This Week in Real Estate: May 14, 2018

According to Fannie Mae’s most recent Home Purchase Sentiment Index released This Week in Real Estate, housing confidence hits a new all-time high. Below are a few highlights from the second week of May that influence our business:

* Housing Confidence Hits New All-Time High. The Fannie Mae Home Purchase Sentiment Index (HPSI) rose 3.4 points in April to 91.7, marking a new all-time survey high. The increase can be attributed to increases in five of the six HPSI components. The net share of respondents who said now is a good time to buy a home was the only component that decreased, falling 3 percentage points compared to March. However, the net share who reported that now is a good time to sell a home increased 6 percentage points month over month. Additionally, the net share who said home prices will go up in the next 12 months increased 7 percentage points in April, while the net share of consumers who said mortgage rates will go down over the next 12 months increased 4 percentage points. Americans expressed an increased sense of job security, with the net share who say they are not concerned about losing their job increasing 5 percentage points this month. Finally, the net share reporting that their income is significantly higher than it was 12 months ago increased 1 percentage point in April. “The latest HPSI reading edged up to a new survey high, showing that consumer attitudes remain resilient going into the spring/summer home buying season,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “High home prices and good economic conditions helped push the share of Americans who think it’s a good time to sell to a fresh record high.
* House Search Takes Many Months, But Buyers Do Not Intend to Give Up. The Housing Trends Report (HTR) is a new research product created by NAHB’s Economics team to track prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets. 17% of adults responding to our poll in the first quarter of 2018 reported to be planning the purchase of a home in the next 12 months. A follow-up question asked that group if they were already actively trying to find a house or still just in the planning stage: 42% said their house search was in full throttle, down from the 67% of prospective buyers who said to be actively searching in the last quarter of 2017. A breakdown of first quarter 2018 results by generation shows that, of the 19% of Millennials who said to be planning a home purchase within the next year, about half (49%) are already actively engaged in the search for a home, making them the most likely generation to be currently involved in trying to find a house (and not just planning it). The poll also revealed that prospective buyers actively looking for a home are spending considerable amounts of time house hunting. In fact, more than half have been trying to find the right home for three months or longer: 51% in the first quarter of 2018 and 62% in the last quarter of 2017.

* Conventional Loan Share Reaches Decade High. NAHB analysis of the most recent Quarterly Sales by Price and Financing published by the U.S. Census Bureau reveals that conventional loans accounted for 73.8% of new home sales in the first quarter of 2018, the highest share in a decade. Conventional loans financed over three-quarters of new home sales in the second quarter of 2008 before steadily falling and bottoming out at 57.3% in the third quarter of 2010. The share has steadily risen since then and has been above 71% each of the last seven quarters. FHA-loans financed 11.6% of new home sales during the first quarter of 2018, down from 12.5% in the prior quarter and from 14.8% in Q3 2017. Since its most recent peak in Q1 2016, the share of sales financed with FHA-backed mortgages has fallen 5.5 percentage points. Cash purchases accounted for 9,000 new home purchases, 5.2% of total new home sales. The aggregate 1.6% decline in the share of sales financed by FHA loans and cash was mostly due to the 1.6% rise in conventional mortgage market share.
Have a productive week.

Jason

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