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Builders Report Increase In Affordability Concerns

In some ways, builders are good predictors of where the housing market is headed. Since their business is dependent on knowing whether or not consumers are interested in buying homes, they are among the first to see changes in buyer traffic and interest. Because of this, the National Association of Home Builders tracks builder confidence as part of their monthly Housing Market Index. In December, the index fell to 56 on a scale where any number above 50 indicates more builders view conditions as good than poor. And, while that means builders still see market conditions as favorable, the four-point decline is an indication that builders are seeing some changes in buyers’ attitudes. Robert Dietz, NAHB’s chief economist, says the issue is affordability. “The fact that builder confidence dropped significantly in areas of the country with high home prices shows how the growing housing affordability crisis is hurting the market,” Dietz said. “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.” 

Do Buyers Need To Have A 20% Down Payment?

There’s a fairly common misconception among prospective home buyers that they’ll need a 20 percent down payment before they can buy a house. This, of course, isn’t true. It’s recommended since it’ll help you avoid paying mortgage insurance, reduce your monthly payment, and get you a lower mortgage rate. But, depending on the terms of your loan, how much money you put down is flexible. So what do most home buyers put down and how do they get it? Well, according to one recent report, just 43 percent of buyers nationally put down 20 percent or more, which means more than half of all home buyers opt for a smaller down payment. Seventy percent of buyers said they used savings as part of their down payment. But proceeds from a home sale and gifts from family or friends were also popular sources for down payment funds. Other sources included investments and retirement accounts. In short, the amount and source of a buyer’s down payment will be unique to their financial situation and the home they’re hoping to buy. However, it’s important to go over how much you can afford to put down and what costs will be associated with a smaller investment, as it could have a long-term effect on your financial future. More here.

Mortgage Rates Fall For 3rd Consecutive Week

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were down last week from the previous week. It marks the third consecutive week of declines. But though rates fell, there wasn’t a corresponding jump in the number of home buyers requesting loans to buy homes. In fact, refinance activity rose 6 percent from the previous week, but the seasonally adjusted Purchase Index only increased 1 percent. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says overall there have been significant gains in application demand since rates began falling three weeks ago. “Application activity increased over the week for both purchase and refinance loans, and were 10 percent and 7 percent higher, respectively, than the week before the Thanksgiving holiday,” Kan said. “Additionally, we saw a decrease in the average loan size for purchase applications to the lowest since December 2017. This is perhaps an indication that there are fewer jumbo borrowers, or maybe first-time buyers are having better success reaching the market as we close out the year.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

What Home Buyers Want Most In 2019

Home design trends can be fleeting. This year’s hot color combination will be old news before you know it. So, unless you want to paint your home every six months, you’re better off choosing your home’s décor based on the things you love rather than the things you read about. There are, however, some trends that are more meaningful and can help you save money and make your life more comfortable. For example, a new list of trends from national home builder and developer Taylor Morrison offers some interesting ideas about what buyers want in 2019. According to the list, home buyers are looking for healthier, greener homes that aren’t as high maintenance or too tailored. In other words, buyers are focused on comfort and want finishes and features that aren’t a lot of work to maintain. Think soft rugs, cozy furnishings, more plants and less work. It seems today’s home buyers are more interested in enjoying their home than spending their time on maintenance, cleaning, and keeping up with the latest catalogue-worthy looks. More here.

Inventory Grows Faster in Larger Metros

Market conditions will differ from one neighborhood to the next. That’s why it’s said that real estate is all about location. One area can be hot with buyers while another sees falling prices and little interest. These days, inventory is the primary factor determining what conditions look like in a particular market. In neighborhoods where there are an increasing number of available homes for sale, home prices are beginning to soften. Where inventory is lagging, prices are still headed upward. One recent report says that the distinction is clearest when looking at larger, more expensive metro areas and comparing them to smaller, affordable locations. For example, the number of available homes for sale is up 9 percent in the country’s largest metros, while only rising 4 percent overall. In other words, larger cities and their surrounding suburbs are seeing more new listings, which is leading to more price cuts. In fact, 40 of the top 45 markets saw an increase in price reductions year-over-year. On the other hand, the cities with the highest year-over-year gains in median listing price are smaller markets like Indianapolis, Milwaukee, and Memphis. More here.

Taking The Long View Of The Housing Market

When you’re in the middle of something, it can be hard to see things clearly. Only after you’ve gained some perspective and had time to reflect do things become clearer. Hindsight, after all, is 20/20. This is also true when it comes to the housing market. Each month, more data is released and compared to the previous month’s data. And, if you follow along, it’s easy to get the feeling that things are worse and/or better than they actually are. But taking a step back can help put things in context. Perhaps that’s why Lawrence Yun, the National Association of Realtors’ chief economist, recently said that he’s very optimistic about the housing market’s long-term outlook. When compared to historical data, conditions look pretty good. As an example, Yun says home sales are now around the same level they were in 2000 but a comparison of fundamentals shows we’re in much better shape now than we were then. “Mortgage rates are much lower today compared to earlier this century, when mortgage rates averaged 8 percent,” Yun said. “Additionally, there are more jobs today than there were two decades ago. So, while the long-term prospects look solid, we just have to get through this short-term period of uncertainty.” More here.

Online Tools Gain Popularity With House Hunters

The internet and smartphones have changed the way we do things. Everything from how we buy groceries to how we listen to music has been affected by technological advances. So it should come as no surprise that shopping for a house has also been transformed by easy access to information and resources. A look at research from the National Association of Realtors shows just how much. For example, in 2003, 42 percent of home buyers said they used the internet frequently during their home search. This year, 83 percent said so. Additionally, over just the past few years, there’s been a nearly 20 percent increase in the number of buyers that said they frequently used a mobile or tablet application while searching for a home. But though the internet has become an important part of the house hunt, most buyers still seek out the expertise and experience of a professional when it comes time to buy. In fact, 89 percent of respondents who said they used the internet during their home search purchased their home through an agent. More here.

Mortgage Demand Spikes As Buyers Return

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were down last week for loans with conforming balances and the drop helped drive mortgage demand upward. In fact, demand for loans to buy homes was up 9 percent from the week before and is now 2 percent higher than the same week one year ago. Mike Fratantoni, MBA’s chief economist, said the increase in home buying activity follows several weeks of volatility. But though encouraging, the improvement wasn’t evenly distributed. “The rise in purchase activity was led by conventional purchase applications, which surged almost 12 percent, while government purchases were essentially unchanged over the week,” Fratantoni said. “This also pushed the average loan size for purchase applications higher, which likely meant there were fewer first-time home buyers in the market last week.” The survey shows rates were down for 30-year fixed-rate mortgages with conforming loan balances but unchanged for both jumbo loans and 15-year fixed-rate loans. Rates for loans backed by the Federal Housing Administration were up over the previous week. The MBA’s survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Home Prices Are Beginning To Slow Down

Home prices have been increasing for a while. Driven by high buyer demand and a lower-than-normal number of homes for sale, values have been on the rise. But, according to the latest S&P CoreLogic Case-Shiller Home Price Indices, the rate of home price increases is now starting to slow. In fact, the results show the National Index gained 5.5 percent year-over-year, which is down from 5.7 percent. Additionally, 16 of 20 included cities saw smaller annual increases. David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, says month-over-month results show even more evidence that price increases are slowing. “On a monthly basis, nine cities saw prices decline in September compared to August,” Blitzer said. “In Seattle, where prices were rising at double-digit annual rates a few months ago, prices dropped last month.” Overall, prices were up just 0.4 percent month-over-month after seasonal adjustments. Naturally, the report is good news for prospective home buyers, as it means prices are beginning to moderate which will help improve affordability conditions. More here.

October Home Sales Increase Is First In Months

Sales of previously owned homes rose 1.4 percent in October from the month before, according to new numbers from the National Association of Realtors. The increase was the first in six months. Lawrence Yun, NAR’s chief economist, said housing inventory is increasing and it’s bringing buyers back to the market. “After six consecutive months of decline, buyers are finally stepping back into the housing market,” Yun said. “Gains in the Northeast, South, and West – a reversal from last month’s steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018.” And while total housing inventory was down in October, it is up from where it was last year at the same time. In fact, at the current sales pace, there is a 4.3-month supply of unsold homes available for sale. Last October, there was just a 3.9-month supply. Also, the typical property was on the market for 33 days, which is up from 32 in September. Yun says healthier inventory has helped price growth to slow and “allows for much more manageable, less frenzied buying conditions.” More here.

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