Real house prices increased 0.8 percent between November and October 2018, according to the First American Real House Price Index. Real house prices increased 15.3 percent year over year.

Consumer house-buying power, how much one can buy based on changes in income and interest rates, decreased 0.04 percent between October 2018 and November 2018, and declined 7.5 percent year over year. Average household income has increased 3.5 percent since November 2017 and 54.3 percent since January 2000.

Real house prices are 9 percent lower than in January 2000. While unadjusted house prices are now 1.8 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 35.3 percent below their 2006 housing boom peak.

“Throughout 2018, consistent growth among three driving forces – mortgage rates, household income, and unadjusted house prices defined the housing market. These three factors are also the core metrics that comprise the RHPI,” said Mark Fleming, chief economist for First American. “November 2018 was no exception, as household income, mortgage rates, and the unadjusted house price index all increased compared with a year ago. The 30-year, fixed-rate mortgage increased by nearly 1 percent and the unadjusted house price index jumped 6.7 percent.”

The six cities in which the RHPI declined on a month-over-month basis are as follows:

1. San Jose, Calif. (- 0.7 percent)
2. Boston (- 0.4 percent)
3. Portland, Oregon (- 0.2 percent)
4. Pittsburgh (- 0.2 percent)
5. San Diego (- 0.1 percent)
6. Seattle, (- 0.1 percent)

“Six cities are leading the shift in the housing market. Consider that in October 2018, real house prices increased month over month in all 44 of the markets we track in the RHPI,” said Fleming. “Rising inventory is one reason these markets are bucking the national trend. According to Realtor.com, the number of active listings increased year over year in five of the six markets listed. In San Jose, Seattle, and San Diego, the increase in active listings was substantial, as active listings jumped 158 percent, 77 percent, and 46 percent, respectively,” said Fleming. “As more inventory enters the market, buyers have more options, bidding wars are less likely and sellers start reducing list prices.”

SB Financial Group Inc. increased mortgage origination volume in 2018, though the business environment was challenging for lenders. The bank originated mortgage origination volume of $342.1 million, an increase of $26.3 million, or 8.3 percent, compared with 2017.

[caption id="attachment_9395" align="alignleft" width="223"] Mark A. Klein[/caption]

"Despite rising rates and inventory pressure, we increased our mortgage production this quarter compared to the prior year,” said Mark A. Klein, chairman, president and CEO of SB Financial. “Our full year production level of $342 million is the second highest in our history and included our first loan closing from our new Indianapolis office."

Mortgage origination volume of $342.1 million, an increase of $26.3 million, or 8.3 percent, in the fourth quarter. SB Financial reported net income of $11.6 million, an increase of $2.3 million, or 24.3 percent. Also, earnings per share were $1.51, an increase of $0.04 per share, or 2.5 percent, reflecting a $30 million capital infusion in the first quarter of last year.

Mortgage loan originations for the fourth quarter of 2018 were $78.8 million, up $6.7 million, or 9.3 percent, compared to the same time period a year earlier. Sales of originated loans were $60.3 million, up $6.5 million, or 12.1 percent, compared with the year-ago quarter.

Net mortgage banking income, consisting of gains on the sale of mortgage loans and net-loan servicing fees, was $2 million for the fourth quarter of 2018, compared to $2.1 million for the year-ago quarter. The mortgage servicing valuation adjustment for the fourth quarter of 2018 was a negative $0.07 million, compared to a positive adjustment of $0.12 million for the fourth quarter of 2017. The mortgage servicing portfolio, as of Dec. 31, 2018, was $1.08 billion, up $0.09 billion, or 9 percent, from $0.99 billion in the same period a year earlier.

New construction starts in December fell 10 percent to a seasonally adjusted annual rate of $708.9 billion. They declined 7 percent in the prior month.

The December downturn reflects decreases in the three construction sectors, according to Dodge Data & Analytics. For instance: Residential building decreased 8 percent, due to reduced activity in December for both single family and multifamily housing. Nonresidential building dropped 14 percent, as its commercial building segment lost momentum following its heightened November amount. Non-building construction decreased 9 percent, with a steep plunge by the electric utility-gas plant category that outweighed a December rebound for public works.

For 2018, construction starts increased just 0.3 percent to $789.0 billion. That performance followed 7% gains in 2016 and 2017, as well as 11percent to 14 percent gains from 2012 through 2015. The 2018 increase in construction starts was restrained by a 31 percent decrease in the electric utility and gas plant category. If electric utilities and gas plants were excluded, however, construction starts in 2018 increased 2 percent compared to 2017.

[caption id="attachment_5116" align="alignright" width="150"] Robert Murray, chief economist for Dodge Data[/caption]

“By recent standards, the overall level of construction starts in 2018 can be regarded as healthy, but the substantially slower rate of growth compared to the prior six years is suggestive of a market that’s close to a peak,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “Last year’s brisk economic expansion enabled market fundamentals for multifamily housing and commercial building to strengthen, which supported more growth for apartment projects, office buildings, and hotels. Single family housing showed improvement early in 2018, but then plateaued and began to recede given affordability constraints.”

Residential building in December was $300.6 billion (annual rate), down 8% from the previous month.  Multifamily housing retreated 15%, slipping for the second month in a row after a 19% gain in October.  There were four multifamily projects valued at $100 million or more that reached groundbreaking in December, compared to ten such projects in November.

The large multifamily projects in December were led by a $265 million apartment building in Oakland and a $150 million apartment building in Long Beach, Calif.  Single family housing in December dropped 5%, settling back from the extended plateau that was present for much of 2018.  The December pace for single family housing was down 7% from the average dollar volume for the previous eleven months.

The 2018 amount for residential building was $323.5 billion, up 5%.  Multifamily housing grew 8% in 2018, rebounding from the 8% decline that was reported for 2017.  The largest multifamily projects that reached groundbreaking in 2018 were the $700 million City View Tower at Court Square in Queens, N.Y., the $580 million multifamily portion of the Winthrop Square Tower in Boston, and the $550 million Queens Plaza Park Apartments in Queens, N.Y.

The top-five metropolitan areas ranked by the dollar amount of multifamily starts 2018, compared with the previous year were New York, up 2 percent; Boston, up 71percent; Washington D.C., up 26 percent; Miami, up 43 percent; and Los Angeles, down 11 percent.

Metropolitan areas that ranked six through 10 were San Francisco, up 23 percent; Seattle, up 25 percent; Dallas-Ft. Worth, up 24 percent; Chicago, down 28 percent; and Philadelphia, up 3 percent.

Eight of the top-ten metropolitan areas for multifamily housing reported gains in 2018 compared to the prior year, which reported only three of the top-ten metropolitan areas reporting gains in 2016.  Single family housing in 2018 rose 4 percent, a smaller increase than the 9 percent increase in 2017.  The top five regions for single family housing in 2018 were as follows: the West, up 8 percent; the South Atlantic, up 5 percent; the South Central, up 4 percent; the Midwest, up 1 percent; and the Northeast, down 1 percent.

Going forward into 2019, economic growth is not expected to be as strong as what occurred during 2018, which may dampen groundbreaking for multifamily housing and commercial building projects,” said Murray.

Existing-home sales declined in the month of December, after two consecutive months of increases. None of the four major U.S. regions saw a gain in sales activity last month.

Total existing-home sales, or completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 6.4 percent from November to a seasonally adjusted rate of 4.99 million in December, according to the National Association of Realtors. Sales are now down 10.3 percent compared with December 2017, 5.56 million.

"The housing market is obviously very sensitive to mortgage rates. Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today,” said Lawrence Yun, chief economist at the National Association of Realtors. “Now, with mortgage rates lower, some revival in home sales is expected going into spring."   

[caption id="attachment_9286" align="alignright" width="214"] Lawrence Yun[/caption]

The median existing-home price for all housing types in December was $253,600, up 2.9 percent from December 2017, $246,500. December's price increase marks the 82^nd straight month of year-over-year gains.

Total housing inventory at the end of December decreased to 1.55 million, down from 1.74 million existing homes available for sale in November, but it represents an increase from 1.46 million a year ago. Unsold inventory is at a 3.7-month supply at the current sales pace, down from 3.9 last month and up from 3.2 months compared to a year ago.

Properties typically stayed on the market for 46 days in December, up from 42 days in November and 40 days a year ago. Thirty-nine percent of homes sold last month were on the market for less than a month.

"Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home-price appreciation," says Yun. "But there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points."

First-time buyers were responsible for 32 percent of sales in December, down from last month 33 percent, but the same as a year ago. NAR's 2018 Profile of Home Buyers and Sellers, released late last year, revealed that the annual share of first-time buyers was 33 percent.  

All-cash sales accounted for 22 percent of transactions in December, up from November 21 percent and a year ago, 20 percent. Individual investors, who account for many cash sales, purchased 13 percent of homes in December, the same as November but down from a year ago, 16 percent.

Distressed sales^, foreclosures and short sales, represented 2 percent of sales in December, unchanged from 2 percent last month and down from 5 percent a year ago.

Single-family and Condo/Co-op Sales
Single-family home sales sit at a seasonally adjusted annual rate of 4.45 million in December, down from 4.71 million in November, but is 10.1 percent below the 4.95 million sales pace of a year ago. The median existing single-family home price was $255,200 in December, up 2.9 percent from December 2017.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 540,000 units in December, down 12.9 percent from last month and down 11.5 percent from a year ago. The median existing condo price was $240,600 in December, which is up 2.3 percent from a year ago.

Regional Breakdown 
December existing-home sales in the Northeast decreased 6.8 percent to an annual rate of 690,000, 6.8 percent below a year ago. The median price in the Northeast was $283,400, which is up 8.2 percent from December 2017.

In the Midwest, existing-home sales fell 11.2 percent from last month to an annual rate of 1.19 million in December, down 10.5 percent overall from a year ago. The median price in the Midwest was $191,300, unchanged from last year.

Existing-home sales in the South dropped 5.4 percent to an annual rate of 2.09 million in December, down 8.7 percent from last year. The median price in the South was $224,300, up 2.5 percent from a year ago.

Existing-home sales in the West dipped 1.9 percent to an annual rate of 1.02 million in December, 15 percent below a year ago. The median price in the West was $374,400, up 0.2 percent from December 2017.