This Week in Real Estate: February 12, 2018

This Week in Real Estate, Fannie Mae released the results of it’s January Home Purchase Sentiment Index, which recorded an all-time survey high. Below are a few highlights from the first week of February that influence our business:

* LMI Indicates Continued Improvement Across the Country. According to the NAHB/First American Leading Markets Index (LMI), 82%, 277 metropolitan statistical areas, recorded growth in their LMI Score over the fourth quarter of 2017 compared to a year ago. The index uses single-family housing permits, employment, and home prices to measure proximity to a normal economic and housing market. The index is calculated for 337 local markets, metropolitan statistical areas (MSAs), as well as the entire country. A value of 1.0 means the three components have achieved a level of recovery that combined averages 1.0. Of the 337 metro areas tracked by the LMI, 195 of them have an LMI Score that exceeds 1.0. House prices continue to be a key driver of the LMI results. Of the 337 markets tracked by the LMI, house prices in 333 areas have normalized or are above 1.0. The LMI Score for the country as a whole reached 1.04. However, at 1.58, only the house price component is above 1.0. Meanwhile, the employment component sits at 0.98 and single-family permits are currently at 0.56. One interpretation of these metrics is that the slower recovery in housing supply coupled with strong demand is contributing to house price appreciation.
* Americans Gain Confidence in Housing as Home Prices Rise. Americans continue to gain confidence in the housing market, not just despite, but even because of rising home prices, according to the latest Home Purchase Sentiment Index from Fannie Mae. Over the past year, home prices have continued to rise, threatening affordability, and housing inventory is falling dangerously low. However, despite these setbacks, Americans continue to hold a positive view of the housing economy. Fannie Mae’s HPSI rose 3.7 points in January to 89.5, reversing the decrease seen the month before and an all-time survey high. This rise is due to increases in five of the six HPSI components. “HPSI rebounded from last month’s dip to a new survey high in January, in large part due to the spike in consumers’ net expectations that home prices will increase over the next year,” said Doug Duncan, Fannie Mae senior vice president and chief economist.
* Housing Affordability Remains Flat in 2017. Data for all four quarters of 2017 show housing affordability remaining essentially flat throughout the year, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI). In all, 59.6 percent of new and existing homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $68,000. This is just slightly up from the 58.3 percent of homes sold that were affordable to median-income earners in the third quarter, and effectively the same rate as in the fourth quarter of 2016, when the HOI stood at 59.9 percent. The national median home price fell to $255,000 in the fourth quarter of 2017 from $260,000 in the previous quarter. Meanwhile, average mortgage rates inched down four basis points in the fourth quarter to 4.06 from 4.1 in the third quarter. Youngstown-Warren-Boardman, Ohio-Pa. and Syracuse, NY tied as the nation’s most affordable major housing market. In both metros, 88.3 percent of all new and existing homes sold in the fourth quarter were affordable to families earning the area’s median income of $54,600 and $68,000, respectively. San Francisco, which had been the nation’s least affordable housing market for 19 straight quarters before being displaced by Los Angeles in the third quarter of 2017, once again assumed the mantle as the least affordable market. There, just 6.3 percent of the homes sold in the last quarter of 2017 were affordable to families earning the area’s median income of $113,100.

Have a productive week.

Jason

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