Homebuilders preparing for big 2021, data suggests

Overall housing starts in January totaled 1.58 million units, a decline of 6% from December, according to the latest statistics from the U.S. Census Bureau. But there’s reason for optimism from homebuilders – a huge spike in building permits.

“Despite a modest month-over-over decline, single-family housing starts are up 17.5% from one year ago,” said Odeta Kushi, deputy chief economist at title insurance firm First American. “Single-family permits, a leading indicator of future starts, are up nearly 30% from one year ago. It’s still not enough to significantly narrow the gap between supply and demand, but it’s a step in the right direction.”

A total of 1.881 million residential building permits were issued last month to homebuilders, roughly 1.2% above December’s tally but more than 22% greater than were issued a year ago.

Interestingly, the overall decrease in housing starts last month was driven by single-family starts, which decreased by 12.2% from the prior month, while multi-family starts increased by 17.1% from last month. A seasonal dip was to be expected, experts said, but the widespread distribution of a COVID-19 vaccine should give the economy – and the housing industry – a shot in the arm in 2021.

Doug Duncan, Fannie Mae’s senior vice president and chief economist, said the vaccine combined with President Joseph Biden’s $1.9 trillion fiscal stimulus will drive consumer interest in locking-in historically low mortgage rates, thus driving the amount of home sales upward.


Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

“We assume that the proposed fiscal stimulus of around $1.9 trillion will be passed in mid-March, and that growth will accelerate sharply beginning in the second quarter,” Duncan said. “If 2020 was the year of the virus, then 2021 will more than likely be the year of the vaccine. Whether the vaccines are effective, including with the new virus strains, and how broadly and timely they can be distributed remain key questions.”

Economists are wary, Duncan said, of a potential boom-or-bust scenario for the housing industry in the new year: the combination of rising interest rates from record-low levels, a high national debt, and the risk of rising inflation.

“Very strong growth in the second half of 2021 could push inflation, and thereby rates, up significantly in 2022, thus invoking a Fed response of tightening and a significant deceleration later in 2022,” Duncan said. “This is not our base case scenario, but we see it as a significant risk moving forward.”

Added John Pataky, TIAA Bank executive vice president: “With rates creeping up and homebuilding still partially restricted by the pandemic, the housing market’s next phase of growth may be much more of a grind.”

Privately-owned housing starts in January hit an adjusted rate of 1.336 million, down 2.3% from December but up 2.4% from January 2020.

Single-family authorizations in January were at 1.269 million, up 3.8% from December.

January housing starts increased in the Northeast (+2.3%), but decreased in the Midwest (-12.3%), the West (-11.4%), and the South (-2.5%).

Where homebuilders go from here is of great interest to industry experts: Construction rates are expected to climb in the opening quarter of 2021 and possibly into the summer thanks to high-lumber prices and low land inventory, but the demand for homes is expected to remain high thanks to low interest rates and the hope of President Joseph Biden’s $15,000 first-time homebuyer tax credit.

“Lumber now costs more than double what it did this time last year – a fact that that has reportedly caused some builders to stop some projects mid-way,” said Matthew Speakman, Zillow economist. “Land and labor shortages also continue to hinder the ability to take on new projects.”

Still, Speakman noted, homebuilders’ earned some benefit of the doubt with the way they handled hurdles in 2020.

“Home construction was a source of strength in the U.S. economy in 2020, as builders strove to keep up with robust demand for housing and put up homes at the strongest pace in a decade and a half,” he said.  

Source: housingwire.com

Mortgage rates have never been this low – CNN

The average interest rate on a 30-year fixed-rate mortgage dropped to 2.72%, according to Freddie Mac. That’s the lowest level in the nearly 50 years of the mortgage giant’s survey. The 15-year fixed-rate mortgage dropped to 2.28%.
“Weaker consumer spending data, which accounts for the majority of economic growth, drove mortgage rates to a new record low,” said Sam Khater, Freddie Mac’s chief economist. “While economic growth remains unstable, strong housing demand continues to have a domino effect on many other segments of the economy.”
3 reasons you shouldn't wait to refinance your mortgage3 reasons you shouldn't wait to refinance your mortgage
The continuing low interest rates have helped to fuel a boom in the US housing market. In the third quarter Americans’ mortgage debt climbed to a record high of nearly $10 trillion according to the Federal Reserve Bank of New York.
Investors had to weigh the promising news of another vaccine contender against a disappointing retail report and still-rising Covid cases, which drove down the interest rate for a 30-year loan, said George Ratiu, Realtor.com senior economist.
“Real estate markets mirrored broader uncertainties this week,” he said. “Sales of existing homes continued upward in October, boosted by buyers with jobs, savings and the ability to work from home.”
But, he said the steep rise in home prices is diminishing the benefit of lower mortgage rates.
“For today’s buyers, the current rate combined with higher prices translates into a savings of only $4 per month on a mortgage payment,” he said. “Rising housing markets may run out of affordable homes over the next few months.”
How has the economy affected you this year? Share your storyHow has the economy affected you this year? Share your story

Source: cnn.com

Fannie Mae reports rising confidence in housing market

Following two months of steady declines, Fannie Mae’s Home Purchase Sentiment Index (HPSI), a composite index designed to track the housing market and consumer confidence to sell or buy a home, rose in January.

The HSPI rose 3.7 points last month to 77.7. Though it’s undoubtedly a positive sign, the HPSI has yet to recover to pre-pandemic levels and is still down 15.3 points year over year.

Doug Duncan, Fannie Mae’s chief economist, noted a slight chasm has formed in confidence among lower and higher- income groups based on recent stimulus and fiscal policies.

According to Duncan, this newfound optimism in lower-income borrowers and renters could indicate those who have been more negatively impacted by the pandemic may be starting to feel the economic recovery.

“Among homeowners in higher income groups, however, the other five components of the index remained relatively flat or slightly negative, suggesting to us that some consumers are waiting to gauge the effectiveness of any new fiscal policies and vaccination distribution programs on both housing and the larger economy,” Duncan said.


Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

Overall, January’s housing market confidence jump was largely driven by renewed optimism for prospective home sellers, after December’s increasing home prices and tight inventory left homeowners weary that 2020’s record sales may not roll in to the new year. However, the percentage of respondents who say it is a good time to sell a home increased from 50% to 57% in January, while those who believe it is a good time to buy remained unchanged at 52%.

Even though buying sentiment stood idle in the first month of 2021, mortgage applications jumped 8.15% from the week ending Jan. 29, breaking a two-week streak of decreases, according to the Mortgage Bankers Association.

And borrowers are still relatively unsure of how long elevated home prices will hold. The HPSI reported 41% of respondents expect home prices will go up in the next 12 months – unchanged from the month prior – while those who believe it will go down increased from 16% to 17%.

But even if those prices do rise, borrowers can still save on the record low rates the industry has become accustomed to. The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 8% to 9%, while the percentage who expect mortgage rates to go up increased from 43% to 45%.

Though economists are fairly certain all signs indicate to rising mortgage rates, experts said it won’t be a sudden jerk reaction but rather a slow build that will force its way over 3% later in the year. Regardless, LO’s made insane money in 2020 thanks to record low rates, with the jury still out on whether they can swing it again in 2021 if refi’s begin to fall with rising rates.

But rising rates are a sign of a recovering economy, and though that recovery may look slow, the housing market is showing signs its already occurring.

The percentage of respondents who say they are not concerned about losing their job in the next 12 months remained unchanged at 75%, while those who are concerned fell from 25% to 24%. And the percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 20% to 21%, while the percentage who say theirs is significantly lower decreased from 18% to 14%.

January’s unemployment numbers weren’t overly impressive to economists, with the unemployment situation virtually unchanged for the month.

“The number of people on temporary layoff fell slightly in January, while the number of permanent job losers rose, a troubling sign. On the other hand, the number of people working part time but who would prefer full time employment also fell slightly, a positive indicator of labor demand,” Duncan said.

Source: housingwire.com

Biden stimulus could worsen affordable housing crisis

The nation’s most influential housing trade groups sent a letter to the House Committee on Financial Services saying any new stimulus package considered would need to have rental assistance, and warned of dire consequences if it does not.

Housing groups including CCIM Institute, Council for Affordable and Rural Housing, Institute of Real Estate Management, Manufactured Housing Institute, Mortgage Bankers Association, National Affordable Housing Management Association, National Apartment Association, National Association of Home Builders, National Association of Housing Cooperatives, National Association of Realtors, National Leased Housing Association and National Multifamily Housing Council sent a letter to Rep. Maxine Waters, D-Calif., chair of the committee, and Rep. Patrick McHenry, R-N.C., the ranking member, outlining their concerns.

In the letter, the trade groups urged Congress to move beyond “one size fits all” federal housing policies in favor of a more tailored approach. President Joe Biden’s American Rescue Plan stimulus proposes a continuation of previously passed policies for the rental sector such as an extension of federal eviction moratoriums. However, the letter states this approach could threaten the stability of the rental sector.

It proposes, instead, a rental assistance plan be considered.

“We strongly support the inclusion of additional rental assistance in the Americans Rescue Plan,” the letter states. “Without additional robust, direct rental assistance – beyond the newly proposed $25 billion – housing providers may never fully recover outstanding debt – whether through the eviction process or otherwise – and the housing affordability crisis will be exacerbated in the long- and short-term. This could devastate the industry and hurt America’s most vulnerable renters.”


Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

The apartment industry faces an estimated nearly $60 billion in lost rent for 2020, according to a recent study released by the Urban Institute and authored by Moody’s Analytics Chief Economist Mark Zandi and Falling Creek Advisors Owner Jim Parrott.

The letter explains this places a heavy financial strain on many in the rental industry, including “mom and pop firms.”

“Functioning under reduced revenue for almost a year has drained reserves, caused deferred maintenance and capital improvements and placed many housing providers on the precipice of economic ruin,” the analysis states.

Other economists agree that the rental space is being heavily hit, creating concerns for the housing market.

“There are some things that are of concern from a policy perspective and that, in the housing sector, is actually in the rental space,” Fannie Mae Chief Economist Doug Duncan recently told HousingWire. “There is the risk of a significant increase in the level of evictions in that space. The difficulty is targeted these policies so that they don’t distort normal behavior patterns. The devil will be in the details of how that gets put in place. Unemployment is definitely higher among the renter population than among the owner population.”

Congress continues to negotiate the stimulus package as Republicans seek to slim down the $1.9 trillion package to about $600 billion. The White House, however, remains unmoving on that front. The House passed the bill as a budget resolution, meaning it did not need any votes from the Republican party. The Senate could do the same, however it would require every one of the Democratic Senators on board with the new package.

“Renters need additional assistance, including emergency housing vouchers to ensure people in rural, and suburban and urban communities can remain stably housed,” Waters said in a committee hearing titled: More than a Shot in the Arm: The Need for Additional COVID-19 Stimulus. “More funding is needed for persons experiencing homelessness, who face even greater health risks as a result of the pandemic.”

“We must also address the reality that homeowners across America face a foreclosure crisis if Congress does not step in to support modifications before the pandemic ends,” she said. “And this Committee will also need to come to the aid of businesses and their workers who are barely staying afloat, including small businesses, minority-owned businesses, and sectors hit hard like the airlines.”

Source: housingwire.com

White homeownership rate hits nine-year high

Despite an unrelenting COVID-19 virus and economic recession, U.S. homeownership rose in the fourth quarter of 2020 from the same period last year. And it’s reached a record high for white homeowners, but fallen for Black Americans.

The overall homeownership rate in the fourth quarter of 2020 rose 0.7% above that of the fourth quarter of 2019, according to a new report from the U.S. Census Bureau. The share of Americans who own their own home was 65.8% in the fourth quarter of 2020, rising from 65.1% in the same period a year earlier, the Department said in a report on Tuesday.

That percentage is a drop, however, from the third quarter of 2020, which reported a robust 67.4% homeownership.

The homeownership rate for white Americans in the fourth quarter of last year was 74.5% – a nine-year high, and surpassing the fourth quarter of 2019’s rate of 73.7%. Homeownership rates for Black Americans dipped to 44.1%, the lowest rate since the first quarter of 2020.

Hispanic-American homeownership rose to its highest fourth quarter rate in three years, at 49.1%. Asian, Native, Hawaiian, and Pacific Islander homeownership was reported at 59.5% – up from the rate of 57.6% in the fourth quarter of 2019.


Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

Homeownership in Q4 2020 was highest in the Midwest – about 70.8%, according to the report. The South (67.7%), Northeast (62.6%), and West (60.4%) all reported homeownership rates above 60%, as well. All regions had higher fourth-quarter homeowner rates than in 2019.

The median asking sales price for vacant, for-sale units was $214,600 in the fourth quarter of 2020.

The average U.S. rate for a 30-year fixed mortgage fell to under 2.8% in the fourth quarter, which pushed up home purchases (though a lack of inventory and rising prices have hindered even higher rates of home ownership).

Approximately 89.1% of all housing units were occupied in the fourth quarter of 2020, and 10.9% were vacant. Owner-occupied housing units made up 58.6% of total housing units.

Owners over the age of 65 made up the majority of homeowners in the fourth quarter of 2020 at 80.2%. The under-35 crowd accounted for only 38.5% of homeowners.

It’s conceivable that the total number homeowners increases in the next few years, as well. President Joe Biden is hoping to pass a bill green-lighting a $15,000 tax credit for first-time homebuyers. If the bill is passed, those first-time potential buyers could use the $15,000 essentially as a down payment on the home.

This looms as a solution to prospective buyers looking to take advantage of historically-low mortgage rates brought on by the pandemic and recession.

Source: housingwire.com

U.S. new-home sales rose in December for first time since July

U.S. new-home sales rose in December for the first time in five months, capping the best year since 2006 and signaling that record-low mortgage rates continue to drive demand for a sector that’s been a bright spot in the economy.

Purchases of new single-family houses increased 1.6% to an 842,000 annualized pace in December from a downwardly revised 829,000 rate in the prior month, government data showed Thursday. The median projection in a Bloomberg survey called for 870,000. The median price rose 8% from a year earlier to $355,900.

Housing has helped drive the U.S. economic recovery, fueled by cheap borrowing and buyers looking for more space during the pandemic. While the strength continued in December, a lack of affordable homes and a sluggish job market may be starting to limit the strength in the sector.

For the full year, sales climbed to 811,000, the best level in more than a decade, according to the report, which is released jointly by the Census Bureau and Department of Housing and Urban Development.

Other data in recent weeks show the housing market strengthened in December. Housing starts recently rose to the best pace since late 2006, while existing homes saw unexpected strength.

Federal Reserve Chair Jerome Powell on Wednesday cited real estate as a bright spot in the economy even as other sectors have cooled. “The housing sector has more than fully recovered from the downturn, supported in part by low mortgage interest rates,” he said in a briefing after the latest gathering of policy makers.

The report also showed the number of properties sold for which construction hadn’t yet started increased to 277,000 from 256,000 in the prior month, while the number of homes for sale rose to 302,000, the most since May.

At the current sales pace, it would take 4.3 months to exhaust the supply of new homes, up from 4.2 months. Across regions, sales climbed in the West and Midwest, while the South, the biggest region, fell to the lowest since May

Source: nationalmortgagenews.com

5 Crucial Questions To Ask Before You Renew Your Rental Lease Right Now

Is your lease almost up? Before you renew your rental contract for another year, there are numerous questions you should consider, particularly in the era of COVID-19.

While signing a new lease should never be done without pondering your current circumstances, the coronavirus pandemic has made it all the more crucial to weigh your options first. After all, COVID-19 may have changed many things about how you live and work—and how well your current space and location suit your needs.

So before you sign on that dotted line of a new lease, consider these questions first to make sure it’s the right decision for you.

1. Can I still afford this rental?

The first and most important question to ask relates to your current financial situation. Are you fearing a layoff or pay cut? Or worse, have you already experienced it? If so, it may be time to consider downsizing to a less expensive rental, or negotiate with your current landlord for a rent reduction. You might be surprised by how accommodating your landlord is right now.

“Landlords are in serious competition for quality renters now,” says Justin Pogue, a residential property manager for nearly 20 years. “With millions unemployed, the pool of qualified renters has shrunk, which may give you the ability to negotiate.”

If you like your apartment but can’t afford it anymore, take a price survey of other apartment communities that meet your livability criteria before your lease is up, says Pogue. “If you find a better deal, ask your landlord to match it.”

Just make sure you’ve done your research first.

“Tenants should only renegotiate their rates after finding another comparable, but cheaper unit,” says Berk Cagatay, an apartment rental manager in Los Angeles. “It’s a good strategy for the renters who want to lock in a low rate before the economy picks back up.”

And if your landlord won’t budge, you may just want to move to less expensive digs.

2. Should I look for a roommate?

If you’re dogged by financial concerns, one of the easiest ways to control monthly expenses is by splitting them. Unless there’s a significant other in the picture, you may want to consider finding a trustworthy roommate or two. They can help you make ends meet, and provide some company in these isolating times.

“You may have dismissed the possibility before, but after living in the solitary confinement of lockdown, having the right roommate just might be more appealing now,” points out Pogue.

Just make sure to clear such a change in your living arrangements with your landlord so this can be reflected in your new lease.

3. Should I negotiate for lower rent where I am, even if I can afford it?

Even if your finances aren’t in jeopardy, negotiating for lower rent is still a smart option if you feel there are better deals to be had out there—or if you’re no longer able to use many of the amenities you once enjoyed, like the building gym or community swimming pool.

“Reach out, and ask for what you want. The worst they can say is no. And in that case, you’re no worse off than when you started,” says Seth Rouch, a landlord in Aurora, CO. In fact, he’d just offered one tenant a monthly discount of $300, totaling $3,600 for the year.

“I did this because they are great tenants,” he explains. “Landlords often confuse themselves, thinking their building is the asset. However, the truth is the tenant is the asset. Without a tenant, I just have an extra house payment.”

4. Does my rental still meet my space needs?

Though cities across the U.S. have slowly opened up, many people are still cooped up at home, either working virtually or home-schooling children. With that in mind, rental units have transformed from places to eat, sleep, and relax to doubling as offices, classrooms, and entertainment areas.

“One of the first questions I would ask is, ‘If I’m working or home-schooling kids from home now, does this rental meet those needs and space requirements?'” says Rob Carrillo, a property manager with Century 21 Haggerty in El Paso, TX.

It’s also worth pondering whether your apartment is conducive to being in quarantine. By that, think about your comfort level inside the space itself for long periods of time and in the surrounding neighborhood.

“Are you in an area where you want to live if you encounter a serious health issue or other crisis?” asks Chris Gold, CEO of Chris Buys Homes in St. Louis. “This virus may stick around for a while, and people should plan for it. Maybe you’d like to be closer to family or emergency services? Or maybe you’d like to get out of the city to live in a place where you are not directly in contact with people on a regular basis?”

5. Should I buy a home instead of renting?

There are numerous reasons why someone may choose to rent instead of buy. However, with interest rates hovering at all-time lows, renters may be surprised to find out they can often save money in the long run if they buy instead of rent.

“I understand down payments may be difficult for some people to come up with,” says Mike Zschunke, a real estate agent in Arizona. “However, it doesn’t hurt to call a mortgage broker to review your current situation. You may realize your situation is different than you initially thought.”

“Always evaluate the opportunity cost of renting versus buying,” adds Michael Chadwick, a licensed real estate salesperson with the Corcoran Group in New York City. “If you are at least four to six months from when your lease expires, and you have the means to buy, consider if you want to continue to dump thousands of dollars into rent when you could be investing in yourself. Despite every crisis in the past 30 or 40 years, home prices on average always rise. You have to play the long game.”

Not sure whether renting or buying is right for you? Use an online rent vs. buy calculator to see what’s cheaper in your area, or check out a home affordability calculator, which helps estimate how much you can afford to spend on a home and monthly mortgage payments.

Source: realtor.com