Factors Driving The Housing Market Moving into 2021

According to a study done by Eyul Tekin, “after adjusting for inflation over time the future of the American Dream seems rather gloomy. Median home prices increased 121% nationwide since 1960, but median household income only increased 29%.” This is rather disturbing.

Thankfully, we have companies like Fannie Mae and Freddie Mac who have mandates to keep housing affordable for Americans.

In response to this disparity between the rise in wages versus home prices, Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae said “the rise of women in the workforce has changed the dynamics of house prices to reflect an expectation of two incomes. If you look at median house price in a market relative to median income of a two- person household, it’s at long term normal levels. If you have only one income, that is where the affordability problem is.”

So, it’s not so gloomy, it is societal trends running their course.

The accelerated increase in house pricing is being driven by several factors:

  • The cost of the big three components – land, labor and lumber – have all increased. Lumber cost is at an all-time high. With lower levels of immigration, labor costs have increased and, with strict zoning regulations, especially in urban settings, land has been limited and the price driven up.
  • Low interest rates, which are expected to remain at existing levels though this year, have made borrowing more affordable. That same monthly payment can now buy more house, driving up buyers’ bids.
  • The supply/demand imbalance, which is perhaps the biggest factor. On January 22nd, the National Association of Realtors announced that unsold housing inventory sits at an all-time low of 1.9 months based on the current sales rate. That’s down from 3 months a year ago. Demand, driven by low interest rates and societal shifts due to Covid-19, has outpaced supply.

Why the shortage of houses for sale?

Many people, especially older people driven by COVID-19 concerns, who own homes don’t think now is a good time to sell. In December, the Fannie Mae  Home Purchase Sentiment Index® (HPSI) declined for the second consecutive month and fell to its lowest level since May 2020 as consumers adjusted to the worsening COVID-19 conditions of the first few weeks of December.

“Both the ‘Good Time to Sell’ and ‘Good Time to Buy’ components fell significantly, with respondents overwhelmingly noting the unfavourability of economic conditions,” Duncan said. “In particular, the sell-side component fell for the first time since April and by 18 points, reversing most of the increases of the past three months and implying to us that, at least temporarily, potential home sellers might wait to list their homes. If so, this could have the effect of perpetuating already-tight inventory levels and supporting additional (albeit lesser) home price growth, which could contribute to a further moderating of home sales.”  When supply falls more sharply than demand, prices increase.

Supply is Expected to Increase Going Forward

The U.S. Commerce Department announced that housing starts jumped 21.4% on a year-over-year basis and building permits soared 9.2%, the highest level in 13 years. “The good news about the house rise is that markets are performing the way you would expect. When prices go up and profits go up that is a signal for others to enter production and increase supply, and that’s certainly happening,” Duncan said. However, it might take a while for the supply to catch up with demand. Experts say that homebuilders and construction companies will have to continue these increased efforts though 2022 to meet demand levels.

It’s Not Just About Building More Houses

More people may be putting their houses on the market as well. As the HPSI indicates, there is pent up demand on the sell side.

Also, the MBA estimates that 5.54% of mortgage loans are in forbearance. When forbearance ends, some homeowners will be faced with a tough choice, either sell or get foreclosed upon. Unless they bought very recently, chances are they have built up enough equity to make selling the best option. This too will add to inventory levels.

The impact of the end of forbearance on the housing market is a matter of debate, but Fannie Mae sees the impact as one reason it is forecasting housing appreciation in 2021 to be 4.5% rather than the 10% of 2020. (Note: the historical norm for annual price increase is 3.75%)

Millennials were already starting to move from urban to suburban areas. During the financial crisis Millennials were looking for jobs and the places they were available was in the urban centers. This meant many lived in apartments. Now that they have children that are reaching school age they are moving out to areas with more land, more sports, good schools and other amenities.

They are moving from urban areas to the suburbs. When COVID-19 hit, the plans these people had for the next three years accelerated. The recent housing starts data support this, showing single family housing starts rose 12% while multi-family fell 13.6%.

How sustainable this movement is remains to be seen. If this is just an acceleration of buying that would have happened anyway, it implies that the supply/demand balance would move toward more supply, less demand a few years out.

There are a lot of factors at play when it comes accessing the cost of housing. It seems that the house prices will continue to rise in the short term and have the potential to grow at a slower pace, or even decline slightly, a few years out. With that said, if you have to borrow to buy a house, now is a good time to buy. You might just have to be more patient or more aggressive than you would have been otherwise given the competition.

Source: themortgageleader.com

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 set new record low, falling below 3% as concerns rise about coronavirus second wave – CNBC

Prospective home buyers arrive with a realtor to a house for sale in Dunlap, Illinois.

Daniel Acker | Bloomberg | Getty Images

Barely a week ago it looked like mortgage rates were finally breaking higher, but in a sudden reversal, they just set a new record low.

The average rate on the popular 30-year fixed mortgage hit 2.97% Thursday, according to Mortgage News Daily, as the stock market sold off and investors rushed to the relative safety of the bond market. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury. 

For top-tier borrowers, some lenders were quoting as low as 2.75%. Lower-tier borrowers would see higher rates.

“This is a very abrupt and arguably unexpected change given that last week looked like a potentially scary lift-off for rates after an extended stay near the previous all-time lows,” said Matthew Graham, chief operating officer at Mortgage News Daily. “It suggests we shouldn’t count out the ability of interest rates to maintain these levels (or improve upon them) even if the economy continues showing signs of healing.”

The market sell-off is being fueled by new concerns that there may be a second wave of the coronavirus, which already decimated the economy in April and May. Rates have been hovering above 3% for much of the past month and only broke higher last week, following a surprisingly more optimistic May employment report. That, on top of cities across the country reopening, fueled more selling in the bond market.

Interest rates also benefited from an announcement by the Federal Reserve on Wednesday that it would continue buying mortgage-backed bonds. That will keep liquidity in the lending market. 

 “I think rate levels will be directly tied to the ability of the economy to recover. If it goes better than expected, rates would rise, and vice versa if things remain sluggish. Either way, the Fed is committed to keeping shorter-term rates lower for longer, and that will help to anchor longer-term rates like mortgages to some extent,” added Graham.

Low rates have fueled a sharp and fast recovery in the housing market, especially for homebuilders. Mortgage applications to purchase a home were up 13% annually last week, according to the Mortgage Bankers Association. 

A new housing recovery index from realtor.com, which combines home search activity, prices and inventory, showed continued improvements in the market, even as social unrest erupted in several large cities.

“The general sentiment from consumer surveys is that now is not a good time to sell a home because of Covid, economic uncertainty, and social unrest, but the data is saying the opposite,” said Danielle Hale, chief economist for realtor.com. “Home prices are back to their pre-Covid pace and we’re seeing listings spend slightly less time on the market than last week.”

Mortgage rates are just one piece of the puzzle. Mortgage credit availability is still key, and it fell last month to the lowest level in nearly six years, according to an MBA survey.

“Under the current economic environment, low rates are having very little impact due to depleted mortgage availability and a decline in savings, which are putting potential buyers on the sidelines, unfortunately, just as mortgage rates are making homes more affordable,” said George Ratiu, senior economist at realtor.com.

Source: cnbc.com

Refinance demand jumps 105% annually, as mortgage rates set 15th record low of 2020 – CNBC

In this Friday, Sept. 21, 2012, photo,a home is for sale in Oklahoma City. Average U.S. rates on fixed mortgages fell again to new record lows. The decline suggests the Federal Reserve’s stimulus efforts may be having an impact on mortgage rates. Mortgage buyer Freddie Mac said Thursday, Sept. 27, 2012, the rate on the 30-year loan dropped to 3.40 percent. That’s down from last week’s rate of 3.49 percent, which was the lowest since long-term mortgages began in the 1950s. (AP Photo/Sue Ogrocki)

Sue Ogrocki

Mortgage rates set yet another record low last week — the 15th this year and the second record in as many weeks.

The drop, however, did not spark any significant change in weekly mortgage applications, but demand is substantially stronger than it was a year ago.

Total mortgage application volume increased 1.1% week-to-week according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 2.85% from 2.90%, with points decreasing to 0.33 from 0.35 (including the origination fee) for loans with a  20% down payment.

“U.S. Treasury rates stayed low last week, in part due to uncertainty over the prospects of additional pandemic-related government stimulus, as well as concerns about the continued rise in Covid-19 cases across the country,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Applications to refinance a home loan, which are most sensitive to mortgage rate fluctuations, increased 1% for the week but were a strong 105% higher than the same week one year ago. Last year at this time, mortgage rates were 113 basis points higher. Refinancing now would give anyone who refinanced last year substantial savings on their monthly payments.

Mortgage applications to purchase a home increased 2% for the week and were 26% higher annually. December is not typically a strong month for home sales, but demand continues to surge as Americans continue to work from home. They want more space, and some now have the ability to work from anywhere, giving them far more options for relocation.

“Applications to buy a home increased for the fourth time in five weeks, as both conventional and government segments of the market saw gains,” said Kan. “Government purchase applications rose for the sixth straight week to the highest level since June — perhaps a sign that more first-time buyers are entering the market.”

First-time buyers have been up against strong competition for seriously low supply at the entry level of the market. Cash-heavy investors continue to pile in, and homebuilders are not building nearly enough low-priced homes to meet the demand. Home prices at the low end are rising fastest, leaving some potential buyers on the sidelines.

Source: cnbc.com

5 Things Every Home Buyer Needs to Know About New Construction

Imagine being the very first person to live in your new home.

Any buyer shopping for a home today, in any market and at any price point, is likely to come across new construction homes for sale. The sellers are both large national builders and smaller local developers. Some homes are for sale as a part of a subdivision, while others are one-off homes.

But is a new-construction home the right path for you? Here are five factors you should keep in mind.

New homes may not be listed in your local MLS

Unlike a regular seller who lists their home with a local real estate agent, homebuilders often have their own sales employees working for them on site. They do this to have more control and to cut costs.

What does this mean for buyers? Mostly, it may mean the homebuilder isn’t a member of the local MLS. As a result, the homes may not show up in your agent’s MLS search.

The builder may be more apt to advertise online, in the paper or with billboards. So if you’re interested in newly built homes, work with your agent to make sure you’ve identified all the possibilities.

New homes are often sold before they’re built

A builder will generally get financing lined up, and map out both a construction and a sales process. This means they’ll try to sell as many homes as possible, before they’re even built.

To accomplish this, they’ll build out model homes and allow buyers to go in and review floor plans, fixtures and finishes while the homes are under construction. Depending on the state, builders need to get through some of the approvals process before they can actually start signing contracts.

For the most part, you can get a sense of what your new home would look and feel like, and where it will be located in the community. Ready to move forward? You’ll likely have to put down a deposit, from a few thousand dollars to 10 percent of the purchase price.

Be aware that even if there are 100 homes in the community, they won’t all be available at once. Home builders tend to release the homes in phases. If the first five homes sell quickly at the asking price, and the market continues to do well, the builder can raise the prices on the second or third phase.

Also, the sales cycle for a new community can take years. The last phase could end up being priced 10 percent or more than the first, simply because the real estate market has appreciated.

The first buyers may get the best discounts

A home builder, especially early in the sales process, wants to get a few homes under contract quickly. If the builder can announce they have 10 homes under contract in a few months, the project can seem more desirable to future buyers.

Also, builders like to go back to their lenders with positive news about the project and their investment. To do this, they need early buyers to sign contracts.

For buyers, this means that early in the sales process there could be room to negotiate the price down. But with the reward, there is potential risk. By being an early buyer, you’re committed to the project. If for some reason sales don’t manifest, or you don’t want to move ahead before the home is built, you risk losing your down payment. For example, right after the previous housing downturn, some buyers were stuck under contract on new homes where sales had stalled.

Builders don’t have a personal attachment to the home

A typical seller has lived in their home for many years, and raised their family or built memories there. So when it’s time to sell, the seller may experience all kinds of issues, questions and uncertainties, which can come out in the negotiation and purchase process.

The seller may unconsciously price the home too high because they’re not ready to emotionally detach from it. They may want to know more about you, or what your plans are for the property. If given a choice between two buyers, the seller may pick one over the other for non-financial reasons.

With a home builder, it’s just a numbers game. They’re focused more on spreadsheets than sentiment. They want to make sure you’re qualified and can get a loan. They set the prices based on their inventory, though there may be a little room for negotiations.

Discounts may be available in the form of upgrades

Is the project you’re interested in nearing the end of its sales cycle, with many homes already sold? If so, the builder may be a little more willing to negotiate with you — not so much on price, but on upgrades. If they reduce the price on your home and the sale closes, then that sale price becomes public record. But if they offered you an upgrade package (hardwood floors instead of carpet, or higher-end appliances), there isn’t any way to track that.

What could amount to thousands of dollars in upgrades could end up being a better deal than simply getting a price reduction.

For many first-time buyers, new construction could be a great idea.


Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published March 18, 2016.

Source: zillow.com

Home sales have best year since 2006 with record-low mortgage rates – Fox Business

The housing market had its hottest year in over a decade fueled by record-low mortgage rates and historically thin inventory, even as the economy was hit by the coronavirus pandemic.

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Sales of existing homes were 5.64 million in 2020, the best in 14 years, rising 5.6% from the prior year and the most since “before the Great Recession,” according to the National Association of Realtors. Last month, sales saw an uptick of 0.7% to 6.76 million, while total sales jumped 22.2% from a year ago.


Ticker Security Last Change Change %
TOL TOLL BROTHERS 50.82 +0.79 +1.58%
LEN LENNAR 84.61 +1.01 +1.21%

“Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” said Lawrence Yun, NAR’s chief economist. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.”


Courtesy: Freddie Mac

Mortgage rates continue to hover at record lows, helped by the Federal Reserve’s ongoing pledge to keep interest rates near zero.

A 30-year fixed-rate mortgage sits at 2.77%, as tracked by Freddie Mac.


The combination pushed prices up 12.9% with the average home sale being $309,800.

Source: foxbusiness.com

How Long Can The Good Times Last For Housing and Rates?

While it wasn’t quite the biggest surprise of 2020, the strength of the housing market was one of the best. The just-released numbers for December keep the good times rolling.

Leading the charge was December’s Existing Home Sales report from the National Association of Realtors (NAR).  The annual pace wasn’t quite at the recent 15-year high seen 2 months ago, but it hasn’t really fallen since then.  No complaints.

20210122 NL2.png

If you want to see more 15-year records broken, you’ll have to rely on The Census Bureau’s New Residential Construction numbers.  While not a direct measure of New Home Sales, the correlation is high (we’ll get the official sales numbers next Thursday).  For now, we can bask in the warm glow of another long-term high in Housing Starts.

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With sales and construction numbers like this, it’s no surprise to see builder confidence remain in record high territory.  The National Association of Homebuilders (NAHB) reported another slight drop in builder confidence for January. The silver lining?  If not for the past 3 months, January’s index would have been an all-time high.

20210122 NL3.png

Silver linings aside, do builders know something that the home sales data has yet to tell us?  That’s possible, but most of the drop was chalked up to higher costs for materials, and shortages of labor and lots.  In other words, the only thing the builder confidence numbers are telling us is that the housing market is a victim of its own success.

If we want to worry about the future of housing for more legitimate reasons, the most obvious candidate is the threat of rising rates.

Actually, there have been indications of upward pressure on interest rates for months.  That hasn’t been immediately apparent in the mortgage world because mortgage rates diverged from their normal benchmarks in such an unprecedented way in 2020.

Chief among those benchmarks is the 10yr Treasury yield, which has been conveying a slow, steady rise in rates since August.  Mortgage rates, however, moved mostly lower since then, largely because they still had a lot of catching up to do following 2020’s initial bond market shock.

20210122 NL1.png

Now that mortgage rates have been reunited with Treasuries, so to speak, we can expect to see bond market volatility have an easier time translating to movement in the mortgage market.  From there, to whatever extent we credit low rates for benefitting the housing market, there is indeed some cause for concern.

Are we talking about huge, immediate concerns?  Probably not.  The trajectory of rates depends heavily on the trajectory of the pandemic and its economic impacts.  It goes without saying that covid won’t be defeated overnight.  Moreover, progress may be uneven (2 steps forward, 1.X steps back?).  As such, even if rates continue trending higher, they would be hard-pressed to do so very quickly.  

The week of the Georgia senate election was an exception, and rates have already recovered significantly since then. As of this week, the average lender was almost all the way back in line with early January levels.

20210122 nl7.png

The week ahead brings more housing data with home price reports on Tuesday, New Home Sales on Thursday, and Pending Sales on Friday (a leading indicator for next month’s Existing Home Sales report).  In addition the Fed releases a policy statement on Wednesday.  Given what we’ve heard from Fed Chair Powell recently, it’s too early for investors to be looking for any major changes from the Fed, but hints about those changes will eventually be a big motivation for upward pressure in rates.

Source: mortgagenewsdaily.com

Construction Surges to Highest Levels in 15 Years

Residential construction finished out 2020 much more
strongly than analysts had expected. The U.S. Census Bureau and Department of
Housing and Urban Development reported significant increases in both
residential permitting and housing starts in December
, the second month in a
row those numbers have grown. The numbers, however, took a hit in the

Permits for privately funded construction were issued at
a seasonally adjusted annual rate of 1,709,000 units, an increase of 4.5
percent from the revised (from 1,639,000 units) rate of 1,635,000 in November. The
pace of permitting in December was 17.3 percent higher than the 1,437,000 units
estimated a year earlier.

Econoday and Trading
had reported low expectations for December permits on the part of
their analysts. The consensus estimates from both were around 1,600,000 units.  

Single-family permits rose 7.8 percent from the prior
to a rate of 1,226,000 and the November estimate was raised to 1,137,000 from
1,128,000. Single-family permits are now up 30.4 percent year-over-year.
Multifamily permits, in contrast, declined by 2.0 percent for the month and were
7.8 percent lower on an annual basis. The annual permitting rate for units in
building with five or more was 437,000 units.

There were 134,100 housing permits issued in December,
88,800 of them for single-family construction. The unadjusted numbers in
November were 120,000 and 79,500, respectively.

There were an estimated 1,452,000 permits issued over
the course of 2020 compared to 1,386,000 in 2019, an increase of 4.8 percent.
The year’s total of 977,000 single-family permits was a 13.3 percent annual
gain while permits for multifamily construction dropped 10.8 percent to 429,400

Housing starts, which were projected to be flat
compared to November, posted a 5.8 percent gain to 1,669,000 units in December.
The November estimate was also boosted from the original 1,547,000 to 1,578,000

Single family starts increased 12.0 percent for the
month and 27.8 percent on an annual basis to 1,338,000 units. Multifamily
starts fell 15.2 percent and 40.0 percent compared to the two earlier periods.
The December estimate was 312,000 units.

On a non-adjusted basis, housing starts totaled
113,300 for the month compared to 120,200 in November. Single family starts
rose to 89,300 from 88,500.

There were an estimated 1,380,300 housing starts in
2020 compared to 1,290,000 by year’s end in 2019, an increase of 7.0 percent.
The 991,200 single family starts represented growth of 11.7 percent for the
year while multifamily starts dipped 3.2 percent to 376,300 units.

Lawrence Yun, chief economist for
the National Association of Realtors (NAR) said the December numbers
represented the “biggest bang since 2006” for home construction and could mean the
worst of the housing shortage might soon come to an end. However, he added, “For 13 straight years prior, homebuilders
have been underproducing below historic norms. Therefore, it will take robust
home construction this year and next, at a minimum, to fully supply the market
to properly meet the demand. More construction also means more local job
The housing sector looks to lead the economy in recovery in 2021.”

The rate of residential completions jumped 15.9
percent in December, more than making up for a 12 percent shortfall in November
and were up 8.0 percent year-over-year. The estimated rate was 1,417,000 units
compared to 1,223,000 units in November, a revision from the original estimate of
1,163,000 units. Single-family completions rose 10.2 percent and were 9.0
percent higher than 12 months prior. Multifamily units were completed at a rate
32.3 percent higher than in November and 5.0 percent higher than a year
earlier. The estimate rates of completion were 984,000 single-family and 422,000
multifamily units.

Completions on an unadjusted basis in December were 134,400
total and 95,700 single family units compared to 99,600 and 75,600 in November.
There were a total of 1,290,600 housing units completed in 2020, a 2.8 percent
increase from 2019. Single family completions rose 1.3 percent to 915,300 and
multifamily completions were 6.4 percent higher at 364,000 units.

At the end of December there were an estimated
1,271,000 units under construction, 612,000 of them single-family houses. In
addition, an estimated 185,000 permits were awaiting the start of construction,
105,000 of them for single-family houses.

Permits declined in the Northeast by 7.2 percent in
December and were 4.1 percent lower than the same month in 2019. Starts were
down 34.8 percent from November and 24.1 percent compared to the prior
December. Completions did tick up 0.9 percent from the previous month but were
down 44.9 percent year-over-year.

The Midwest saw permits grow by 13.6 percent from
November and 20.7 percent from 12 months earlier. Starts grew 32.1 percent and
5.5 percent compared to the two prior periods. Units were brought on line at an
increased rate of 15.7 percent and 38.1 percent.

Building permits were issued in the South at a rate
that was 1.3 percent higher for the month and grew 22.1 percent over the last
12 months. Starts improved by 5.5 percent and 7.8 percent for the month and the
year. Completions were up by 19.5 percent and 16.0 percent, respectively.

Permits increased by 11.2 percent and 14.7 percent for
the month and year-over-year in the West. The rate of starts rose 10.2 percent
and 10.0 percent from November 2020 and December 2019 estimates. Completions
were up by 14.1 percent and 12.7 percent.

Source: mortgagenewsdaily.com

2020 home sales hit highest level since 2006

Existing home sales rose in December, and total home sales in 2020 reached the highest level in 13 years, according to the National Association of Realtors.

A total of 5.64 million homes were sold in 2020, up 5.6% from 2019 and the most since before the Great Recession, according to Lawrence Yun, NAR’s chief economist. Sales also rose 0.7% from November and 22.2% year over year.

“What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market,” said Yun.

Experts project low mortgage rates to continue driving home sales in 2021. Industry officials believe rates could hover around or below 3% for the foreseeable future.

“Early signals show that rates may begin to inch back up, but as long as COVID strains the economy, it’s unlikely mortgage rates will rise substantially,” said John Pataky, executive vice president at TIAA Bank.

If consumers aren’t holding lenders back, then who or what is?

The challenge for mortgage lenders and investors is understanding how to meet borrowers where they are without layering on risk or getting bogged down in third-party intermediation. And now, there’s a way to make that happen.

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Plus, financial relief from President Joe Biden’s American Rescue Plan is expected to provide a boost for home sales.

“Expect economic conditions to improve with additional stimulus forthcoming and vaccine distribution already underway,” said Yun.

“NAR will work with the incoming Biden administration in pursuit of policies promoting housing affordability and accessibility,” said NAR President Charlie Oppler. “We were pleased with the homebuyer tax credit President Biden proposed as a candidate and we look forward to continuing our work with Congress and the White House. We will aim to find common ground, especially related to ways of boosting home supply and working toward solutions that will protect and support homeownership and America’s broader real estate industry.”

The median existing-home price for all housing types in December was $309,800 – up 12.9% from December of 2019 – as prices increased in every region. December’s national price increase marks 106 straight months of year-over-year gains, according to NAR officials.

Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and down 23% from one year ago. 

Yun added that 70% of homes sold in December of 2020 were on the market for less than a month.

“To their credit, homebuilders and construction companies have increased efforts to build, with housing starts hitting an annual rate of near 1.7 million in December, with more focus on single-family homes,” Yun said. “However, it will take vigorous new home construction in 2021 and in 2022 to adequately furnish the market to properly meet the demand.”

Individual investors or second-home buyers purchased 14% of homes in December, identical to the share recorded in November 2020 and a small decline from 17% in December 2019, per officials.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 2.68% in December – down from 2.77% in November.

Here’s the regional breakdown of existing home sales in December:

  • Home sales in the Northeast rose 4.5%, recording an annual rate of 930,000. The median price in the Northeast was $362,100, up 19% from December 2019.
  • Home sales in the Midwest were unchanged, recording an annual rate of 1,590,000 in December – but up 26.2% from a year ago. The median price in the Midwest was $235,700, a 13.7% increase from December 2019.
  • Home sales in the South increased 1.1% to an annual rate of 2,860,000 in December. The median price in the South was $268,100, an 11.3% increase from a year ago.
  • Home sales in the West fell 1.4% from the month prior, recording an annual rate of 1,380,000 in December – but still a 17.9% increase from a year ago. The median price in the West was $467,900, up 14.2% from December 2019.

Source: housingwire.com