE 1 OF 7 CARTUS | MARKET WATCH: UNITED STATES PROPERTY / SEPTEMBER 2016 | MARKET WATCH Information from Cartus on Relocation and International Assignment Trends and Practices. SEPTEMBER 2016 This is a periodic communication from Cartus intended to keep you informed about the current housing market trends and conditions in the United States. UNITED STATES PROPERTY Home Sales Tempered According to the National Association of Realtors ® (NAR), July saw the first existing-home sales year-over-year drop since November 2015. Persistent low housing inventory throughout the country contributed to the decline. Total housing inventory inched up to 2.13 million existing homes for sale, a 0.9% increase—5.8% lower than July 2015. Inventories declined year- over-year for the last fourteen consecutive months. At the end of July, inventory was at a 4.7-month supply. NAR Chief Economist Lawrence Yun stated that, “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month.” (NAR, 8/2016) Even though mortgage rates are remaining near record lows, existing-home sales relaxed a bit in August, the second month of weakening. Existing-home sales—which are completed transactions on single-family homes, townhomes, condos, and co-ops—dropped 0.9% in August to a seasonally adjusted annual rate of 5.33 million, according to NAR. Sales are now at the second lowest pace of the year. Still, sales are 0.8% higher than a year ago, (when sales stood at 5.29 million). Low housing inventory and elevated home prices are limiting sales. The only region to experience an increase in closings in August was the Northeast where inventory levels are more stable. According to Lawrence Yun, “Healthy labor markets in most of the country should be creating a sustained demand for home purchases, however, there’s no question that after peaking in June, sales in a majority of the country have inched backwards because inventory isn’t picking up to tame price growth and replace what’s being quickly sold.” (NAR, 9/2016) 10 Hottest Real Estate Markets MARKET JULY RANK JUNE RANK Vallejo, CA 1 1 Dallas, TX 2 3 Denver, CO 3 7 San Francisco, CA 4 2 Stockton, CA 5 4 Columbus, OH 6 11 San Diego, CA 7 5 Santa Cruz, CA 8 15 Sacramento, CA 9 8 Santa Rosa, CA 10 6 Based on Realtor.com’s “Advanced Read on March Trends,” which analyzes real estate inventory and demand trends over the first 3 weeks of the month. As U.S. housing markets continue to improve, there are many trends in the areas of home sales, mortgage, and job growth that have the potential to impact relocation programs. Cartus, in cooperation with the Relocation Directors Council (RDC) and their National Market Trends and Topics update, presents information on a wide variety of market trends and their impact on relocation in 2016, and what to expect in 2017, including home sale prices, inventory levels, mortgage industry changes, and the U.S. rental market.

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Page 1: UNITED STATES PROPERTY - Cartus · UNITED STATES PROPERTY CARTUS | MARKET WATCH: UNITED STATES PROPERTY / SEPTEMBER 2016 | PAGE 3 OF 7 Inventory Shortages 2015 was the fourth consecutive

P A G E 1 O F 7C A R T U S | M A R K E T W A T C H : U N I T E D S T A T E S P R O P E R T Y / S E P T E M B E R 2 0 1 6 |

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

S E P T E M B E R 2 0 1 6

This is a periodic communication from Cartus intended to keep you informed about the current housing market trends and conditions in the United States.

U N I T E D S TAT E S P R O P E R T Y

Home Sales Tempered

According to the National Association of Realtors® (NAR), July saw the first existing-home sales year-over-year drop since November 2015. Persistent low housing inventory throughout the country contributed to the decline. Total housing inventory inched up to 2.13 million existing homes for sale, a 0.9% increase—5.8% lower than July 2015. Inventories declined year-over-year for the last fourteen consecutive months. At the end of July, inventory was at a 4.7-month supply. NAR Chief Economist Lawrence Yun stated that, “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month.” (NAR, 8/2016)

Even though mortgage rates are remaining near record lows, existing-home sales relaxed a bit in August, the second month of weakening. Existing-home sales—which are completed transactions on single-family homes, townhomes, condos, and co-ops—dropped 0.9% in August to a seasonally adjusted annual rate of 5.33 million, according to NAR. Sales are now at the second lowest pace of the year. Still, sales are 0.8% higher than a year ago, (when sales stood at 5.29 million). Low housing inventory and elevated home prices are limiting sales. The only region to experience an increase in closings in August was the Northeast where inventory levels are more stable.

According to Lawrence Yun, “Healthy labor markets in most of the country should be creating a sustained demand for home purchases, however, there’s no question that after peaking in June, sales in a majority of the country have inched backwards because inventory isn’t picking up to tame price growth and replace what’s being quickly sold.” (NAR, 9/2016)

10 Hottest Real Estate Markets

MARKET JULY RANK JUNE RANK

Vallejo, CA 1 1

Dallas, TX 2 3

Denver, CO 3 7

San Francisco, CA 4 2

Stockton, CA 5 4

Columbus, OH 6 11

San Diego, CA 7 5

Santa Cruz, CA 8 15

Sacramento, CA 9 8

Santa Rosa, CA 10 6

Based on Realtor.com’s “Advanced Read on March Trends,” which analyzes real estate inventory and demand trends over the first 3 weeks of the month.

As U.S. housing markets continue to improve, there are many trends in the areas of home sales, mortgage, and job growth that have the potential to impact relocation programs. Cartus, in cooperation with the Relocation Directors Council (RDC) and their National Market Trends and Topics update, presents information on a wide variety of market trends and their impact on relocation in 2016, and what to expect in 2017, including home sale prices, inventory levels, mortgage industry changes, and the U.S. rental market.

Page 2: UNITED STATES PROPERTY - Cartus · UNITED STATES PROPERTY CARTUS | MARKET WATCH: UNITED STATES PROPERTY / SEPTEMBER 2016 | PAGE 3 OF 7 Inventory Shortages 2015 was the fourth consecutive

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

S E P T E M B E R 2 0 1 6

U N I T E D S TAT E S P R O P E R T Y

P A G E 2 O F 7C A R T U S | M A R K E T W A T C H : U N I T E D S T A T E S P R O P E R T Y / S E P T E M B E R 2 0 1 6 |

4.4%MT

1.8%ND

4.2%SD

6.1%WA

6.9%OR

9.6%CA

10.2%NV 5.3%

UT

6.8%AZ

2.5%WY

5.9%CO

4.7%NM

4.1%NE

4.3%KS

2.5%TX

3.1%OK

4.0%MN

4.4%IA

4.3%MO

5.2%AR

4.5%WI

2.5%LA

6.4%MI

4.5%IL

4.5%IN

4.9%OH

4.5%PA

5.1%NY

4.3%KY

3.9%TN

3.1%MS

4.3%AL

6.0%AK

3.9%GA

6.8%FL

4.1%SC

4.1%NC

4.3%VA

6.2%ME

DC (3.8%)

NH (7.7%)

MA (4.9%)

RI (3.6%)

CT (5.6%)

NJ (5.1%)

DE (4.5%)

MD (4.1%)

VT (5.9%)

4.0%WV

6.1%HI

UNITED STATES5.3%

6.2%ID

Forecasted Year-Over-Year % Change in Price by State

< 0.0%

0.0% to 1.9%

2.0% to 3.9%

4.0% to 5.9%

> 6%

Source: Corelogic

Lawrence Yun, NAR chief economist, says a faster pace of home sales amidst languishing inventory levels pushed home prices higher in most metro areas during the second quarter. “Steadily improving local job markets and mortgage rates teetering close to all-time lows brought buyers out in force in many large and middle-tier cities,” he said. “However, with homebuilding activity still failing to keep up with demand and not enough current homeowners putting their home up for sale, prices continued their strong ascent—and in many markets at a rate well above income growth.” (National Association of Realtors, August 2016)

According to CoreLogic’s July Home Price Index (HPI®) Report, national home prices increased 6% year-over-year in July 2016. While the HPI has increased on a year-over-year basis every month since February 2012, prices are still 6.1% below the April 2006 peak. Home prices have risen 41.3% since bottoming out in March 2011 and are expected to increase by 5.4% from July 2016 to July 2017. It is projected that prices will return to the April 2006 peak in mid-2017. Adjusting for inflation, U.S. home prices increased 6.3% year over year in July 2016, and are 19.5% below their peak. (CoreLogic, September 2016)

Page 3: UNITED STATES PROPERTY - Cartus · UNITED STATES PROPERTY CARTUS | MARKET WATCH: UNITED STATES PROPERTY / SEPTEMBER 2016 | PAGE 3 OF 7 Inventory Shortages 2015 was the fourth consecutive

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

S E P T E M B E R 2 0 1 6

U N I T E D S TAT E S P R O P E R T Y

P A G E 3 O F 7C A R T U S | M A R K E T W A T C H : U N I T E D S T A T E S P R O P E R T Y / S E P T E M B E R 2 0 1 6 |

Inventory Shortages2015 was the fourth consecutive year that inventories held below the 6-month level, the conventional measure of a balanced market. Currently at 4.6 months, down from 4.7 months in July, housing inventory remains below that 6-month level. Existing-home sales slowed in July due to the low inventory levels in many parts of the country.

Job Growth RobustThe U.S. Labor Department reported that job growth continues to trend upward as employers hired an additional 255,000 people in July, marking the second consecutive month of robust hiring and rising wages. Jobs gains occurred in professional and business services, health care, and financial activities. Over the last 12 months, wages are up 2.6% which is a faster pace than earlier in the economic recovery, but only about half the increase seen in home prices. At 4.9%, the jobless rate has fallen by more than half since exceeding 10% in October 2009.

PROGRAM GUIDANCE: Continuing low housing inventory and rising home prices create a challenging market for transferees. Transferring employees will need more in-depth counseling on market conditions to prepare for buying and selling their properties. The need exists for transferees to put all their records in order so immediate action can take place when an acceptable property is located.

Months of Inventory Homes for Sale—Last 12 Months

SELLERS MARKETHome prices

will appreciate

BUYERS MARKET

Home prices will depreciate

LESS THAN6 MONTHS

BETWEEN6-7 MONTHS

GREATER THAN 7 MONTHS

The Impact of Monthly Housing Inventory on Home Prices

Jobs Added (Thousands)

Source: NAR 9/2016

Source: U.S. Department of Labor

0

50

100

150

200

250

300

Jul '16Jun '16May '16Apr '16Mar '16Feb '16Jan '16Dec '15Nov '15Oct '15Sep '15Aug '15Jul '15

4.8%

AugJulJunMayAprMarFebJanDecNovOctSep

4.8% 4.8%5.1%

3.9% 4.0%4.4% 4.4%

4.7% 4.7% 4.6% 4.6%4.7%

Page 4: UNITED STATES PROPERTY - Cartus · UNITED STATES PROPERTY CARTUS | MARKET WATCH: UNITED STATES PROPERTY / SEPTEMBER 2016 | PAGE 3 OF 7 Inventory Shortages 2015 was the fourth consecutive

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

S E P T E M B E R 2 0 1 6

U N I T E D S TAT E S P R O P E R T Y

P A G E 4 O F 7C A R T U S | M A R K E T W A T C H : U N I T E D S T A T E S P R O P E R T Y / S E P T E M B E R 2 0 1 6 |

Mortgage Industry Highlights

Mortgage Rates Drop The Federal Housing Finance Agency (FHFA) reported that the average interest rate on all mortgage loans was 3.63 in July, down from 3.7 in June. Mortgage refinances surged more than 11% as rates dropped to a three-year low—up 65% from last year. Mortgage applications to purchase a home, which are less rate-sensitive, didn’t move at all during the same time frame.

According to Michael Fratantoni, Chief Economist of MBA.org, “Interest rates continued to drop as markets assessed the impact of Brexit, downgrading the likelihood of additional rate hikes by the Fed, and mortgage rates for 30-year conforming loans dropped to their lowest level in over three years.”

Homeownership Landscape

In the second quarter of 2016, the U.S. homeownership rate fell to the lowest level since 1965. Effects of housing price increases, low inventory and lagging income growth contribute to this situation. According to the U.S. Census Bureau, the second quarter 2016 homeownership rate of 62.9 was 0.5 percentage points lower than the second quarter 2015 rate (63.4) and 0.6 percentage points lower than the rate in the first quarter 2016 (63.5). The homeownership rate is low not because we have lost homeowners but because there are so many more renters.

Since the beginning of the recession, rental households have increased by 22% equating to an increase of 8.4 million households. In contrast, there are 2% fewer owner-occupied households (1.5 million). This is due in part to “regular” homebuyers being forced to rent due to low inventory levels. (Wall Street Journal, 7/28/16)

QUARTER

F A N N I E

MAE

FREDDIE

MAC

MBA

NAR

AVERAGE OF ALL FOUR

2016 2Q 3.5% 3.6% 3.8% 3.7% 3.65%

2016 3Q 3.5% 3.8% 4.0% 3.8% 3.76%

2016 4Q 3.5% 3.9% 4.1% 4.0% 3.88%

2017 1Q 3.6% 4.1% 4.3% 4.2% 4.05%

MT ND

SD

WA

OR

CA

NV

UT

AZ

WY

CO

NM

NE

KS

TX

OK

MN

IA

MO

AR

WI

LA

MI

ILIN OH

PA

NY

KY

TN

MSAL

AK

GA

FL

SC

NC

VA

ME

DC

NH

MA

RI

CT

NJ

DE

MD

VT

WV

HI

ID

A lot cheaper to own

A little cheaper to own

A little cheaper to rent

A lot cheaper to rent

No difference

During the month of July 2016, United States of America rents experienced an average decrease of 0.7% for one-, three-, and five-bedroom rents while two- and four-bedroom apartments and house rents remained flat, when compared to last month. When compared with same month of last year, rents saw an average increase of 6.27% for one-, two-, three-, four-, and five-bedroom rentals. (http://www.zilpy.com/rentalmarket)

Mortgage Rate Projections

Source: U.S. Census Bureau

Source: FHFA

Page 5: UNITED STATES PROPERTY - Cartus · UNITED STATES PROPERTY CARTUS | MARKET WATCH: UNITED STATES PROPERTY / SEPTEMBER 2016 | PAGE 3 OF 7 Inventory Shortages 2015 was the fourth consecutive

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

S E P T E M B E R 2 0 1 6

U N I T E D S TAT E S P R O P E R T Y

P A G E 5 O F 7C A R T U S | M A R K E T W A T C H : U N I T E D S T A T E S P R O P E R T Y / S E P T E M B E R 2 0 1 6 |

2015 2016 2017 2018 20190

100000

200000

300000

400000

500000

600000

700000

800000

Boomerang Buyers: More than seven million Americans lost their homes to foreclosures or short sales from 2007 to 2014. Although many of these individuals have met the required timeframe after which the Fair Credit Reporting Act requires derogatory information to be removed from consumer credit reports, historical data shows a more gradual return rate for these “boomerang buyers” than previously predicted, reporting less than half returned to homeownership even 16 years after the foreclosures were completed. Data shows that of the 4.4 million owner-occupied foreclosures completed since 2000, one million foreclosed homeowners have returned to the market. Reentry, even at a slower rate, will help boost homeownership levels over the next few years. (DSNews, 7/25/16, CoreLogic)

Millennials: Defined as those aged 18-34, Millennials could help boost the housing market drastically. As Millennials, the largest demographic group in American history, finish their

education and secure jobs, the majority are renting. This group of individuals are facing high student loan payments and a lack of savings required for significant down payments. If, and when, Millennial renters decide it is time to purchase homes, the homeownership rate will be positively impacted.

Hope for Underwater Homeowners Despite the negative aspects of rising home prices including slowed sales, the price increase does provide hope to “seriously underwater” homeowners as it lifts all home equity. The increase in home equity also reflects declining numbers of distressed borrowers and increased principal repayment.

RealtyTrac reported, in its 2Q2016 U.S. Home Equity and Underwater Report, 6.7 million seriously underwater properties representing 11.9% of all U.S. properties with a mortgage as of the end of the quarter—down from 12% in the previous quarter and down from 13.3% in 2Q2015.

Daren Blomquist, VP of ATTM Data Solutions, provided his opinion, “Rising home prices are bailing out seriously underwater homeowners and enriching homeowners who already have positive equity. Nationwide home prices reached a new all-time high in June on the heels of 52 consecutive months of annual increases.” (RealtyTrac, 8/2016)

The President and CEO of Corelogic, Anand Nallathambi, agrees and stated, “If home values rise another 5% uniformly across the U.S., the number of underwater borrowers will fall by another one million during the next year.”

Boomerang Buyers

Source: CoreLogic

Page 6: UNITED STATES PROPERTY - Cartus · UNITED STATES PROPERTY CARTUS | MARKET WATCH: UNITED STATES PROPERTY / SEPTEMBER 2016 | PAGE 3 OF 7 Inventory Shortages 2015 was the fourth consecutive

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

S E P T E M B E R 2 0 1 6

U N I T E D S TAT E S P R O P E R T Y

P A G E 6 O F 7C A R T U S | M A R K E T W A T C H : U N I T E D S T A T E S P R O P E R T Y / S E P T E M B E R 2 0 1 6 |

Regional Rental Information

Atlanta

1 bedroom apt $999

2 bedroom apt $1,104

3 bedroom apt $1,169

• Average rental rates have increased 14% on 1BRs year over year and 18% on 2BRs.

• There is currently a shortage of rental units, however 9000 units are scheduled for completion in 2016.

Chicago

1 bedroom apt $1,970

2 bedroom apt $2,630

3 bedroom apt $3,069

• Average rental rates of 1 & 2BR units are up 10.7% year over year.

• High-end rental developments are opening up all over the city, driving rental prices up.

• Chicago has the 7th most expensive rental market in the country.

New York City

Studio apt $2,371

1 bedroom apt $3,131

2 bedroom apt $4,188

3 bedroom apt $5,308

• Vacancy rate around 1.7%.

• The average apartment rent over the prior 6 months in New York has increased by $201 (6.5%).

• One bedroom units have increased by $129 (4.7%) and two bedroom apartments have increased by $154 (4.4%).

Boston

1 bedroom apt $2,442

2 bedroom apt $2,996

3 bedroom apt $3,671

• Vacancy rate around 5.5%.

• 1BR rental prices increased 5.8% across the city.

• Emerging neighborhoods such as South Boston, East Boston, and Dorchester have seen double digit percentage increases year-over-year.

Raleigh-Durham

Studio apt $923

1 bedroom apt $1,005

2 bedroom apt $1,257

3 bedroom apt $1,504

• Vacancy rate around 4.3%.

• Year-over-year, average Raleigh rents increased for all sized apartments, with the highest increase seen for 2 BR (6.7%).

San Francisco

1 bedroom apt $4,000

2 bedroom apt $5,000

3 bedroom apt $6,500

• Low inventory and high demand are fueling a spike in rental pricing.

• Many “regular” homebuyers are forced to rent due to the lack of resale inventory.

• Vacancy rate between 2-3% is the lowest in 30 years.

Cincinnati

1 bedroom apt $720

2 bedroom apt $1,117

3 bedroom apt $1,400

• There has been less than a 1% increase on average rental prices year-over-year.

• Vacancy rate is just over 2%.

Phoenix

1 bedroom apt $781

2 bedroom apt $1,094

3 bedroom apt $1,500

• Vacancy rate is close to 6%.

• The average monthly rental rates have increased 4.1% in the past 6 months.

Sources: Relocation Directors Council (RDC), rentjungle.com

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For more information, please email: [email protected]

© 2016 Cartus Corporation. All rights reserved. Cartus and the Cartus logo are registered trademarks of Cartus Corporation.

Sources: Market data - www.trulia.comThe information provided in this Market Watch publication is provided in good faith but is not intended to provide specific advice or to take the place of either written law or regulations. Cartus does not guarantee the accuracy or endorse any of the views or opinions given by any third parties and accepts no liability for the data and information included within.

www.cartus.com | [email protected]

M A R K E T W A T C HInformation from Cartus on Relocation and International Assignment Trends and Practices.

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U N I T E D S TAT E S P R O P E R T Y

P A G E 7 O F 7C A R T U S | M A R K E T W A T C H : U N I T E D S T A T E S P R O P E R T Y / S E P T E M B E R 2 0 1 6 |

What to Expect the Second Half of 2016 and Into 2017?

New construction starts remain slow. July housing starts were at a seasonally adjusted annual rate of 1.211 million below the 1.5 million needed to get supply back in line with demand. This is 2.1% above the revised June estimate of 1.186 million and is 5.6% above the July 2015 rate of 1.147 million. Construction in recent years has been geared towards the luxury consumer, rather than those seeking lower price starter homes. Price growth has slowed to about 4% at the top end of the housing market but has risen to 8% on the lower end. Rising starter home prices may encourage new construction in that segment. This could, in turn, entice Millennials to join the homeowner ranks. (U.S. Census, 8/16/16)

The United Kingdom’s vote to leave the European Union, Brexit, may have an impact on U.S. mortgage rates pushing them to all-time lows. Treasury rates which serve as a benchmark for mortgage rates were pushed to new lows because of the decision. The 30-year fixed-rate now at 3.6%, hit a record low of 3.3% in 2012. The low rates could be an incentive in demand for homes, as well as loan refinancing. (Forbes, 7/6/16)

“With the U.K.’s decision to exit from the European Union, global risks increased substantially leading us to revise our views for the remainder of 2016 and all of 2017,” Freddie Mac Chief Economist Sean Becketti said. Nonetheless, the turbulence abroad should continue to create demand for U.S. Treasuries and keep mortgage rates near historic lows,” Becketti said. “Thereby, allowing home sales to have their best year in a decade, along with a boost in refinance activity.” (Freddie Mac, 7/12/16)

1060

1080

1100

1120

1140

1160

1180

1200

1220

Aug '16Jul '16Jun '16May '16Apr '16Mar '16Feb '16Jan '15Dec '15Nov '15Oct '15Sep '15

U.S. Housing Starts

Source: U.S. Census Bureau