Monthly Archives: November 2019

In October, sales of newly built, single-family homes were relatively flat from the month before, according to a new report from the U.S. Census Bureau and the Department of Housing and Urban Development. But, despite a flat month, they’re now up 32 percent from last year at the same time. That’s because September’s sales estimate was revised upward and, combined with October’s results, the two months were the best for new home sales since 2007. So what’s driving the sales surge? Well, a couple of things. One is mortgage rates, which are significantly lower than they were last fall. Another is buyer demand. The number of interested home buyers has been elevated for a while now, in large part due to a strong job market. Additionally, new home prices are falling. In fact, according to the report, the median sales price of a new home is down 3.5 percent from last year. When you combine high demand and low borrowing costs with declining prices, it becomes pretty clear why prospective home buyers might be taking a longer look at buying new. More here.

The economy has many parts. And, naturally, the housing market plays a role. When its strong, it can add to economic growth. When it isn’t, it can drag the economy down. According to the latest forecast from Fannie Mae’s Economic and Strategic Research Group, it’s currently strong and adding to growth for the first time in a year and a half. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says buyer demand is responsible and, if not for inventory issues, the market might even be stronger. “As we forecasted, housing supported the larger economy in the third quarter, and we expect it to continue to play a productive role through the first half of 2020,” Duncan said. “Of course, the housing market as a whole remains constrained by the persistent supply and affordability issues, which is particularly unfortunate given the current strength of consumer demand for reasonably priced homes.” Ultimately, how much the housing market contributes to economic growth next year will be determined by how well the number of homes for sale can keep up with demand from buyers. More here.

New numbers from the National Association of Realtors show sales of previously owned homes increased in October from the month before. The nearly 2 percent improvement pushed sales 4.6 percent higher than they were last year at the same time. Lawrence Yun, NAR’s chief economist, said favorable conditions are likely to keep buyers coming out as long as there are enough homes to buy. “Historically-low interest rates, continuing job expansion, higher weekly earnings, and low mortgage rates are undoubtedly contributing to these higher numbers,” Yun said. “We will likely continue to see sales climb as long as potential buyers are presented with an adequate supply of inventory.” And, although the number of homes available for sale has been declining recently, news of rising new-home construction offers hope that inventory levels will begin to see gains again in the coming months. Regionally, the South saw the biggest bump in sales, with a 4.4 percent increase. The Midwest also saw gains, while the Northeast and West saw slight declines. More here.

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week 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. The decline keeps rates favorable and just above historic lows. It’s one of many current housing trends good for prospective home shoppers. Joel Kan, MBA’s associate vice president and economic and industry forecasting, says improving inventory may be another. “Purchase applications were 7 percent higher than a year ago, which adds another solid data point to the recent increases in new home sales and housing starts,” Kan said. “There may be signs that housing inventory is starting to meaningfully rise, which will help with affordability and provide more choices for potential home buyers.” But though demand for loans to buy homes was up from the previous week, refinance activity fell. Still, refinance demand is currently 152 percent higher than last year at the same time. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

The most recent numbers from the U.S. Census Bureau and the Department of Housing and Urban Development show permits for future home construction were at a 12-year high in October. Building permits are now 14.1 percent higher than they were last year at the same time. That sounds good, of course, but why should it matter to the average home buyer? Well, it’s pretty simple. When the number of homes available for sale is lower than the number of interested home buyers, prices rise. That’s why home values have been increasing steadily in recent years. In short, there have been fewer homes on the market while, at the same time, buyer demand has been climbing. The most effective solution to this problem is to build more homes. That’s because, as the supply of homes increases, buyers have more options to choose from and home sellers have to adjust their asking price to attract interest. So, news that permits are on the rise is good for buyers, as more new home construction may help slow the rate of price increases going into 2020. More here.

Each month, the National Association of Home Builders surveys builders to gauge their confidence in the market for newly built homes. The NAHB’s Housing Market Index scores responses on a scale where any number above 50 indicates that more builders view conditions as good than poor. In November, the index fell one point to 70 but remains near its 2019 peak of 71. Greg Ugalde, NAHB’s chairman, says builders are reporting positive conditions. “Single-family builders are currently reporting ongoing positive conditions, spurred in part by low mortgage rates and continued job growth,” Ugalde said. “In a further sign of solid demand, this is the fourth consecutive month where at least half of all builders surveyed have reported positive buyer traffic conditions.” Among the surveys three main components, the one measuring sales expectations for the next six months scored the highest at 77. That builders are feeling confident about future sales is a good sign for the housing market, as an increase in new residential construction can help balance inventory levels and further moderate price increases. More here.

Over the years, owning a home has been considered a pretty safe investment. In fact, homeownership has generally been considered a good way to build wealth and boost your bottom line. That’s rarely been more true than it is today. That’s because, home prices have been climbing for the past several years and it’s helped millions of homeowners count themselves among the equity rich. For example, a new analysis from ATTOM Data Solutions shows 26.7 percent of the 54 million mortgaged homes in the US are now considered equity rich – meaning the home’s value is 50 percent more than the total amount of the loans used to finance the property. Todd Teta, chief product officer with ATTOM, says more Americans will see their equity increase as home values continue to climb. “There are notable equity gaps between regions and market segments,” Theta said. “But as home values keep climbing, homeowners are seeing their equity building more and more, while those with properties still worth a lot less than their mortgages represent just a small segment of the market.” More here.

Next year should be a good one for the housing market, according to new remarks from Lawrence Yun, the National Association of Realtors’ chief economist. Yun, speaking at the NAR’s convention in San Francisco, said he expects both existing-and-new home sales to increase next year. In fact, he expects a 3.7 percent year-over-year increase in the number of previously owned homes sold in 2020. That would make it the best year since 2017. But he expects an even bigger increase in new home sales. Yun says he believes new home sales will rise 11 percent to their highest level since 2007. “Some loosening in inventory will happen in 2020, and so we expect home sales to rise,” Yun said. “We’ll see an increase in inventory, but not any oversupply, so home price should continue to move higher – our hope is in a much tamer fashion.” According to Yun, home prices will rise 4.3 percent in 2020. That’s a smaller increase than this year, when prices will end up about 5 percent higher than they were the year before. Between slower price appreciation, low mortgage rates, and improved inventory, 2020 is looking like it could be a good year for buyers. More here.

First-time home buyers typically account for a large share of the houses sold each year. In fact, historically, they’ve represented around 40 percent of all home sales. However, over the past decade – due, in part, to factors such as student loan debt, the housing crash, and a lack of affordable inventory – the number of first-time buyers has fallen. According to a new analysis from TransUnion, that may be about to change. Their analysis projects at least 8.3 million first-time buyers will enter the market over the next three years, which is more than any three-year period in the last decade. Joe Mellman, senior vice president at TransUnion, says there’s reason for optimism. “While we’ve recently seen a boom in refi activity, actual homeownership rates are down,” Mellman said. “But we may be starting to see daylight as slowing home price appreciation, low unemployment, increased wage growth, and low interest rates are helping affordability. As a result, we are optimistic that first-time home buyers will contribute more to homeownership than at any time since the start of the Great Recession.” How an influx of new home buyers affects market conditions will largely depend on how well housing stock can keep up with demand. More here.