May 2016

Home Sales See Best 1st Quarter Since 2007

So far this year, there has been a lot of talk about higher home prices, declining affordability, and a lack of available homes for sale. But, according to the National Association of Realtors, demand remains strong and sales of previously owned homes just had their best first quarter since 2007. Lawrence Yun, NAR’s chief economist, says the housing market continues to make gains despite the challenges facing home buyers this spring. “The housing market continues to expand at a moderate pace in spite of the fact that home prices are rising too fast in some areas because of insufficient supply fueled by the grossly inadequate number of new single-family homes being constructed,” Yun said. “The good news is that pending sales in recent months have remained stable and should support a modest gain in home sales heading into the summer.” Yun is forecasting home sales to finish the year at their strongest pace in a decade. With mortgage rates still historically low and an improved job market, home buyers are showing that they aren’t deterred by higher prices. However, Yun cautions that there needs to be an increase in the number of homes for sale in order to meet the level of demand from buyers and keep prices affordable. More here.

Homeownership Remains Goal For Millennials

Housing and Urban Development Secretary Julian Castro says the idea that younger Americans aren’t interested in homeownership is a myth and that it is as much a goal for them as it was previous generations. “The American Dream of homeownership is as strong today as ever,” Castro told the National Association of Realtors Regulatory Issues Forum. “And perhaps the best news of all is that millennials are showing that their generation is just as committed to homeownership as their parents and grandparents.” Long seen as an essential part of achieving the American Dream, homeownership seemed to lose some of its appeal following the housing crash and financial crisis. Since then, a smaller than normal share of younger buyers have been active in the housing market – fueling the notion that they weren’t interested in owning a home. But, according to one recent poll cited by Castro, 40 percent of millennials plan to buy their first home sometime in the next year. That high level of interest, combined with recent improvements to the labor market and economy, should result in more of those potential buyers becoming actual buyers, according to Castro. In his view, student loan debt has been the main obstacle for young Americans hoping to purchase a home. More here.

Mortgage Rates Hover Near Three-Year Lows

According to the Mortgage Bankers Association’s Weekly Applications Survey, mortgage rates fell across all loan categories last week, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate mortgages. Rates were down from the week before and started the week at their lowest point in three years. Lynn Fisher, MBA’s vice president of research and economics, told CNBC that mortgage rates continue to defy expectations. “Despite expectations that rates would slowly rise this year, the 30-year fixed rate last week was 18 basis points lower than a year ago, continuing to provide a favorable rate environment for the housing market,” Fisher said. Favorable rates, however, failed to spur much demand for mortgage loan applications. In fact, mortgage application demand was essentially flat from the week before, with both the refinance and purchase index up less than one percent. On the other hand, when compared to last year, refinance demand is now up 23 percent and applications for loans to buy homes have increased 14 percent. The MBA’s weekly applications survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

More Homeowners See Opportunity To Sell

A combination of higher home prices and strong buyer demand is convincing more current homeowners that selling their house may be a good idea. According to Fannie Mae’s most recent Home Purchase Sentiment Index – which measures Americans attitudes toward buying and selling a home, renting, household finances, mortgage rates, etc. – April saw a 16 percent increase in the number of consumers who said now was a good time to sell a house. Doug Duncan, Fannie Mae’s chief economist, says that could be good news for both current homeowners and prospective buyers. “We can partially attribute the sizable gain in April in home selling optimism both to a correction for last month’s unexpected dip and to typical seasonal strength in housing activity in the spring and summer,” Duncan said. “Even after accounting for these factors, tight housing supply has led to renewed strength in home price appreciation, making selling a home a more attractive prospect this year in particular. This improved sentiment could provide an extra boost of much-needed supply for the spring selling season.” An increase in available homes for sale would help balance the market, slow down the rate of home price increases, and provide house hunters with more homes to choose from. More here.

New Home Market Strong Among Older Buyers

The market for new homes among buyers over the age of 55 has been in positive territory for eight consecutive quarters, according to the National Association of Home Builders’ 55+ Housing Market Index. The index measures builder confidence in the market for newly built single-family homes on a scale where any number above 50 indicates more builders view conditions as good than poor. Survey results for the first quarter of this year scored a 56, down five points from the previous quarter. Jim Chapman, chairman of the NAHB’s 55+ Housing Industry Council, says sentiment overall was positive. “Although builder sentiment in the 55+ housing sector is down slightly from its peak, overall confidence is still in positive territory,” Chapman said. “Builders for the 55+ market are doing quite well in some areas across the country, while others are experiencing challenges that are hindering production.” Despite those challenges, the number of builders expecting sales to be strong over the next six months was higher than ever. In fact, the index component measuring expected sales rose eight points to 71, which is the highest reading since the index began in 2008. On the other hand, gauges of current sales and buyer traffic were down from the previous quarter. More here.

Majority Of Americans Say It’s Time To Buy

According to a recently conducted poll from Gallup, 66 percent of Americans say it’s a good time to buy a house. That’s up 12 percent from where it was following the housing crash but down slightly from the past few years. Most likely, the recent dip in optimism is a reaction to higher home prices. Low prices and record mortgage rates made buying a house an attractive proposition in the years following the crash. However, as surging demand depleted the stock of houses available for sale, home values shot up. Now, despite mortgage rates still near record lows and a vastly improved job market, Americans’ views of the housing market have begun to change. Though they are still positive, there is a growing concern that buying a house will soon become unaffordable for some buyers. This could explain why some parts of the country are more pessimistic than others. For example, people in the Midwest and South were generally more optimistic than those in the West, where home prices rebounded more quickly. It also explains why older and more financially secure Americans have the most positive perceptions of buying a house. Overall, however, Americans are eager to become homeowners. In fact, 59 percent of non-homeowners say they think they’ll buy a house in the next 10 years. More here.

Purchase Activity Flat As Rates Rise

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were up slightly last week from the week before. In fact, rates rose across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate mortgages. Though the increases were minor, it was enough to cause a 6 percent drop in refinance activity. Michael Fratantoni, MBA’s chief economist, told CNBC there are fewer borrowers looking to refinance with rates at their current level. “Refinance activity decreased for the second-straight week because fewer borrowers have an incentive to refi at the current level of rates, but there are still some who respond to the small changes we have seen in recent weeks,” Fratantoni said. Since demand for loans to buy homes is less affected by weekly rate fluctuations, the Purchase Index was unchanged from the week before and remains 13 percent higher than the same week one year ago. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Home Sellers See Biggest Gains Since 2007

A new analysis of 125 metropolitan areas found that Americans who sold their homes in March sold them for an average of $30,500 more than they originally paid for them. That’s the highest average price gain of any month since December 2007, according to the report from RealtyTrac. Daren Blomquist, RealtyTrac’s senior vice president, says the numbers should be encouraging to current homeowners. “Home sellers in many markets are now seeing average price gains close to or above what home sellers experienced during the last housing boom,” Blomquist said. “That should encourage more homeowners to take advantage of the prime seller’s market and list their homes for sale this year. Banks are already taking advantage of that market as evidenced by the uptick in the distressed sales share over the last two quarters.” Though home price gains may seem like bad news for prospective buyers, the more homeowners who put their homes up for sale this year, the better the market will be for buyers. That’s because, home prices are largely driven by a lack of available homes for sale. As more homes become available, buyers will have more choices and more negotiating power – which will help moderate future price gains and balance the market. More here.

Are Low Rates Offsetting Higher Home Prices?

With home prices largely recovered from the crash, affordability is once again a concern for the average American home buyer. In fact, there has been a lot of discussion recently about whether higher prices will lead to a drop in buyer demand or if still low mortgage rates and a better job market will help keep demand high and affordability conditions favorable. According to Black Knight Financial’s latest Mortgage Monitor, demand is still healthy but home price increases have begun to cut into the amount of savings buyers can expect from historically low rates. For example, without factoring in home price movement, recent mortgage rate declines would be saving buyers approximately $44 a month on their monthly payment. However, when including the rate of price gains, that savings falls to $18. Ben Graboske, Black Knight’s data and analytics SVP, says home prices are muting the effect low mortgage rates are having on housing affordability. “By and large, borrowers are still seeing net reductions in monthly payments across the country heading into the early home buying season,” Graboske said. “In some areas though, prices are appreciating so quickly that they may have fully offset any savings from rate declines.” However, declining mortgage rates have had a positive impact on housing affordability. According to Graboske, without falling rates, buyers would have been paying an additional $28 a month for the median-priced home compared to the end of last year. More here.

Housing Poised For Best Year In A Decade

Housing markets across the country are trending positive and it could lead to real estate’s best year in a decade, according to Freddie Mac’s chief economist, Len Kiefer. “The U.S. housing market is poised to have its best year in a decade,” Kiefer said upon release of this month’s Multi-Indicator Market Index. “The National MiMi currently stands at 83, the highest since September of 2008. And the trends are nearly all positive.” The index – which compares current market data to long-term norms – looks at things like demand for home purchase loans, proportion of on-time mortgage payments, and the job market in all 50 states and the top 100 metropolitan areas. Year-over-year, the index has improved by 7.46 percent and 35 states have returned to their long-term stable range. According to Kiefer, the improving national trend can be found in local markets as well. “We still see pockets of weakness in the Midwest and South, while the Northeast and West are generally doing better,” Kiefer said. “But most markets in the Midwest and South are improving according to MiMi.” In fact, the index found 59 percent of included metro areas are now within their stable range with Austin, Denver, Salt Lake City, Honolulu, and Los Angeles rounding out the top five. More here.