This Week in Real Estate: May 22, 2017


As we move closer towards the summer selling season, we have favorable news This Week in Real Estate relative to home builder confidence and average closing time of home loans. Below are a few highlights from the third week of May that influence our business:

* Homebuilder Confidence Soars in May. The housing market is showing signs of strength as homebuilder confidence grew in May to the second-highest point since the recession, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Home builders increased their confidence in the market for newly built single-family homes by two points in May to 70. “This report shows that builders’ optimism in the housing market is solidifying, even as they deal with higher building material costs and shortages of lots and labor,” said NAHB Chairman Granger MacDonald. The index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as good, fair or poor. “The HMI measure of future sales conditions reached its highest level since June 2005, a sign of growing consumer confidence in the new home market,” said NAHB Chief Economist Robert Dietz. “Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward.”
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* New Single-Family Home Size Continues to Trend Down. After increasing and leveling off in recent years, new single-family home size continued along a general trend of decreasing size during the start of 2017. This 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. As the entry-level market expands, including growth for townhouses, typical new home size is expected to decline. According to first quarter 2017 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was slightly lower at 2,389 square feet. This is down from 2,440 square feet last quarter and 2,465 square feet last year. Similarly, the average square footage also decreased slightly from 2,652 square feet in the fourth quarter and 2,658 square feet last year to 2,628 square feet. The post-recession increase in single-family home size is consistent with the historical pattern coming out of recessions. Typical new home size falls prior to and during a recession as 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. This pattern was exacerbated during the current business cycle due to market weakness among first-time homebuyers. But the recent declines in size indicate that this part of the cycle has ended and size will trend lower as builders add more entry-level homes into inventory.
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* Closing Time on a Mortgage Keeps Getting Faster. The time to close a loan fell once again, marking the third consecutive month of declines. Time to close all loans fell to 42 days in April, down from 43 in March and a substantial drop from the beginning of 2017’s 51 days in January. The time it takes to close a refinance dropped to 41 days in April, down from 43 days in March. The time to close a purchase also decreased from 43 days the previous month to 42 days in April. And while the time it takes to close a refinance came in lower than purchase loans, it is purchase originations that continue to rule the market. In April, refis represented 35% of the market, while purchases made up the other 65%.
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Have a productive week!

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