The Rise of Housing Inventory and Market Prices

The Rise of Housing Inventory and Market Prices

According to the latest National Association of Home Builders Housing Market Index (HMI), builder confidence has reached its highest level since October 2018 and NAR chief economist, Lawrence Yun, predicted at NARs mid-year meeting This Week in Real Estate, that he expects new home sales to reach a 12-year high this year. Below are a few highlights from the second week of May that influence our business:

Builder Confidence Posts Solid Gain in May. Builder confidence in the market for newly-built single-family homes rose three points to 66 in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Builder sentiment is at its highest level since October 2018 after declines in late 2018 due to higher interest rates and concerns over slower growth. Builders are catching up after a wet winter and many characterize sales as solid, driven by improved demand and ongoing low overall supply. All the HMI indices posted gains in May. The index measuring current sales conditions rose three points to 72, the component gauging expectations in the next six months edged one point higher to 72 and the metric charting buyer traffic moved up two points to 49. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a six-point gain to 57, the West increased two points to 71, the Midwest gained one point to 54, and the South rose a single point to 68.

Home Prices Continue on Healthy Course in Q1. Inventory increased and metro market prices rose in the first quarter of 2019, but at a slower pace than the previous quarter, according to new research. From the first quarter of 2018 to the first quarter of 2019, home prices rose 3.9 percent, according to a National Association of REALTORS® (NAR) report. On an annual basis, there were higher home prices in 86 percent or 153 of the 178 metropolitan areas in the report. Comparing the largest markets, the median price was $254,800, up from $245,300 in Q1 2018. Lawrence Yun, NAR chief economist, says the first quarter has been beneficial to U.S. homeowners. “Homeowners in the majority of markets are continuing to enjoy price gains, albeit at a slower rate of growth. A typical homeowner accumulated $9,500 in wealth over the past year,” he said.

NAR’s Yun Forecast for 2019 Housing Sales: New Homes Will Drive Market Gains. Sales of new homes probably will reach a 12-year high this year as builders scramble to meet demand from entry-level buyers, according to Lawrence Yun, chief economist of the National Association of Realtors. Existing home sales probably will be flat, he said. The number of new houses sold in 2019 probably will total 667,000, the highest level since the beginning of the financial crisis in 2007, Yun said at NAR’s Legislative Meetings & Trade Expo in Washington D.C. on Thursday. Sales of existing homes, which tumbled 3.1% in 2018 as mortgage rates rose to an eight-year high, probably will be flat this year, Yun said. Next year, existing home sales probably will gain 3.7%, he said. Nationally, the inventory of homes on the market has grown for eight straight months on a year-over-year basis, and Yun said he expects that to continue.


May’s Hot Housing Market Increases Mortgage Applications

 

 

May’s Hot Housing Market Increases Mortgage Applications

The Mortgage Bankers Association announced This Week in Real Estate that the mortgage credit availability index for April was the highest reading for that month ever in the eight-year index. A high reading means it’s easier to get a home loan and a low reading indicates a credit crunch. Below are a few highlights from the first full week of May that influence our business:

Leading Indicators Point To A May Pick-Up in Home Sales. Mortgage credit availability is the highest ever recorded for the spring market. Fixed rate for home loans are near 4% and wages are up. What can that mean for the spring selling season? Unless Americans don’t want to own houses anymore – and that hasn’t happened yet – it means this month’s data should look pretty good. The purchase index from the Mortgage Bankers Association, which measures applications for mortgages to buy homes, increased 5% during the first week of May compared with the previous week and was 5% higher than the same week one year ago. MBA’s mortgage credit availability index for April was the highest reading for that month in the eight-year index. And, it was near the record high seen in mid-2018. A high reading means it’s easier to get home loans and a low reading indicates a credit crunch. At the end of March, the U.S. average rate for a 30-year fixed mortgage had the largest one-week decline in more than 10 years, dropping to 4.06%, according to Freddie Mac. Since then, it has bounced around in a narrow band, and this week averaged 4.1%. That’s almost half a percentage point lower than it was a year ago, according to Freddie Mac data. Sales of new homes, which are recorded when a contract is signed, rose 4.5% in March, according to the Commerce Department. Pending home sales, reflecting existing homes with newly signed contracts, rose 3.8% in March, according to the National Association of Realtors. “There is a pent-up demand in the market, and we should see a better performing market in the coming quarters and years,” Lawrence Yun, chief economist of NAR, said in the report.

Lending Conditions Tighten (But Less Than Expected). The recently released results of the Federal Reserve Board’s quarterly Senior Loan Officer Opinion Survey (SLOOS) show some tightening of lending conditions in the first quarter of 2019. While many banks reported that their standards in approving applications for credit cards from individuals or households tightened somewhat, overall, the tightening was not as much as they had anticipated, when they were asked about their outlook for 2019 in the fourth quarter of 2018’s survey. The tightening of credit standards is consistent with the Federal Reserve’s data on Consumer Credit, which, in part, show a decrease in revolving debt from the previous month.

Cooling of Home Price Gains Continued For Eleventh Consecutive Month. National home prices increased 3.7 percent year over year in March 2019 and are forecast to increase 4.8 percent from March 2019 to March 2020, according to the latest CoreLogic Home Price Index (HPI) Report. The March 2019 HPI gain was down from the March 2018 gain of 6.6 percent and it continued a slowdown in home price growth that began in May 2018. The overall HPI has increased on a year-over-year basis every month for seven years (since March 2012) and has gained 59 percent since hitting bottom in March 2011. As of March 2019, the overall HPI was 6.9 percent higher than its pre-crisis peak in April 2006. Adjusted for inflation, U.S. home prices increased 2.6 percent year over year in March 2019 and were 12.5 percent below their peak.

Looking to purchase a new home or see how much of a mortgage you can qualify for? Speak with a HomeServices Lending Mortgage Loan Officer in Oregon or Washington today!

 


Federal Funds Rate Holds while Homeowner Tenure Slips

 

 

 

Federal Funds Rate Holds while Homeowner Tenure Slips

The Federal Reserve decided to keep the federal funds rate steady This Week in Real Estate, with no expectation of a rate increase until the end of the year, at the earliest. Below are a few highlights from the last few days of April that influence our business:

Federal Reserve: Patience Continues. At the conclusion of its May meeting, the Federal Reserve held the key, short-term federal funds rate steady, with a top rate of 2.5%. The decision was unanimous and widely expected, with members of the Federal Open Market Committee agreeing that while economic growth conditions remain “solid,” inflation pressures remain anchored. We do not expect another federal funds rate increase until, at the earliest, the end of 2019. For housing, the more dovish perspective of the Federal Reserve is an important reason why mortgage interest rates have declined from late-2018 cycle highs. Given that the housing market faced a 10-year low for housing affordability last Fall, the Fed’s approach is a net positive for future housing market activity and offers an offset (but only a partial one) for rising construction costs. These costs are limiting housing inventory, particularly at the entry-level market. Moreover, higher production costs have caused housing affordability to decline in recent years and are the primary driver for NAHB’s call for generally flat conditions for new home sales and starts in 2019.

Homeowners Are Staying Put, Just Not For As Long As Before. At the end of last year, the length of time that a homeowner stayed put hit a record high at an average of 8.17 years. But the latest data from the first quarter of 2019 reveals that the average tenure has begun to backslide as more Americans opt to relocate. Homeowners who sold their home in Q1 2019 had owned their property for an average of 8.05 years, according to the latest from ATTOM Data Solutions. While this is down slightly from the previous quarter, ATTOM points out that it is up from the 7.75-year average seen in Q1 2017. It’s also significantly longer than the average tenure seen in the years leading up to the housing bubble. Between 2000 and 2007, homeowners moved an average of just 4.21 years, ATTOM revealed.

Top Home Technology Features. According to the latest edition of NAHB’s study, What Home Buyers Really Want, 46 percent of recent and prospective home buyers want a security camera in their home, more than any other home technology feature listed in the survey. Three of the four most wanted features are security-related: along with a security camera, a video doorbell and a wireless home security system are wanted by at least 40 percent of home buyers. However, at most 21 percent of homebuyer currently have any one of these technology features installed, indicating that there is market growth potential for these items. In contrast, about the same share of home buyers who want a programmable thermostat (44 percent) have one already installed (41 percent). Four other home technology features are desired by at least a third of buyers: a multi-zone HVAC system (39 percent), a lighting control system (36 percent), and a wireless home audio system and central vacuum system (both wanted by 33 percent of home buyers). An energy management system/display and a smart washer/dryer (controlled remotely) are wanted by 31 percent of home buyers each.  Few home buyers currently have any of these items (14 percent of home buyers at most), which also indicates that there is room for growth in these product areas.


When to Sell Your Home for the Highest Return on Investment

 

When to Sell Your Home for the Highest Return on Investment

ATTOM Data Solutions released its Q1 2019 U.S. Home Sales Report This Week in Real Estate, finding that homeowners who sold their home in the first quarter realized a 31.5% return on their investment. Below are a few highlights from the fourth week of April that influence our business:

New Home Sales Rise in March with Lower Rates. Contracts for new, single-family home sales increased almost 5% on a monthly basis to a 692,000 seasonally adjusted annual rate according to estimates from the joint release of HUD and the Census Bureau. The months’ supply number improved to 6.0, which indicates the market is stabilizing after the fall-off in sales last Fall due to higher interest rates. For the first quarter of 2019, new home sales are running 1.7% higher than the first quarter of 2018. However, while sales were up 9.6% for the quarter in the South (the largest region), sales were down 5.9% in the West, 8.1% in the Midwest and 17.6% in the Northeast.

U.S. Home Sellers Realized Average Price Gain of $57,500 in First Quarter of 2019. ATTOM Data Solutions released its Q1 2019 U.S. Home Sales Report on Thursday, which shows that homeowners who sold in the first quarter realized an average price gain of $57,500 since purchase, representing an average 31.5% return on the purchase price. Meanwhile, the report also shows that homeowners who sold in the first quarter had owned an average of 8.05 years, down slightly from a record-high average homeownership tenure of 8.17 years in Q4 2018 but still up from 7.75 years in Q1 2018. Homeownership tenure averaged 4.21 years nationwide between Q1 2000 and Q3 2007, prior to the Great Recession.

Homeownership Rate Flat, But Household Growth Booming. According to the latest Housing Vacancies and Homeownership data release from the U.S. Census Bureau, the homeownership rate was flat year-over-year at 64.2 percent in the first quarter of 2019. The flat change was due primarily to a strong uptick in new renter households, although growth among owner households continues to strongly outpace renters. While the homeownership rate was flat over the past year, the first quarter of 2019 was the sixth consecutive quarter that owner-occupied households grew by more than a million, at nearly 1.1 million new owner households. Total household growth remains strong, topping 1 percent for six straight quarters, and continues the most significant streak of household growth in more than 12 years.


A Healthy and Opportunistic Spring Market

 A Healthy and Opportunistic Spring Market 

According to data released by the Mortgage Banker’s Association This Week in Real Estate, purchase applications reached their highest level since April 2010, further suggesting a healthy and opportunistic spring market. Below are a few highlights from the third week of April that influence our business:

Builder Confidence Edges Higher in April. Builder confidence in the market for newly built single-family homes rose one point to 63 in April, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held in the low 60s for the past three months. The HMI index gauging current sales conditions increased one point to 69, and the component measuring the traffic of prospective buyers rose three points to 47. The measure charting sales expectations in the next six months fell one point to 71. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a three-point gain to 51, the Midwest increased two points to 53, and the South was up one point to 67. The West remained unchanged at 69.

Weekly Mortgage Applications For Homebuyers Hit Highest Level in 9 Years. Mortgage applications to purchase a home rose 1% last week from the previous week and were 7% higher than a year ago. Purchase applications reached their highest level since April 2010. Volume was 14% higher than a year ago. Applications to refinance a home loan brought the total down, falling 8% for the week but still rising 26% from a year ago, when interest rates were higher.

U.S. Weekly Jobless Claims Lowest Since 1969. The number of Americans filing applications for unemployment benefits fell to more than a 49-1/2-year low last week, pointing to sustained strength in the economy. Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 192,000 for the week ended April 13, the lowest level since September 1969, the Labor Department said on Thursday. Claims have now declined for five straight weeks. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 6,000 to 201,250 last week, the lowest reading since November 1969. Though the trend in hiring has slowed, job gains remain above the roughly 100,000 needed per month to keep up with growth in the working-age population. The unemployment rate is at 3.8 percent, near the 3.7 percent Federal Reserve officials project it will be by the end of the year.


What You Need to Know About First-Time Homebuyers

 

 

What You Need to Know About First-Time Homebuyers

Signs of a continuing strong housing market were reported This Week in Real Estate as evidenced by the fact that bank repossessions reached an all-time low in the first quarter and applications for new home purchases were up 7% compared to the same time last year and up 19% over the prior month. Below are a few highlights from the second week of April that influence our business:

Builder Applications Hint at Strong Spring New Home Sales. Applications for financing new home purchases were up significantly in March. The Mortgage Bankers Association (MBA) reports that Builder Application Survey (BAS) data for the month shows a 7 percent increase in those applications compared to March 2018 and a 19 percent gain over February. The application data is not adjusted for seasonal variations. With a strong job market, rising wages and lower mortgage rates, housing demand remains strong, as shown by the solid 7 percent growth in new home purchase applications in March,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The confluence of declining mortgage rates with the spring buying season is supporting stronger housing demand and activity. Additionally, the drop in average loan size suggests that builders are tilting production to lower-priced homes, which continues to see the tightest inventories and strongest home-price growth.” Conventional loan applications accounted for 68.7 percent of the total. The FHA share was 18.8 percent, the VA share was 12 percent and RHS/USDA loans received 0.5 percent of the total. The average loan size of new homes decreased from $340,692 in February to $331,794 in March.

Here’s What You Need to Know About First-Time Homebuyers. Earlier this week, we established that first-time homebuyers are not, in fact, being shut out of the housing market as some had feared, thanks to a recent study by the Federal Reserve Bank of New York. Rather, their share of market participation has remained stable over time, rising and falling slightly over the last 17 years in response to market conditions, but averaging about 45% of the overall market. The NY Fed revealed that as of 2016, first-timers comprised a healthy 46% of homebuyers. First-time buyers generally take out smaller mortgages than repeat buyers. And, this gap is widening. In 2000, the average origination mortgage balance was $117,000 for first-timers was and $143,000 for repeat buyers. In 2016, the average origination mortgage balance was $213,000 for first-timers was and $273,000 for repeat buyers. First-time buyers traditionally have lower credit scores than repeat buyers. In 2000, first-time buyers had an average credit score of 670, while repeat averaged 705 – representing a 35-point difference. The subsequent housing boom and then bust drew credit scores down around 2003 and then up again in 2007. They continued to rise until 2013 and then remained stable for three years. In 2016, the spread between the two was 37 points – relatively unchanged from 2000. First-time buyers have smaller student loan balances than repeat buyers. While in 2000, average student loan balances for both first-time and repeat buyers were about the same, around $13,000, although first-timers generally had a slightly higher balance. But average student loan balances have trended upward over the last 17 years, and the disparity between the two demographics grew. As of 2016, the conditional average student loan debt for first-time buyers was $29,000, compared with $42,000 for repeat buyers. First-time buyers are getting older every year. The average first-timer was 35.4 years old in 2016 – quite a bit younger than 2017’s average of 37.9. The age of first-time buyers has increased incrementally every year for the past 17 years. Conversely, repeat buyers are also getting older, averaging 44.7 in 2000 and reaching 47.5 in 2016. First-time buyers are purchasing homes in cheaper neighborhoods than repeat buyers. Researchers looked at the average income in zip codes where buyers were purchasing homes. They determined that there is a relatively consistent difference of about $9,000 in average income in neighborhoods chosen by first-timers versus repeat buyers.

U.S. Foreclosure Activity Decreases 15 Percent in Q1 2019 to Lowest Levels Since Q1 2008. ATTOM Data Solutions released its Q1 2019 U.S. Foreclosure Market Report on Thursday, which shows a total of 161,875 U.S. properties with a foreclosure filing during the first quarter of 2019, down 23 percent from the previous quarter and down 15 percent from a year ago to the lowest level since Q1 2008. The report also shows a total of 58,550 U.S. properties with foreclosure filings in March 2019, up 7 percent from the previous month but down 21 percent from a year ago – the ninth consecutive month with a year-over-year decrease in U.S. foreclosure activity. “While some markets saw a slight uptick in foreclosure filings, that is above pre-recession levels, the majority of the major markets are well below pre-recession levels,” said Todd Teta, chief product officer at ATTOM Data Solutions. “While we did see a slight increase in U.S. foreclosure starts from last quarter, bank repossessions reached an all-time low in the first quarter of 2019, showing continuing signs of a strong housing market.”


Unemployment Hits Record Low as Home Prices Rise to Record High

 

Unemployment Hits Record Low as Home Prices Rise to Record High

As we transition from Q1 to Q2 This Week in Real Estate we do so on the heels of the median value of homes for sale reaching a record high, declining interest rates spurring a refinance surge and unemployment claims at the lowest level since December 1969. Below are a few highlights from the first week of April that influence our business:

Home Prices Hit a Record High. If you’re shopping for a cheap home this spring, good luck. The median value of homes listed for sale in March hit a record $300,000, according to realtor.com.”Despite a slowing growth rate, home prices will likely continue to set new records later this year,” said Danielle Hale, realtor.com’s chief economist. “Heading into spring, U.S. prices are expected to continue to rise and inventory is expected to continue to increase, but at a slower pace than we’ve seen the last few months as fewer sellers want to contend with this year’s more challenging conditions.” The number of homes for sale listed above $750,000 increased 11% year over year in March, while the number of entry-level homes priced $200,000 or below fell 9%.

Refinancing Activity Soars Due to Rate Declines. Amid growing concerns about housing affordability, the latest data from the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey show a surge in home refinancing, a week-to-week increase of 39% on a seasonally adjusted basis. The increase is contemporaneous with the fourth consecutive week of mortgage rates’ declining. Despite the widespread decrease in mortgage rates, changes in purchasing activity (i.e., purchases on new or existing homes) were not as sensitive to the drop as were applications to refinance. The data also show that purchase applications are almost 10% higher than they were a year ago, that refinance applications are 58% higher on a year-over-year basis, and that, combined, both purchase and refi applications are almost 30% higher than they were a year ago. Despite the tight lending environment of 2019, as anticipated by banks’ senior loan officers in the Federal Reserve’s Senior Loan Officer Opinion Survey, the data show a rise in applications on a year-to-date and year-over-year basis, which may partially offset tighter lending standards. The mortgage applications for purchase index is usually a leading indicator for forthcoming home sales, but the latter may be conflated by other factors, such as all-cash sales. The prior few months’ data lean less to such a conclusion, as the upward trend of the purchase index in January 2019 was subsequently followed up by increases in new and existing home sales in February.

Weekly Jobless Claims Drop to the Lowest Level Since 1969. The number of Americans filing applications for unemployment benefits dropped to a more than 49-year low last week, pointing to sustained labor market strength despite slowing economic growth. Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 202,000 for the week ended March 30, the lowest level since early December 1969, the Labor Department said on Thursday. Job growth has slowed from last year’s roughly 225,000 monthly average pace. The pace of increase, however, remains more than sufficient to keep up with growth in the working age population, holding down the unemployment rate. The unemployment rate forecast is unchanged at 3.8 percent.


The Best Time To List A Home

 

The Best Time To List A Home 

According to research released by realtor.com This Week in Real Estate, the best time to list a home for sale in the top 50 largest U.S. Metro areas is the first week of April. The research suggests the best week to go live for the Seattle-Tacoma-Bellevue area is April 7, 2019 and for the Portland-Vancouver area is April 14, 2019, respectively. Below are a few highlights from the fourth week of March that influence our business:

New Home Sales Rise to 11-Month High in February. Sales of new U.S. single-family homes increased to an 11-month high in February and sales for January were revised higher. The Commerce Department said on Friday new home sales rose 4.9 percent to a seasonally adjusted annual rate of 667,000 units last month, the highest level since March 2018. January’s sales pace was revised up to 636,000 units from the previously reported 607,000 units. The 30-year fixed mortgage rate tumbled to a more than one-year low of 4.06 percent last week from an average of 4.28 percent in the previous week, according to data from mortgage finance agency Freddie Mac. Mortgage rates have been declining since the Federal Reserve signaled a long pause in interest rates increases this year. Lower borrowing costs, slowing house price inflation and rising wages have improved housing affordability.

The First Week of April is The Best Time to List a Home For Sale. The first week of April is the best time to list a home on the market in 2019. By listing during the week of March 31 – April 6, sellers are able to take advantage of a sweet spot in the season that offers high buyer demand, less competition, quick home sales, and strong prices. June is often considered the peak of home buying season, but our analysis found the first week of April is best for sellers looking to maximize list price, and also reduce the risk of price cuts and competition from other sellers. Given the time it takes from listing to close, putting a home on the market in early April positions sellers to attract buyers seeking to close and move before the beginning of school year. The analysis is based on trends in median listing prices, views per property on realtor.com, home price drops, median days on market, and number of listings on the market over the last three years. The market is bustling with buyers, but the number of homes hasn’t peaked yet, which means more demand for every listing. In fact, homes listed the first week of April see 14 percent more views, on average, and 5 percent less competition compared to the rest of the year’s weekly average. As a result, homes are likely to sell 6 days, or nearly 9 percent, faster on average. Another factor that’s likely to boost April buyer demand this year, is the surprising decline in mortgage rates that started in November 2018. Rates are now below 4.5 percent vs. nearly 5.0 percent in November 2018. These lower rates could entice demand earlier than usual and April sellers could see even more buyers trying to take advantage of this temporary window of affordability.

HPI for Largest Metro Areas: Growth Continues, But at a Slower Pace. CoreLogic Home Price Index appreciation slowed in recent months, with an annual appreciation of 4.4 percent in January 2019 compared with 6.1 percent in January 2018. This slowdown in home price growth comes after stellar appreciation when prices started increasing again after the housing market crash. National home prices through January were 6 percent above the pre-crisis peak hit in April 2006 and two-thirds of the 50 largest metros now have prices at or above their pre-housing-crisis peaks. While the 17 metros that have yet to regain home price losses are dispersed across the U.S., six of them are located in Florida. What does the future hold for home price growth? The CoreLogic HPI forecast predicts home price appreciation will continue to slow, with National appreciation over the next 12 months averaging 3.2 percent.


March Fuels the Spring Selling Season

 

The real estate market is poised for a super ‘spring selling season’ fueled by increased inventory, more sustainable price appreciation and according to data released by Freddie Mac This Week in Real Estate, interest rates that have dramatically dipped since the start of the year. Below are a few highlights from the third week of March that influence our business:

Mortgage Rates Are In A Free Fall With No End In Sight. According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average slipped to 4.28 percent. It was 4.31 percent a week ago and 4.45 percent a year ago. “Mortgage rates fell this week and have yet to account for yesterday’s Fed’s announcement,” said Danielle Hale, chief economist for realtor.com. “Looking ahead to next week, we could see rates fall even further based on the decision to hold rates steady combined with guidance that emphasized patience.” The Federal Reserve did not increase its benchmark rate Wednesday and signaled it would not hike rates this year. “These developments almost certainly mean mortgage rates will be moving even lower in the coming days after remaining in a narrow range and hovering around 14-month lows for most of the past couple of months.”

Existing Home Sales Surge 11.8% in February. Existing-home sales rebounded strongly in February, experiencing the largest month-over-month gain since December 2015, according to the National Association of Realtors. Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops, shot up 11.8 percent from January to a seasonally adjusted annual rate of 5.51 million in February. However, sales are down 1.8 percent from a year ago (5.61 million in February 2018). Lawrence Yun, NAR’s chief economist, credited a number of aspects to the jump in February sales. “A powerful combination of lower mortgage rates, more inventory, rising income, and higher consumer confidence is driving the sales rebound.” Existing-home sales in the West rocketed 16.0 percent to an annual rate of 1.16 million in February, 7.9 percent below a year ago. The median price in the West was $379,300, up 3.0 percent from February 2018.

Builder Confidence Holds Steady in March. Builder confidence in the market for newly-built single-family homes held steady at 62 in March, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Builders report the market is stabilizing following the slowdown at the end of 2018, and they anticipate a solid spring home buying season. The HMI component charting sales expectations in the next six months rose three points to 71, the index gauging current sales conditions increased two points to 68, and the component measuring traffic of prospective buyers fell four points to 44. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a five-point gain to 48, the South was up three points to 66 and West increased two points to 69. The Midwest posted a one-point decline to 51.


Home Price and Mortgage Rate Forecasts



Home Price and Mortgage Rate Forecasts 

According to the Federal Reserve’s Flow of Funds report that was released This Week in Real Estate the home equity percentage has reached its highest level since the second quarter of 2002. Below are a few highlights from the second week of March that influence our business:

Equity Rises for U.S. Homeowners. The home equity percentage reached a level that had not been seen since the second quarter of 2002. As of the fourth quarter of 2018, the equity percentage, on a non-seasonally-adjusted basis, stood at 60.1%. At the end of 2018, the market value of all owner-occupied real estate totaled $25.9 trillion, growing by 5.3% from the start of the year, and outstanding home mortgage debt totaled $10.3 trillion, growing by a lesser percentage of 2.6%. The trend in the market value of all owner-occupied real estate mirrors that of the Case-Shiller U.S. National Home Price Index. Rising residential real estate prices are a good proxy for the increasing market value of homes in the U.S. As of the fourth quarter of 2018, homeowners collectively held 15.4 million home equity lines of credit, totaling a balance of about $0.4 trillion.

Home Price and Mortgage Rate Forecasts Suggest Smaller Gains in the Mortgage Payments Homebuyers Will Face This Year. While the nation’s median home sale price rose about 4 percent year over year in December 2018, the principal-and-interest mortgage payment on that median-priced home increased nearly three times as much because mortgage rates rose by more than half a percentage point over that period. However, some forecasts for home prices and mortgage rates indicate mortgage payments will rise at a much slower pace this year, which could help stoke home sales this spring. One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home.

Looking ahead, the CoreLogic Home Price Index Forecast suggests a 4.5 percent annual gain in home prices by this December, while the average among six rate forecasts indicates a small increase – 0.1 percentage points – in mortgage rates this December compared with December 2018. The CoreLogic HPI Forecast suggests the median sale price will rise 2.1 percent in real, or inflation-adjusted, terms over the year ending December 2019 (or 4.5 percent in nominal, or not-inflation-adjusted, terms). Based on that projection, coupled with the aforementioned consensus mortgage rate forecast, the real typical monthly mortgage payment would rise from $904 in December 2018 to $935 by December 2019, a 3.5 percent year-over-year gain , down from a 9.9 percent gain a year earlier. In nominal terms the typical mortgage payment’s year-over-year increase in December 2019 would be 6.0 percent, or about half the 12.1 percent gain a year earlier.

MBA Has a More Upbeat View on New Home Sales. Even though the January Census Bureau report on new home sales published on Thursday wasn’t all that encouraging for the spring market, the Mortgage Bankers Association (MBA) is predicting more upbeat news for February. The Association’s Builder Application Survey (BAS) shows a 6 percent increase in new home purchase applications from the previous month and a 3-point gain from February 2018. Those numbers are not seasonally adjusted. “The housing market remains poised for a strong spring, with last month’s increase in builder applications likely leading to a healthy 7 percent year-over-year rise in new home sales,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “We are starting to see signs of more new residential construction and inventory, which increases buying opportunities for the many home shoppers who have been hampered by the ongoing lack of supply.” Added Kan, “Slowing home-price growth, combined with stronger wage gains and lower mortgage rates, is translating to improving affordability conditions for spring buyers.”


©2016 BHH Affiliates, LLC. An independently operated subsidiary of HomeServices of America, Inc., a Berkshire Hathaway affiliate, and a franchisee of BHH Affiliates, LLC. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc. Equal Housing Opportunity.