This Week in Real Estate: June 19, 2017


Happy Father’s Day to all you Berkshire Hathaway HomeServices dads, as well as to the dads of our entire team, including my hero, mentor, friend, and dad Bert Waugh.

As home equity grows and builder confidence remains strong, HUD released This Week in Real Estate a drop in both construction permits and starts for the second straight month, which could put additional downward pressure on future inventory. Nonetheless, single-family starts are up 7% compared to the same time period the year before. Below are a few highlights from the second week of June that influence our business:

* Home Equity Grows As The Composition of (Fewer) Refinancing Shifts. According to the Federal Reserve Board’s first quarter of 2017 release of its Financial Accounts of the United States report, household holdings of real estate, measured on a not seasonally adjusted basis, totaled $23.526 trillion in the first quarter of 2017, $1.597 trillion higher than its level in the first quarter of 2016. Home mortgage debt outstanding, $9.813 trillion in the first quarter of 2017, rose by $252 billion over the same four-quarter period. As the change in the total value of household-held real estate exceeded growth in mortgage debt outstanding, total home equity held by households grew. Over the year, total home equity held by households rose by $1.346 trillion, 10.9 percent, to $13.714 trillion. Households’ home equity is now 58.3 percent of household real estate.
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* Housing Starts Decline in May. Total housing starts declined in May after a few, strong early months to begin 2017. Total starts were down 5.5%, falling to a 1.092 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD. Declines were recorded for both single-family and multifamily development. Single-family starts fell back, declining to a 794,000 annual rate. The February annualized rate, 877,000, was the fastest monthly pace since the Great Recession. Nonetheless, single family starts are up 7% year-to-date compared to 2016 as limited existing inventory and solid builder confidence make for positive demand conditions. Single-family permits were down 4.9% in May. There has also been a noticeable increase in the number of single-family homes permitted but not started, consistently with survey data indicating supply-side bottlenecks. For example, in May there were 78,000 single-family homes permitted but not started construction. This is almost 15% higher than a year ago. With respect to housing’s economic impact, 57% of homes under construction in May were multifamily (612,000), that is 6% higher than a year ago. There were 455,000 single-family units under construction, a gain of 6% from this time in 2016. This is slightly lower than the April total (457,000), which was a post-recession high. Regionally, single-family starts declined in the South (-8.9%) and the West (-4.9%), the two largest market areas. Single-family starts were up in the Northeast (12.5%) and the Midwest (9.5%).
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* Builder Confidence Remains Solid in June. Builder confidence in the market for newly-built single-family homes weakened slightly in June, down two points to a level of 67 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). “Builder confidence levels have remained consistently sound this year, reflecting the ongoing gradual recovery of the housing market,” said NAHB Chairman Granger MacDonald. “As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labor and buildable lots that is impeding stronger growth in the single-family sector,” said NAHB Chief Economist Robert Dietz. All three HMI components posted losses in June but remain at healthy levels. The components gauging current sales conditions fell two points to 73 while the index charting sales expectations in the next six months dropped two points to 76. Looking at the three-month moving averages for regional HMI scores, the Midwest and South each edged one point lower to 67 and 70, respectively. The Northeast and West both dropped two points to 46 and 76, respectively.
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Have a productive week!

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