The S&P Case-Shiller U.S. National Home Price Index – considered the leading measure of U.S. home prices – has been tracking home values for nearly 30 years. According to their most recent release, national home prices are up 5.1 percent year-over-year, with the biggest price increases seen in the West. David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones indices, says home prices show no sign of slowing down. “Home prices continued to rise across the country led by the West and the South,” Blitzer said. “In the strongest region, the Pacific Northwest, prices are rising at more than 10 percent; in the slower Northeast, prices are climbing a bit faster than inflation. Nationally, home prices have risen at a consistent 4.8 percent annual pace over the last two years without showing any signs of slowing.” Overall, Blitzer believes the residential real estate market is in good shape, noting improvements in housing starts and home sales. Among individual cities included in the index, Denver, Seattle, and Portland led the way with the biggest year-over-year gains in home values. More here.
The housing market had a strong first of half of the year. In fact, according to Jonathan Smoke, Realtor.com’s chief economist, it was the best spring in a decade. However, a number of factors will likely cause things to slow down in the second half of the year. “As a result of a very strong spring and summer leaving us with low inventories, mortgage rates potentially moving back up, and the presidential election creating more uncertainty, we may see a weaker housing market in September, October, and November,” Smoke says. “However, given the performance so far this year, 2016 should end as the best year in a decade.” And, though things may slow down in the months ahead, that’s no reason to believe the real estate market will have a bad 2017. Smoke says housing should remain strong next year, unless there is a substantial increase in mortgage rates over a short period of time. But that type of rate increase should only occur if the economy is also strong. And, if that’s the case, then lower unemployment and higher wages should help offset the effects of higher rates. Smoke feels that positive conditions and favorable demographics will keep the housing market strong and healthy for at least two more years. More here.
According to a recent survey of potential home buyers, the cost of renting is the main motivator for almost half of all first-time buyers and nearly a quarter of respondents overall. That is nearly double what it was last year at this time. That’s mostly due to the fact that, in recent years, rent has been rising at a rapid pace and – despite the fact that home prices have also been increasing – buying a home has generally remained the more affordable choice in many markets. That, and mortgage rates that have been hovering near record lows for some time now, are driving renters to the housing market. But that doesn’t mean there still aren’t concerns about the cost of buying a home. In fact, affordability was named by 28 percent of survey participants as their top concern, with too much competition and a lack of homes to choose from following close behind. For first-time home buyers, in particular, affordability is a growing worry. For that reason, inventory levels and new home construction are the keys to the current housing market. As more homes become available for sale, the rate of price increases should begin to moderate, which will help balance the market and provide more opportunities for buyers. More here.
Sales of previously owned homes fell in July after four consecutive months of increases, according to the National Association of Realtors. The 3.2 percent decline was led by a 13.2 percent drop in the Northeast. The Midwest and South also saw decreases, while the West climbed 2.5 percent from the month before. Lawrence Yun, NAR’s chief economist, says inventory and affordability are behind the decline. “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,” Yun said. “Realtors are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.” But though July’s numbers fell, home sales are still expected to finish the year at their strongest pace since the housing crash and the number of homes available for sale actually improved during the month – though only by 0.9 percent. Currently, unsold inventory is at a 4.7-month supply at the current sales pace. A six month supply is considered healthy for the housing market. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates moved up last week across all loan categories, including 30-year fixed-rate mortgages with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. The increases, though slight, were enough to cause a dip in mortgage activity. Refinance demand – which is typically more sensitive to rate increases – fell 3 percent from the previous week, while purchase activity was down 0.3 percent from the week before. But though demand was slower on a week-over-week basis, it is still up significantly from last year when mortgage rates were higher. For example, refinance demand is now 45 percent higher than at this time last year and requests for applications for loans to buy homes are nearly 8 percent above last year’s level. Unfortunately, though rates remain low and buyer demand is strong, a lower-than-typical number of homes on the market could be suppressing sales which, despite this, are on track to have their best year in a decade. The MBA’s weekly applications survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage activity. More here.
New numbers released by the U.S. Census Bureau and the Department of Housing and Urban Development show sales of new single-family houses up 12.4 percent in July from the month before. The improvement puts new home sales at a nine-year high. Rebounding strength in the housing market has analysts optimistic about the future. Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters that the residential real estate market is now one of the economy’s strongest sectors. “A very rosy picture is beginning to emerge on the housing market, pointing to sustained buoyancy in the sector’s recovery, which remains one of the few bright spots for the U.S. economy,” Mulraine said. But though sales have been strong, the number of homes being built still lags behind other housing measures, which tempers some of the optimism surrounding this year’s solid sales performance. Still, July’s gain pushed new home sales 31.3 percent higher than they were at the same time last year and beat economists’ expectations by nearly 75,000. Economists surveyed prior to the release forecast sales to fall in July. Also in the report, the median sales price of new houses sold in July was $294,600; the average sales price was $355,800. More here.
Today’s housing market is a mixed bag. On the one hand, a better job market, improving wage growth and low mortgage rates have driven buyer demand higher and made an increasing number of Americans consider buying a house. On the other, too few homes for sale are driving prices upward and new home construction isn’t keeping pace with the increase in demand. Fortunately, in some cases, these factors help balance each other out. For example, though prices continue to rise in most markets, mortgage rates remain low – making higher prices slightly more manageable. All in all, Fannie Mae’s chief economist, Doug Duncan, says the real estate market isn’t likely to change too much one way or the other before the end of the year. “Housing market fundamentals remain a mixed bag. During the second quarter of 2016, both new and existing home sales rose to expansion highs, while single-family starts pulled back, remaining historically low for an expansion,” Duncan explained as part of the group’s most recent Economic and Housing Outlook. “Tight housing inventory from a lack of new construction continues to create affordability challenges, particularly at the lower end of the market … We expect home buyers will benefit from improving job and wage growth, more favorable lending standards, and continued low mortgage rates through the rest of the year.” More here.
Historically, buyers at the higher end of the housing market rebound more quickly from a recession than the average home buyer – who may have to watch their money more closely during rough economic times. Because of this, the typical new house has been growing larger ever since the housing crash and most recent recession. However, according to a new analysis from the National Association of Home Builders of numbers from the Census Bureau’s Quarterly Starts and Completions By Purpose and Design report shows a slight decline in both the average and median square footage for new homes built during the second quarter of this year. And though the decline was small and the typical new home remains large by historical standards, analysts see it as the start of a trend downward for new home size. This is encouraging news for buyers as there has been a lack of entry-level new homes available for sale on the market. And, since for-sale inventory is low, any increase in the number of homes available to the average home buyer is good for balancing the market, reducing price increases, and boosting the number of first-time home buyers active in the market. More here.
The housing market is likely to see its best year of sales in a decade, according to a new outlook from Freddie Mac. In fact, the group’s forecast calls for sales to reach 6.04 million by the end of the year. Sean Becketti, Freddie Mac’s chief economist, says the housing market still has some challenges but is far better balanced than it was even just a few years ago. “This is a good sign for the housing market as it continues to be an even brighter spot in the economy,” Becketti said. “However, the housing market still has challenges, which is reflected in our housing starts forecast. Low levels of inventory across many markets will continue to put upward pressure on house prices for the foreseeable future.” But though Freddie Mac expects home prices to continue to increase due to a lower than normal number of available homes for sale and has revised their forecast for new home construction downward, they also expect mortgage rates to remain low through the end of the year. In other words, the residential real-estate market will continue to look much as it does today for the next several months. Inventory will continue to be the big issue, causing prices to rise while mortgage rates near historic lows help support both refinance and home purchase activity. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell again last week, continuing to hover near record lows. Rates fell 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 loans. Consistently low mortgage rates have been a bright spot for the housing market this year, as low inventory and higher prices strain affordability conditions. Between mortgage rates near record lows and a stronger job market, demand for home loans has been higher than at the same time last year, even as conditions have become more challenging. In fact, refinance demand is now 48 percent higher than last year at this time and purchase activity is 10 percent higher than year-before levels. However, lower rates last week weren’t enough to keep mortgage demand from falling from one week earlier. In fact, the Market Composite Index – which measures both refinance and purchase demand – fell 4 percent from the week before. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.