This Week in Real Estate: August 13, 2018

While the annual rate of home price growth is still historically high at 6.3 percent, some 2.5 percentage points above long-term norms, the annual rate of appreciation declined each month from March through May, the first three-month slowdown in almost four years according to a study released This Week in Real Estate by Black Knight. Below are a few highlights from the second week of August that influence our business:

* West Leads Single-Family Residential Permits Growth, Northeast, Midwest Decline. Over the first six months of 2018, the total number of single-family permits issued year-to-date (YTD) nationwide reached 444,600. On a year-over-year basis, this is a 6.3% increase over the June 2017 level of 418,128. The results from the SOC are similar, year-to-date single-family permits over the first six months of 2018 was, 444,700 which is 6.6% ahead of its level over the same period of 2017, 417,000. Year-to-date, across the country, single-family permits grew in all the regions except in the Northeast and Midwest where it declined by 2.3% and 0.3% respectively, compared to June 2017 YTD. Western region had the highest growth in single-family (14.2%) while South recorded the highest multifamily permits growth (13.6%) during the last 12 months. The 6.3% increase in the nationwide growth rate of year-to-date single-family permits, is largely due to the aggregate increase in single-family permits across the Western states. Out of the 13 which are classified as Western states, eight states recorded single-family permit growth exceeding the national average.
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* Home Price Increases are Slowing; Affordability StabilizesThe Data and Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report on Monday, based on data as of the end of June 2018. This month, Black Knight examined the slowdown in the rate of home price appreciation seen from March through May 2018, while also gauging the impact this slowdown and slightly lower interest rates have had on home affordability. “In May – typically one of the strongest months of the year for home price growth – every state in the nation saw home prices increase,” said Ben Graboske, executive vice president of Black Knight’s Data and Analytics division. “However, the average monthly gain in value of less than one percent was the lowest for any May in the last four years. In addition, the annual rate of appreciation declined each month from March through May, the first three-month slowdown in almost four years. Thirty-two states, as well as 33 of the 50 largest metropolitan areas, have experienced slowdowns in appreciation over the same period. All that said, the annual rate of home price growth is still historically high at 6.3 percent, some 2.5 percentage points above long-term norms. For more than six years, we’ve been riding a wave of home price appreciation above the 25-year average. As rates have ticked down from 4.66 percent in late May to 4.52 percent in mid-July, the monthly principal and interest payment to purchase the average home has only increased by $4 per month – significantly less compared to the $138 per month increase we saw over the first five months of 2018. Still, the $1,213 in principal and interest per month needed to buy the average home remains near a post-recession high. While that represents a nearly $500 per month increase from the bottom of the market in 2012, it’s important to keep in mind that it’s still roughly 13 percent less than was required back in 2006.”
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* Aging Housing Stock; Problem and Opportunity. The American Community Survey (ACS) shows that more than half of today’s owner-occupied homes were built before 1980 and 38 percent before 1970.  Sixteen percent of the current stock was built between 2000 and 2009 but the 3 million units that came on line between 2010 and 2016 added only 4 percent to the owner-occupied stock. Construction since the housing crisis has not kept pace with the homes that age out or are otherwise removed from the housing stock and this means that the overall age of the U.S. housing stock is gradually aging. Na Zhao, writing in the National Association of Home Builders’ (NAHB’s) Eye on Housing blog says data from the 2016 American Community Survey (ACS) puts the median age of owner-occupied homes at 37 years compared to a median age of 31 years in 2005. The number of owner households has been rising since the third quarter of 2016 indicating a strong demand for new construction over the long run to meet and growing population while replacing those homes that disappear from the housing stock.
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Have a productive week.


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