The National Association of Home Builders’ Housing Market Index measures how confident home builders are in the current and future market for new homes. The survey – which has been conducted for 30 years – is considered a good barometer of the housing market’s health, as it can be used to forecast the likelihood that builders will increase the number of homes they build. Scored on a scale where any number above 50 indicates more builders feel the market is in good condition rather than poor, the index is conducted monthly and concentrates on buyer traffic, sales conditions, and expectations for the next six months. In November, the HMI rose to 70, which is the highest score since March of this year and the second highest level since July 2005. Robert Dietz, NAHB’s chief economist, says it’s a sign that the market will continue to grow. “Demand for housing is increasing at a consistent pace, driven by job and economic growth, rising homeownership rates and limited housing inventory,” Dietz said. “With these economic fundamentals in place, we should see continued upward movement of the single-family housing market as we close out 2017.” More here.
These days, the thing driving home prices upward is a lack of homes for sale. Where there are more interested home buyers than available homes to buy, prices rise. Of course, the quickest solution to this problem is building more homes. Prices will begin to moderate when more new homes are being built and buyers have more choices. That’s why there’s been so much attention paid lately to builder confidence, new home sales, and housing construction numbers. In short, the new home market is important to home buyers and sellers regardless of whether they are buying a brand new home or an older one. One recent measure of the new home market is the Mortgage Bankers Association’s Builder Application Survey – which measures mortgage application demand for new home purchases. The survey’s most recent results show a 16.1 percent year-over-year improvement from October 2016 and a 23 percent increase over September’s results. The improvement indicates there’s been a surge in demand to buy new homes, which is good news for the market. Lynn Fisher, MBA’s vice president of research and economics, says the increase is the strongest this year, though some of that is due to the recent hurricanes. “October registered the strongest growth rate in applications so far this year, following September’s hurricane related decrease,” Fisher said. More here.
Along with rising home prices, there has also been increasing concern that the housing market may be entering a bubble. And that’s not surprising, considering the housing crash is still fresh in peoples’ memories. So as home prices reach or exceed previous highs, potential buyers and current homeowners are naturally concerned about the possibility of another housing bubble and crash. According to a recent analysis from Freddie Mac, however, there is a pretty good reason to doubt that today’s price spikes are, in fact, evidence of an emerging bubble. Put simply, one of the primary reasons bubbles form is a perception that home prices will always rise. This causes investors to bid prices up and some mortgage lenders to offer easier credit. In short, a bubble isn’t real. Today’s price increases, on the other hand, are being driven by a lack of for-sale inventory and slower-than-normal new home construction. That means, it is more likely that prices aren’t being driven upward by irrational confidence but, instead, are being driven by an unbalanced market. “The evidence indicates there currently is no house price bubble in the U.S., despite the rapid increase of house prices over the last five years,” Freddie Mac’s chief economist Sean Becketti said. “However, the housing sector is significantly out of balance.” More here.
Traditionally, the argument for homeownership over renting had more to do with the long-term financial benefits of owning a home and establishing roots in the community. Renting was easier and cheaper but had few of the added perks that homeowners enjoyed. These days, however, renting doesn’t necessarily mean you’ll have less of a financial burden. In fact, in some markets, you’ll even need a higher credit score to rent than you would to qualify for a mortgage. New research shows that the average credit score needed to rent an apartment nationally was 650 but, in some markets, the required score reached well over 700. And while the required credit score varies greatly depending on the type of property and the particular market, it is further evidence that the debate over whether to rent or buy isn’t that clear cut. In other words, potential home buyers who feel they may not be able to afford homeownership should explore their options first, as they may find that buying a home is both a better deal in the short and long term. More here.
Not surprisingly, affordability ranks high among home buyers’ concerns. Rising prices and rumors of future mortgage rate increases have some prospective buyers questioning whether or not they can handle the financial obligations that come along with homeownership. However, new data from the National Association of Home Builders says, in most markets, they can. That’s because, the NAHB’s quarterly measure of affordability found 58.3 percent of new and existing homes sold between the beginning of July and the end of September were affordable to families earning the median income of $68,000. That’s encouraging news for hopeful home shoppers. And, according to Robert Dietz, NAHB’s chief economist, there are a rising number of them hoping to take advantage of conditions while they’re still favorable. “Solid economic growth, along with ongoing quarterly job gains and rising household formations, are fueling housing demand,” Dietz said. “Tight inventories and a forecast of rising mortgage interest rates through 2018 will keep home prices on a gradual upward path and slowly lessen housing affordability in the quarters ahead.” More here.
Coming up with a down payment strategy can be difficult for some buyers – especially first-time home buyers who don’t have the benefit of a home to sell. In fact, among first-time home buyers, nearly 60 percent put less than 20 percent down on their house. And while that can be a good option for some buyers, it does have downsides. For one, smaller down payments typically mean you’ll have to pay mortgage insurance. It also means you may be edged out when making an offer on a home. Data from Zillow shows that buyers with larger down payments are more likely to get their offer accepted. On the other hand, waiting to save a larger down payment means risking an increase in home prices that makes it so you can’t afford next year what you could afford right now. What is the best move for today’s buyer? Well that depends a lot on their personal financial situation and how much they already have saved. But, according to Zillow, the median home will be worth just over $6,000 more next year at this time – which means you’ll have to save an additional $105 per month to cover the rise in prices. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week for just the second time since September. But, despite lower rates, demand for mortgage applications was unchanged from the week before. In fact, refinance activity – which is typically more sensitive to rate fluctuations – was down 1 percent and demand for loans to buy homes was up an equal amount. Joel Kan, an MBA economist, told CNBC rates are responding to several economic factors. “Treasury yields weakened last week following the release of more details around the administration’s tax reform plan and the announcement of a new Fed chair,” Kan said. But with rates down, why wasn’t there a corresponding spike in demand for loan applications? Well one reason could be that rates have been hovering within a narrow range for several months and may not be the factor influencing most home buyers this fall. With rates relatively steady, buyers may be more concerned with a lack of available homes for sale or higher prices in their market. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
There are many reasons autumn is a good time to buy a house. But, because spring and summer are traditionally seen as the best seasons for home shoppers, the housing market often cools in the months following its busiest season. Evidence of this can be found in Fannie Mae’s most recent Home Purchase Sentiment Index. The index – which asks Americans for their feelings about buying and selling homes, mortgage rates, home prices, etc. – reached an all-time high in September but saw a decline in October. In short, fewer Americans feel now is a good time to buy or sell a house. But that’s normal, according to Fannie Mae’s chief economist, Doug Duncan. “The modest decrease in October’s Home Purchase Sentiment Index is driven in large part by decreases in favorable views of the current home-buying and home-selling climates, a shift we expect at this time of year moving out of the summer home-buying season,” Duncan said. “Indicators of broader economic and personal financial sentiment remain relatively steady.” In other words, because Americans generally feel better about their economic security, the dip in sentiment is likely to be temporary. More here.
First-time home buyers get a lot of attention, and for good reason. Historically speaking, they make up around 40 percent of all home sales. And though the share has been lower in recent years, the trend among younger buyers is an important indicator for the real estate market and, therefore, gets a lot of press. But older Americans buy homes too, of course. For that reason, the National Association of Home Builders takes a quarterly measure of the market for new homes among buyers 55 and older. According to the most recent results, builders are optimistic about sales among older buyers, though there was a decline from the previous quarter. Robert Dietz, NAHB’s chief economist, says the dip was due to recent natural disasters rather than decreasing confidence. “The decline in the 55+ Single-Family Housing Market Index is consistent with slight softening of other measures of single-family construction seen recently, driven by the effect of the natural disasters on top of ongoing issues with the supply of labor, lots and some building materials.” Dietz said. “However, market conditions on balance remain favorable, and we expect gradual continued growth in the 55+ housing sector.” More here.
This year’s real-estate market has been a mixed bag. On the one hand, demand from home buyers has been strong and an increasing number of renters say they hope to one day own a home. But though there has been strong demand from buyers, there has been a lack of homes available for sale in many markets. Low inventory has caused home prices to continuing rising and sales – though higher than the year before – to fall below expectations considering the level of demand from potential buyers. So what’s in store for next year? Well, Lawrence Yun, the National Association of Realtors’ chief economist, sees improvement. According to Yun, continued economic gains should lead to more home sales and more new home construction. However, because for-sale inventory will remain a concern, Yun is cautiously optimistic. “An overwhelming majority of renters want to own a home in the future and believe it is part of their American Dream,” Yun said. “Assuming there are no changes to the tax code that hurt homeownership, the gradually expanding economy and continued job creation should set the stage for a more meaningful increase in home sales in 2018.” More here.