Home builders are on the frontline of the housing market. Their business depends on knowing what buyers want and when they want it. That’s why the National Association of Home Builders (NAHB) tracks builder confidence in the market for newly built homes. When builders are optimistic about buyer demand they build more homes, which helps balance the market and makes conditions better for all homebuyers. The results of the NAHB’s most recent survey shows builders are confident in the market and reporting solid demand. On a scale where any number above 50 indicates more builders view conditions as good than poor, April’s Housing Market Index scored a 63. Despite the strong showing, Robert Dietz, NAHB’s Chief Economist, says a shortage of construction workers and buildable lots is causing housing costs to rise. Ongoing job growth, favorable demographics, and a low-interest rate environment will help to modestly spark sales growth in the near term, Dietz said. However, supply-side headwinds that are putting upward pressure on housing costs will limit more robust growth in the housing market. More here.
Spring is typically the season when housing market activity picks up. After a slow fall and winter that had mortgage rates rising and affordability concerns increasing, the spring sales forecast had been a question mark. Will homebuyers stay on the sidelines, convinced that there are better conditions ahead? Or will they see declining rates and an increasing number of homes for sale as a sign that it’s a good time to buy? According to Fannie Mae’s most recent Home Purchase Sentiment Index (HPSI), Americans are feeling more optimistic – just in time for the market to heat up. Results show a 7 percent increase in the number of respondents who said it was a good time to buy a home and a 13 percent increase in the number who think it’s a good time to sell. Doug Duncan, Fannie Mae’s Senior Vice President and Chief Economist, says that things are trending in the right direction. A brighter housing market outlook drove this month’s increase in the HPSI, a welcome sign from consumers as we enter the spring and summer home buying seasons, Duncan said. The results further corroborate the positive effect of falling mortgage rates on affordability, which we expect […]
According to the Bureau of Labor Statistics, the unemployment rate remained at 3.8 percent in March from the month before. While 196,000 jobs were added, this wasn’t enough to offset the number of people who became unemployed. The total number of unemployed persons stayed the same from the month before at 6.2 million. The number of long-term unemployed person remained unchanged as well. The industries that added the most jobs were healthcare and professional/technical services. Other industries that had notable employment gains were computer services, architectural and engineering services, and in consulting services. The average workweek was little changed, and the average hourly earnings for employees on payroll ticked up by 4 cents. While the massive gains in employment last year have slowed down, employment is at least remaining stable. If the strong job market continues, this could drive the economy for months or even years to come. More here.
New numbers from the U.S. Census Bureau and the Department of Housing and Urban Development show new home sales reached an 11-month high in February. In fact, sales rose 4.9 percent over the previous month, beating economists’ expectations and rising above numbers from last year at the same time. There was also a revision to January’s estimate, which added nearly 30,000 sales to initial reports. Regionally, new home sales surged in the Midwest and Northeast, while remaining relatively flat in the South and West. Overall, the numbers were encouraging, as it shows home buyers are returning to the market after rising mortgage rates slowed activity last fall. Since then, however, rates have retreated. Buyers have taken notice, and demand for homes is increasing. If softening prices continue through the spring and summer season, homebuyers can expect to find improved affordability conditions and a more balanced market. Also in the report, the median sales price of new homes sold in February was $315,300, which is a 3.6 percent drop from last year. More here.
Where you are in life will determine what type of home you shop for. For example, first-time homebuyers, because they tend to be younger and at the beginning of their careers, buy smaller homes and then trade up to a bigger house when they make more money or have more children. Societal changes affect your choice of home as well. A recent survey from the National Association of Realtors sheds light on this. Their 2019 Home Buyer and Seller Generational Trends study found that Gen X home buyers have recently surpassed younger baby boomers as the generation most likely to buy a multi-generational home. The majority of them did so because their adult children had either moved back in with them or never left home. This is likely because the high cost of rent and lack of affordable housing for younger adults. While it may seem like a negative development, it does provide younger millennials who live with their parents the ability to save for homeownership and gain some financial stability before buying their first house. More here.
Like anything else, residential architecture is affected by the popular trends of the day. Unlike most other things, homes last a very long time. Houses built to fit the lifestyle of people living in the 1940s and ’50s are still being bought and sold in 2019. In most cases, an older home’s quirks are considered charming or even sought after by home buyers. But what about homes whose time period is unpopular? Well, according to one recent article by HousingWire, this can be a problem. For example, in the early 2000s, mini-mansions were the fad. baby boomers with easy access to credit built huge houses intending to live out their retirement in dream homes equipped with all of the day’s most popular features. But now, those homes are beginning to hit the market and are having trouble selling. Today’s home buyers prefer smaller, more modern homes, rather than the lavish, ornate styles that were popular earlier this century. Another problem is the price. Since they are big and located in desirable areas, these homes are expensive. In fact, they can be too expensive for most home buyers. Unfortunately, it looks like the problem will grow, as baby boomer homeowners grow […]
New numbers from the National Association of Realtors (NAR) prove that homebuyers are excited to get the spring season started. With a nearly 12 percent increase in the number of existing homes sold compared to the month before, February had the largest month-over-month improvement since 2015. Lawrence Yun, NAR’s Chief Economist, says there’s a combination of factors helping push home sales upward. A powerful combination of lower mortgage rates, more inventory, rising income, and higher consumer confidence is driving the sales rebound, Yun said. Though home prices were 3.6 percent higher than they were at the same time last year, inventory was also up. If the improvement continues, it’ll help moderate future price increases. Yun says more new home construction is needed. For sustained growth, significant construction of moderately priced homes is still needed, he said. More construction will help boost local economies and more home sales will help lessen wealth inequality as more households can enjoy in housing wealth gains. According to Yun, the typical homeowner accumulated nearly $9,000 in housing equity over the past year. More here.
Among all the indicators that can be used to gauge the health of the housing market, few are as significant as new home construction. After all, home builders wouldn’t be building homes if they didn’t think there were interested home buyers. When new home construction is rising, there’s probably a good reason. Because of this, the January numbers recently released by the U.S. Census Bureau and the Department of Housing and Urban Development are encouraging. They show a 25.1 percent month-over-month increase in the number of new homes that began construction in January and a 30.2 percent increase in the number of completed new homes. That’s a significant improvement, and a pretty good indication that home builders expect a busy spring and summer. However, though the construction numbers are impressive, the number of permits to build homes were only up 1.4 percent. That could be a sign that the building boom will be short lived, but only time will tell. More here.
To understand housing demand, it helps to break it down generationally. For example, baby boomers � because they are older and more likely to be settled somewhere � are the least active in the housing market. Generation X, on the other hand, are in the prime of their professional life. Since they are making more money and have growing families, they account for a large share of buyers looking to upgrade from their first home into something more spacious. Finally, there are millennials. Born between 1982 and 2000, millennials are now at, or will soon reach, the age of the typical first-time home buyer. Naturally, they represent an increasing share of the demand for homes. According to Housingwire.com, millennials are now the age group responsible for the most new mortgages. In fact, in 2018, millennials accounted for 45 percent of all new mortgages. By comparison, Generation X home buyers were responsible for 36 percent of new mortgages and baby boomers represented 17 percent of purchase loans. More here.
During times when the housing market has more buyers than homes for sale, the quickest remedy is to build more homes. Adding inventory to the market gives buyers more options, helps balance supply and demand, and keeps home prices in check. Essentially, new home construction plays a vital role in housing market health and affordability conditions. According to recent news, home construction is up. The U.S. Census Bureau and the Department of Housing and Urban Development show a 3.6 percent increase in the number of new homes that began construction in 2018. The year-over-year improvement put the number of completed new homes last year at nearly 1.2 million. Unfortunately, toward the end of the year, stock market volatility slowed the pace of new home construction. However, with buying conditions becoming more favorable and builder confidence on the rise, there is reason to believe new construction of single-family homes will begin to climb again this spring. That’s encouraging, not just for buyers interested in newly built homes, but for all potential home buyers. More here.