This Week in Real Estate: February 21, 2017


Favorable news This Week in Real Estate with respect to new construction permits as well as mortgage applications for new homes fuels optimism for this sector in the coming months. Below are a few highlights from the second week of February that influence our business:

* Commerce Department: Home-Building Down in January, but Permits Up. Home-building overall stalled in January, but more permits indicate construction will pick up in the months ahead. Single-family construction rose 1.9 percent in January to a rate of 823,000, up from 808,000 in December, according to the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). Privately-owned construction fell 2.6 percent to a rate of 1,246,000, down from 1,279,000 in December – though 10.5 percent higher than the January 2016 rate of 1,128,000. “Today’s reported decline in housing starts and completions weren’t statistically significant, but the big increase in permits was a good sign that we are on track for more much-needed new construction in the months to come,” says Joseph Kirchner, senior economist at “For the housing market as a whole, this means we are seeing a continuing increase in permitting and starts, but not yet completions,” Kirchner says. “Eventually, the permits will turn to starts and completions – the question is whether this will occur prior to the spring market.” Permits for privately-owned housing in January rose 4.6 percent from December to a rate of 1,285,000, an 8.2 percent increase from January 2016 – movement that lays the groundwork for future construction. The National Association of Home Builders anticipates a 10 percent increase in single-family construction in 2017, and a 12 percent increase in 2018.
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* January New Home Purchase Mortgage Applications Increased 9.2 Percent Year Over Year. The Mortgage Bankers Association (MBA) Builder Application Survey data for January 2017 shows mortgage applications for new home purchases increased 9.2 percent compared to January 2016. Compared to December 2016, applications increased by 22 percent relative to the previous month. “As house prices continue to rise and inventories of homes available for sale remain low, it is not surprising that mortgage applications for new homes in January came in higher than a year ago,” said Lynn Fisher, MBA’s Vice President of Research and Economics. “Alongside relatively low supply, rising household incomes and favorable demographics should continue to bolster demand for new homes, despite rising interest rates, leading to modest growth in new home sales this year.” By product type, conventional loans composed 67.2 percent of loan applications, FHA loans composed 18.6 percent, RHS/USDA loans composed 1.1 percent and VA loans composed 13 percent.
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* New Single-Family Home Size Trends. After increasing and leveling off in recent years, new single-family home size continued along a general trend of decreasing size during the fourth quarter of 2016. This ongoing change marks a reversal of the trend that had been in place as builders focused on the higher end of the market during the recovery. According to fourth quarter 2016 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was slightly higher at 2,453 square feet. Average square footage for new single-family homes increased to 2,661 square feet. Typical new home size falls prior to and during a recession as some home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.
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Have a productive week!


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