News

Real Estate Commission Report23 Jul

SUBMITTED BY DAVID SOMERS

The AREC met in Anchorage on June 11. If you have an interest in attending future meetings the schedule is published on the AREC website. There are four regular meetings each year and usually occur in March, June, September and December. The meetings take place at the Atwood Building in Anchorage. The entire meeting is open to the public, but your input can only take place during public comment early in the agenda.

During this meeting’s public comment period the main two topics were payment of commissions to legal entities and how teams are handled by the AREC. One member of the public is pushing for a regulation project the states that all licensees can operate as legal entities. This approach broadens the discussion beyond the payment of commission to legal entities and still leaves open the payment of commissions to legal entities that are not solely made up of licensees, a position that AAR is opposed to.  While this topic is worthy of discussion, we asked that the AREC look at that as a separate discussion and move ahead with the easy fix for the vast majority of licensees by simply stating that brokers may pay a commission to a legal entity as long as the legal entity is made up solely of licensees. We believe that approach for a narrow regulation project complies with the intent of statutes and would survive legal review. A wider approach that allows licensees to operate as legal entities and for commissions to be paid to legal entities, regardless of how many unlicensed people are in the legal entity, would require a statute change. Statute currently states that only a natural person may have a real estate license and further mandates that a commission can only be paid to a licensee. We were disappointed that the AREC did not take action on this at the June meeting, but we are told that they will take action in the September meeting.

On how teams operate, it is becoming apparent that the AREC needs to either accept the fact that teams work differently from the rest of us and new regulations need to be addressed or they need to state very clearly that all licensees need to comply with current law regardless of how they prefer to operate. As teams desire to operate as a separate entity but do not want to open their own brokerage, perhaps making them open a branch office would work. Statute and regs are already in place to cover this approach.  This will also be on the AREC’s September meeting agenda with recommendations coming from Chairman Bates and Investigator Wiriwan. AAR has not taken a position on this issue but I am sure that Industry Issues will be taking this up after reviewing the AREC actions.

Some areas on this issue to watch for:

  • People are confused as to what brokerage the team members are under. It was suggested that Alaska adopt statutes that other states have that mandate that in any advertising the brokerage name as listed with the real estate commission be the most predominant on the sign, ad, etc. The area of forms used for listings, etc. would be covered here, also.
  • How are consumer pamphlets handled? Do all team members have to be on the form and have to be in the same relationship?
  • Is there sufficient broker oversight? It was reported that some licensees were unaware of who their actual broker was and were putting their team leader on license renewal forms as their broker.

The process has taken so long that many of you have probably forgotten about the mandatory Errors and Omissions Insurance. Earlier this year we were finally at the point for the AREC to go out for RFPs but then hit another snag. The new holdup is a concern within the division that the statute on E&O is not aligned with the state procurement code. They hoped to have a final opinion of this within a few weeks but at this writing it has been 4 weeks and no news. It’s only been 6 years or so, so what’s the hurry?

Sara Chambers, who took over for Dan Habeger as the Director of the Division, spoke at length. I was impressed with her apparent concern over fixing the budgetary issues and transparency issues that have plaguing both the Commission and the Division for years, now. Ms. Chambers testified recently at a Legislative Budget and Audit meeting on these issues and Industry Issues will be reviewing her testimony.

It was reported that the Recovery Fund is at or near the legislative cap of $500,000.00. Recent activity will certainly bring it down but it will stay at healthy levels.

In reviewing the minutes from the December 2013 meeting, I saw a report from Investigator Wirawan regarding the lack of the ability of the AREC to take action against an individual who violates an order of the Commission. This has been a long standing problem and I was glad to see her addressing the issue.

She gave the Commissioners a proposed change to AS 08.88.071 that would fix the problem. In the past AAR has taken on these projects that need to go through the legislative process, as we can handle it more efficiently. There are many cases, such as this, where our concerns are similar and we are able to help the Commission along with it’s goal of the protection of the public and get the job done faster. At the request of Commissioner Burke it was decided that it was not appropriate to work with AAR on these projects. I am sure that I can state on the behalf of Industry Issues Chair Errol Champion that AAR remains open to aiding in moving legislation that benefits AAR, AREC and the public. Sometimes it just makes sense to work together.

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Existing-Home Sales Maintain Solid Growth in July

WASHINGTON (August 20, 2015) — Existing-home sales steadily increased for the third consecutive month in July, while stubbornly low inventory levels and rising prices are likely to blame for sales to first-time buyers falling to their lowest share since January, according to the National Association of Realtors®.

Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 2.0 percent to a seasonally adjusted annual rate of 5.59 million in July from a downwardly revised 5.48 million in June. Sales in July remained at the highest pace since February 2007 (5.79 million), have now increased year-over-year for ten consecutive months and are 10.3 percent above a year ago (5.07 million).

Lawrence Yun, NAR chief economist, says the increase in sales in July solidifies what has been an impressive growth in activity during this year’s peak buying season. “The creation of jobs added at a steady clip and the prospect of higher mortgage rates and home prices down the road is encouraging more households to buy now,” he said. “As a result, current homeowners are using their increasing housing equity towards the downpayment on their next purchase.”

The median existing-home price2 for all housing types in July was $234,000, which is 5.6 percent above July 2014. July’s price increase marks the 41st consecutive month of year-over-year gains.

“Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand,” adds Yun. “Realtors® in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains.”

Total housing inventory3 at the end of July declined 0.4 percent to 2.24 million existing homes available for sale, and is now 4.7 percent lower than a year ago (2.35 million). Unsold inventory is at a 4.8-month supply at the current sales pace, down from 4.9 months in June.

The percent share of first-time buyers declined in July for the second consecutive month, falling from 30 percent in June to 28 percent — the lowest share since January of this year (also 28 percent). A year ago, first-time buyers represented 29 percent of all buyers.

“The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face,” adds Yun. “Rising rents and flat wage growth make it difficult for many to save for a downpayment, and the dearth of supply in affordable price ranges is limiting their options.”

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage climbed to 4.05 percent in July from 3.98 percent in June — the first time above 4 percent since November 2014 (4.00 percent) and the highest since September 2014 (4.16 percent).

Properties typically stayed on the market for 42 days in July, an increase from June (34 days) but below the 48 days in July 2014. Short sales were on the market the longest at a median of 135 days in July, while foreclosures sold in 49 days and non-distressed homes took 41 days. Forty-three percent of homes sold in July were on the market for less than a month.

All-cash sales increased slightly to 23 percent of transactions in July (22 percent in June) but are down from 29 percent a year ago. Individual investors, who account for many cash sales, purchased 13 percent of homes in July, up from 12 percent in June but down from 16 percent in July 2014. Sixty-four percent of investors paid cash in July.

Representing the lowest share since NAR began tracking in October 2008, distressed sales4 — foreclosures and short sales — declined to 7 percent in July from 8 percent in June; they were 9 percent a year ago. Five percent of July sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 17 percent below market value in July (15 percent in June), while short sales were discounted 12 percent (18 percent in June).

NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark., says the housing market is in a much better place and has come a long way since the depths of the recession. “Five years ago, distressed sales represented 33 percent of the market in July,” he said. “For many previously distressed homeowners throughout the country, rising home values in recent years have helped recover equity and the vast improvement in several local job markets means fewer are falling behind on their mortgage payments.”

Single-family and Condo/Co-op Sales

Single-family home sales increased 2.7 percent to a seasonally adjusted annual rate of 4.96 million in July (highest since February 2007 at 5.08 million) from 4.83 million in June, and are now 11.0 percent above the 4.47 million pace a year ago. The median existing single-family home price was $235,500 in July, up 5.8 percent from July 2014.

Existing condominium and co-op sales fell 3.1 percent to a seasonally adjusted annual rate of 630,000 units in July from 650,000 units in June, but are still up 5.0 percent from July 2014 (600,000 units). The median existing condo price was $221,800 in July, which is 3.2 percent above a year ago.

Regional Breakdown

July existing-home sales in the Northeast decreased 2.8 percent to an annual rate of 700,000, but are still 9.4 percent above a year ago. The median price in the Northeast was $277,200, which is 1.3 percent higher than July 2014. In the Midwest, existing-home sales were at an annual rate of 1.32 million in July, unchanged from June and 10.9 percent above July 2014. The median price in the Midwest was $186,500, up 6.6 percent from a year ago.

Existing-home sales in the South increased 4.1 percent to an annual rate of 2.29 million in July, and are 9.6 percent above July 2014. The median price in the South was $203,500, up 7.0 percent from a year ago.

Existing-home sales in the West rose 3.2 percent to an annual rate of 1.28 million in July, and are 11.3 percent above a year ago. The median price in the West was $327,400, which is 8.4 percent above July 2014.

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NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.

1Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample — about 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

2The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.

3Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).

4Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at Realtor.org.

NOTE: The Pending Home Sales Index for July will be released August 27, and Existing-Home Sales for August will be released September 21; release times are 10:00 a.m. EDT.

Contact Information

Alaska Association of REALTORS®
4205 Minnesota Drive
Anchorage, Alaska 99503

Phone (907) 563-7133
FAX (907) 561-1779
Toll-Free (800) 478-3763

joinus@alaskarealtors.com

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