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.
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.
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.
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 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.
Over the past decade, housing market conditions have changed dramatically. The housing crash and subsequent price rebound have caused a shift from buyer’s to seller’s market. Add to that lower-than-normal mortgage rates and a lack of for-sale inventory and prospective home buyers could be forgiven for not knowing what to expect when they head out to look for a home. Fortunately, however, Fannie Mae’s most recent forecast from their Economic and Strategic Research Group contains some good news. That’s because, though they expect continuing market challenges due to recent mortgage rate increases and too few homes for sale in the lower tier of the market, they do expect things to be better balanced in 2019. In fact, Doug Duncan, Fannie Mae’s chief economist, says the market may be steadier than it has been. “We expect that existing and new home sales will stabilize in 2019 as home price appreciation moderates and mortgage rates begin to stabilize,” Duncan said. In other words, potential home buyers should expect less volatility next year, though they should still prepare for a competitive market. More here.
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.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week, reversing an upward trend seen over the past several weeks. Though the decline was slight, it affected all loan categories except those backed by the Federal Housing Administration. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says rates slowed due to economic concerns. “Treasury rates declined last week, as equity markets continued to see large swings amidst investor concerns over global economic growth,” Kan said. “As a result, mortgage rates inched back across most loan types, including the 15-year fixed-rate mortgage, 5/1 ARM, and 30-year jumbo mortgage rate. The 30-year fixed rate-mortgage also declined, stopping a run of six straight weekly increases.” Decreasing rates helped boost demand for loans to buy homes, which rose 3 percent higher than the previous week. Refinance activity, however, remained down, falling 5 percent. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
For most of this year, new home builders have been optimistic. With high buyer demand and a stronger economy, the market for newly built homes was building some momentum. But, according to the most recent Housing Market Index from the National Association of Home Builders, conditions are changing and builders are reacting. In fact, the index – which measures builder confidence on a scale where any number above 50 indicates more builders view conditions as good than poor – dropped eight points in November. Robert Dietz, NAHB’s chief economist, says it’s partly due to increasing mortgage rates. “For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” Dietz said. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.” Still, despite a drop this month, the index remains in positive territory at 60. Which means, though builders are concerned that mortgage rate increases may hurt demand for new homes, they still see market conditions as good. In fact, the index component measuring expectations for the next six months was at 65 in November. More here.
Young Americans want to own a home. Research consistently shows large majorities who say they aspire to one day become homeowners. And yet, the number of first-time home buyers active in the market has been lower than what is historically normal for several years. So why aren’t more young Americans buying houses? Well there are a number of factors at play but, among them, student loan debt is a big one. According to one recent study, the average monthly student debt payment for current renters who say they’d like to buy a home in the next year is $388. Naturally, an extra $400 a month to devote to a mortgage payment could go a long way. In fact, with that money, a buyer could afford a house that cost almost $100,000 more. But though that may seem discouraging, the same report also found that prospective buyers with student loan debt can still afford 52.3 percent of homes currently listed for sale. And, in areas where there are more affordable homes available for sale, it’s even easier to find something in a price range that works. In St. Louis, for example, a buyer with student loan debt can still afford nearly 75 percent of currently listed homes. More here.