This Week in Real Estate: Sept. 12, 2016

Prices continue to surge This Week in Real Estate as homebuilders struggle filling construction jobs to meet consumer demand. Below are a few highlights from the first week of September that influence our business:

* CoreLogic: U.S. Home Price Report Shows Prices up 6 Percent Year Over Year in July. Home prices nationwide, including distressed sales, increased year over year by 6 percent in July 2016 compared with July 2015 and increased month over month by 1.1 percent in July 2016 compared with June 2016,” according to the CoreLogic HPI. The CoreLogic HPI Forecast indicates that home prices will increase by 5.4 percent on a year-over-year basis from July 2016 to July 2017. “The strongest home price gains continue to be in the western region,” said Anand Nallathambi, president and CEO of CoreLogic.” As evidence, the Denver, Portland and Seattle metropolitan areas all recorded double-digit appreciation over the past year.”
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* Construction Worker Shortage Weighs on Hot U.S. Housing Market. Eight years after the housing bust drove an estimated 30 percent of construction workers into new fields, homebuilders across the country are struggling to find workers at all levels of experience, according to the National Association of Homebuilders. The association estimates that there are approximately 200,000 unfilled construction jobs in the U.S. – a jump of 81 percent in the last two years. The ratio of construction job openings to hiring, as measured by the Department of Labor, is at its highest level since 2007. “The labor shortage is getting worse as demand is getting stronger,” said John Courson, chief executive of the Home Builders Institute, a national nonprofit that trains workers in the construction field. The impact is two-fold. Without enough workers, residential construction is trailing demand for homes. And with labor costs rising, homebuilders are building more expensive homes to maintain their margins. That has left entry-level homes in tight supply, shutting out many would-be buyers at a time when mortgage rates are near historic lows. The average construction cost of building a single family home is 13.7 percent higher now than in 2007 according to a survey by the National Association of Homebuilders.
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* Home Purchase Sentiment Index Retreats Slightly, but Gradual Upward Trend Continues. Fannie Mae’s Home Purchase Sentiment Index (HPSI) was down slightly in August, dipping 1.5 percentage points to 85.0. The index, based on the company’s National Housing Survey (NHS) reached its all-time high in July. Despite the monthly decline the index is still 4.2 percentage points above where it was in August 2015. “Consumers have a fairly optimistic 12-month outlook on housing at the end of the summer home-buying season, supported by increased job confidence and more favorable expectations regarding their personal financial situations compared with this time last year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The return to a slight upward trend in the HPSI during the spring and summer is, thus far, in line with our forecast, which calls for 4 percent growth in home sales in 2016 to the best level since 2006 and continued improvement for 2017.”
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* Mortgage Originations Surge to Highest Level in Three Years. The purchase market is booming, fueling the overall mortgage market and helping set the highest first-lien mortgage originations volume in a single quarter since the second quarter of 2013, the latest Black Knight Financial Services Mortgage Monitor Report found, based on data as of the end of July 2016. In the second quarter of 2016, purchase loan originations increased 52% ($102 billion) from the first quarter, reaching the highest level in terms of both volume and dollar amount since 2007. This in turn helped bring in first-lien mortgage originations in the second quarter to $518 billion. “Interestingly, however, with interest rates 15 basis points lower than in Q1, and even lower than in early 2015, refinance activity wasn’t nearly as strong as one might have expected,” said Black Knight Executive Vice President Ben Graboske. “While purchase originations jumped more than 50% from Q1, refinances saw only an 8% increase over that period, and were actually down from the same time last year, despite the number of potential refinance candidates outpacing 2015 by over 1 million in every month since March.”
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Have a productive week!

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