There are a lot of Americans looking to buy a home this year. In fact, there are far more home buyers active in the market than there are available homes for sale. That, of course, puts upward pressure on home prices. The latest S&P Case-Shiller Home Price Indices shows just how much. According to the data, which covers the 12 months through the end of April, home prices are up 14.6 percent from last year at the same time. Craig J. Lazzara, managing director and global head of index investment strategy at S&P, says the increases are driven, in part, by demand created by the pandemic. “We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes,” Lazzara said. “April’s data continues to be consistent with this hypothesis.” In other words, the pandemic not only caused some of last year’s buyers to wait until this year, it also pushed more of them to look in the same neighborhoods, causing prices to spike in those markets. (source)
When people talk about the housing market being hot, they’re generally talking about the competition for available homes. A “hot” market, in other words, is one where homes sell quickly and bidding wars are common. That’s where we are today. Hopeful home buyers have to be quick, decisive, and prepared if they want to buy a home in this market. But while there’s definitely an imbalance between supply and demand these days, there are signs that things may be improving. For example, according to one recent analysis, active listings – which refer to the number of homes listed for sale at any given time – have increased 5 percent since hitting their 2021 low in mid-March. Additionally, new listings are up 6 percent from last year. Together, it’s an encouraging sign that more home sellers are returning to the market. And while listings are still down 34 percent from 2020, the upward trend offers hope that homes for sale will continue to rebound and bring needed balance to markets suffering from record-low inventory. (source)
For generations, young Americans have included homeownership among their goals for the future. Its appeal has endured over the decades and through numerous bubbles, crashes, and recessions. Now, according to a new survey from the National Association of Realtors’ consumer website, there’s another generation of young Americans making plans to buy in the near future. The recently released survey of 18-to-25 year olds found that nearly three-quarters of respondents said they’d prefer to buy rather than rent over the long term. Among them, 43 percent said they think they’ll be ready to buy in the next five years – with an almost identical amount saying they think it’ll take them somewhere between five and 10 years. Either way, that means millions of prospective home buyers entering the market over the next decade. And, if survey results are any indication, most of them with be looking to buy in the suburbs – since nearly half of Gen-Z survey participants said they saw themselves buying there rather than in an urban or rural area. (source)
The lack of previously owned homes for sale is an opportunity for home builders. There are, after all, plenty of buyers. So, in a market with low inventory, a builder could be reasonably confident that the homes they built would be purchased, and quickly. So why then do recently released numbers from the U.S. Census Bureau and the Department of Housing and Urban Development show new home sales falling? Well, part of the problem is the rising price of building materials. Costs have skyrocketed over the past year and made it more difficult for builders to build the affordable homes buyers want most. In fact, the median sales price of new homes sold in May was $374,400. The average sales price was $430,600. At the same time, new homes below $200,000 accounted for just 2 percent of all transactions. In other words, it’s getting more expensive to build new homes, which, of course, makes them more expensive to buy. Still, despite the challenges, new home sales are still over 9 percent higher than last year at the same time. (source)
According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for mortgage applications rose 2.1 percent last week from the week before. Refinance activity was up 3 percent and the Purchase Index rose 1 percent. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says demand for loans to buy homes has been increasing lately. “Purchase application have regained an upward trend over the past few weeks,” Kan said. “Activity was slightly higher for the third straight week, but remained lower than the same week a year ago. Government purchase applications drove most of the last week’s increase, which also contributed to a slightly lower overall average purchase loan size.” The improvement came during a week when average mortgage rates were up. In fact, rates were higher across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, FHA loans, and 15-year fixed-rate loans. The MBA’s survey has been conducted weekly and covers 75 percent of all retail residential mortgage applications.
Sales of previously owned homes fell less than one percent in May, according to new numbers from the National Association of Realtors. The month-over-month decline, though slight, was the fourth consecutive monthly decrease for existing-home sales. Lawrence Yun, NAR’s chief economist, says the issues currently holding sales back are expected to improve in the months ahead. “Lack of inventory continues to be the overwhelming factor holding back home sales, but falling affordability is simply squeezing some first-time buyers out of the market,” Yun said. “The market’s outlook, however, is encouraging. Supply is expected to improve, which will give buyers more options and help tamp down record-high asking prices for existing homes.” In the meantime, home buyers should expect a competitive and fast-moving market. In fact, nearly nine out of ten homes sold in May were on the market less than a month. The typical property was sold in just 17 days. At that pace, buyers need to be prepared and ready to move quickly when they find a home they’d like to buy.
If you’re shopping for a home to buy and feel like there are fewer options to choose from, you’re not imagining it. The number of homes for sale is lower than normal and has been for a while now. How much lower? Well, a recent report from Black Knight Financial really puts it in perspective. According to the report, the number of active for-sale listings was down 53 percent year-over-year in April. But since the coronavirus’ impact threw the spring market into chaos last year, it’s hard to tell what that means. So Black Knight compared this year’s April inventory to the average number of active listings in 2017-2019. What they found was homes for sale were down about 60 percent from what’s been typical in recent history. That translates to about 750,000 fewer listings than normal. Ben Graboske, Black Knight’s president, says inventory is at a record low. “Data from our Collateral Analytics group showed there was two month’s worth of single-family inventory nationwide in March, the lowest share on record and trending downward,” Graboske said. For comparison, a six-month supply of homes is considered healthy for the market. (source)
People tend to choose where to live based on a few basic factors. Traditionally, we want to live somewhere close to our family, our friends, and our job. But with more Americans working remotely, one of those three factors has been eliminated and it’s led to an increase in prospective home buyers who are considering moving to a new area. The trend began shortly after the coronavirus’ onset but has persisted. In fact, according to one new analysis, 31.4 percent of buyers in April and May were looking to move to a new metro. That’s up from 27 percent last year at the same time. It’s also well above pre-pandemic levels. Affordability seems to be the main motivator. Americans who work and live in areas where the cost of living is higher are looking to take their salary and move somewhere more affordable. But while the idea is a good one, it’s also a common one. And in some cases, the influx of home buyers is now threatening to drive prices higher in those once-affordable neighborhoods. (source)
Housing market conditions have been pretty consistent over the past few years. Inventory and mortgage rates have remained low while buyer demand and home prices have continued to increase. Even during a global pandemic, conditions remained remarkably steady. There are a number of reasons for this and the latest outlook from Fannie Mae’s Economic and Strategic Research Group highlights a few. But, Doug Duncan, Fannie Mae’s senior vice president and chief economist, says the imbalance between supply and demand is the main issue. “Strong demand for housing continues to run up against a long-running lack of supply,” Duncan said. “We’ve seen this disconnect lead to rapid house price gains over the past year … and many of the supply constraints that home builders face are likely to persist in the near term, so this upward pricing pressure is not likely to be as transitory as many of the current inflation drivers.” In other words, home buyers shouldn’t expect conditions to change too dramatically in the near future. (source)
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week to their lowest level since early May. Rates were down week-over-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 drop led to an increase in demand for mortgage applications, which rose 4.2 percent from the week before. The improvement was driven by a 6 percent jump in refinance activity. Purchase loan demand, on the other hand, rose 2 percent from the week before. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says FHA loans led the gains. “Purchase activity also rebounded, even as supply constraints continue to slow the housing market,” Kan said. “An almost 5 percent increase in government purchase applications drove most of last week’s gain while also tempering the recent growth in loan sizes.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications.