Uncommon Knowledge
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Read more: US home sales – what’s the latest? This trend could prove frustrating for homebuyers seeking more choices in a tight market. Since older homeowners make up a substantial portion of the homeowner population, their decision to age in place limits the number of houses coming on the market, potentially further fueling competition and … [Read more…]
Rates for 30-year mortgages dropped again, but homes remain unaffordable in most areas. (iStock)
Mortgage rates dropped to 6.63% this week, according to Freddie Mac’s Primary Mortgage Market Survey. Rates for 30-years fixed-rate mortgages were 6.69% last week, dropping by 0.06 percentage points.
Rates for 15-year mortgages also dropped slightly from 5.96% last week to 5.94% this week. Both 15-year mortgages and 30-year mortgage rates are still higher than they were last year.
A year ago, 30-year mortgages sat at 6.09%, on average, while 15-year mortgages averaged 5.14%, Freddie Mac reported.
“Mortgage rates have been stable for nearly two months, but with continued deceleration in inflation we expect rates to decline further,” Freddie Mac Chief Economist Sam Khater explained.
“The economy continues to outperform due to solid job and income growth, while household formation is increasing at rates above pre-pandemic levels. These favorable factors should provide strong fundamental support to the market in the months ahead.”
As mortgage rates drop, you may decide it’s the right time to finally buy a home. To find the right mortgage for your needs, Credible can show you multiple mortgage lenders all in one place and provide you with personalized rates within minutes.
HOMEOWNERS INSURANCE RATES ON THE RISE, MAINLY DUE TO INCREASE IN NATURAL DISASTERS
After remaining for high most of the year, home prices are dropping slightly in some metro areas.
Data from a recent S&P report showed prices in 12 out of 20 metro areas decreasing. This decrease in prices has led some households to move across state lines in search of more affordable areas.
Charlotte, Providence and Indianapolis saw the largest increase in buyers as they fled high-cost cities, stated a Zillow report.
Households that made these moves found homes were $7,500 less, on average, than where they left.
Cities that saw the highest outflow in households included Chicago, San Diego and Cincinnati. These metro areas often have higher housing costs and less robust economies, Zillow found.
If you think you’re ready to shop around for a home loan, consider using Credible to help you easily compare interest rates from multiple lenders, all without affecting your credit score.
HOMEOWNERS MOVING ACROSS STATE LINES, SEEKING AFFORDABILITY, FIND IT IN CERTAIN CITIES
The housing market is trudging toward recovery, largely thanks to mortgage interest rates dropping in recent months.
“The surge in pending home sales and new home sales, both determined by contract signings in the early stages of the buying process, indicates increased participation from buyers in the market,” explained Realtor.com Economist Jiayi Xu in response to Freddie Mac’s recent mortgage rates update. “Simultaneously, the recent rise in listing activity suggests that sellers are closely monitoring mortgage rates and adjusting their selling strategies accordingly.”
Potential homebuyers won’t see a full recovery anytime soon, however. JP Morgan experts predict that the real estate market will become affordable again about three and a half years from now. This is largely dependent on continued interest rate decreases.
“Despite the promising increase in listing activity, inventory is likely to remain low as sellers may not respond as swiftly as anticipated. In other words, a more substantial improvement in mortgage rates is necessary to attract more sellers to the market,” Xu said.
Until rates drop more substantially, mortgage payments are likely to stay high. In November 2023, the average monthly mortgage payment was $2,198, up from $1,993 a year earlier, a National Association of Realtors report found.
If buying a home is your near future, make sure you’re getting the best mortgage lender and rates with the help of Credible. Credible helps you compare rates and lenders and get a mortgage pre-approval letter in minutes.
JUST OVER 15% OF HOME LISTINGS WERE CONSIDERED AFFORDABLE IN 2023: REDFIN
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Source: foxbusiness.com
A strong U.S. economy will be a boon for the housing market, Mortgage Bankers Association’s (MBA) chief economist said on Thursday, as it will buoy demand and as inflation continues to fall, mortgage rates will decline as well making home loans more affordable for buyers.
The U.S. economy accelerated at a faster-than-expected clip in the fourth quarter of 2023 at 3.3 percent, the Commerce Department’s Bureau of Economic Analysis revealed on Thursday.
Meanwhile, the personal consumption expenditures (PCE) price index—the Federal Reserve’s preferred measurement of inflation’s progress—jumped by 1.7 percent during the quarter. Core PCE, which excludes the often volatile food and energy prices, increased by 2 percent.
These dynamics bode well for the housing market that has been struggling under the weight of record-high mortgage rates, sparked in part by the Fed’s hiking of rate at the most aggressive clip since the 1980s to fight soaring inflation.
The Fed’s funds rate currently sits at 5.25 to 5.5 percent—the highest they have been in two decades—and policymakers have signaled that they will slash rates should inflation come down to their 2 percent target.
But an economy that may avoid a recession as inflation moderates without the Fed’s tight monetary policy doing too much damage to the jobs market would help the housing sector.
“Stronger economic growth will benefit the housing market, keeping demand robust,” Mike Fratantoni, MBA’s chief economist, said in a statement shared with Newsweek. “Moreover, today’s report also showed further reductions in inflation, which will enable the Federal Reserve to cut rates later this year—as they have been hinting.”
Mortgage rates ticked up slightly for the week ending January 25, Freddie Mac said on Thursday, with the 30-year fixed rate averaging 6.69 percent.
“The 30-year fixed-rate has remained within a very narrow range over the last month, settling in at 6.69% this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Rates look to have stabilized, Khater suggested, encouraging buyers to jump off the fence.
“Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace,” he said.
A slowdown in rates could have a negative impact on home buyers, some analysts say.
A decline in the cost of home loans would encourage more purchases, and this increase in demand will spark competition at a time when there is a limited supply of homes for sale.
More buyers who can afford mortgages entering the market will push up prices, analysts from Goldman Sachs said this week.
The investment bank’s experts project prices to soar by 5 percent in 2024, a marked revision from their earlier expectation of a 2 percent jump. That trend will continue through next year when prices are forecast to increase by nearly 4 percent, which is also a change from a previously estimated increase of close to 3 percent.
Amid the price increases, Goldman Sachs analysts anticipate that rates will fall to 6.63 percent for the year. This drop in rates from the near 8 percent highs of November 2023, will make house loans more affordable, sparking more demand for properties.
“We have very low inventory of houses for sale, which is generally supportive of prices, along with generally stable demand that is coming from things like household formation,” Roger Ashworth, senior strategist on the structured credit team at Goldman Sachs, said this week.
On Thursday, new home sales climbed up by 8 percent in December, according to government data, while prices declined to two-year lows. The fall in prices and a rise in sales was partly due to builders offering inducements to buyers, according to Yelena Maleyev, a senior economist at KPMG.
“Builders have pivoted to building smaller homes and offering more discounts and concessions, such as mortgage rate buydowns, to bring in buyers sidelined by rising mortgage rates,” she said in a note shared with Newsweek.
But the data from the U.S. Census Bureau also showed that inventory of newly built homes fell last month after going up the previous months. There were 453,000 houses available for sale at the end of December, which accounts for 8.2 months’ worth of supply.
This constituted a 3.5 percent decline from the same time a year ago, Maleyev pointed out.
The lack of inventory also comes at a time when the used homes market has struggled. Sales are down in that segment amid a lack of supply of homes as sellers are reluctant to give up their low rates for new home loans hovering in the mid-6 percent.
This lack of supply will be key to how prices shake out and the outlook for the year is not encouraging.
“If mortgage rates fall below 6 [percent] in 2024, more owners will feel comfortable listing their homes for sale, alleviating some of the shortages, but not enough to close the supply gap,” Maleyev said.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
Bank of America CEO Brian Moynihan got down to brass tacks today. Well, sort of. As much as the CEO of one of the world’s largest banks can get.
In prepared remarks at the Brookings Future of Homeownership Forum where he was the keynote speaker, Moynihan questioned homeownership at its core.
He noted that Americans’ view of homeownership has gone “from building long term equity to cashing in on short term equity gains.”
Moynihan pointed to a surge in investment properties, which increased from a historical four percent share to a high of 28% in 2006, just before everything went so terribly wrong.
And added that home flipping was the norm, noting that in late 2005 more than 80% of all refinancing involved cash out, or tapping home equity.
Homeowners became overleveraged, and we all know what happened next – those with little or no equity stopping making payments, and the whole thing came crashing down.
Moynihan also seemed to question whether just anyone should own a home.
“As a just, democratic society, we owe all our citizens a safe, good place to live. But, a roof over one’s head doesn’t always have to come with mortgage debt. And in many cases shouldn’t.”
He also took aim at the financial benefits of owning a home, remarking that since 2001 average appreciation has been just two percent.
And that recent and ongoing weak economic growth, unemployment, and slower household formation will make a home purchase all the less certain in the future.
In short, a quick flip may not be feasible in today’s market, and even those who put little down could land in hot water if they’re unable to make payments for one reason or another.
Put simply, nowadays homeowners must truly qualify for the mortgages they obtain, as skyrocketing home prices probably won’t be the savior this time around.
During the good old days, it didn’t really matter if a borrower was qualified – they could count on the home’s value appreciating to a point where they could sell or refinance again, all while making an interest-only payment or relying on a short-term teaser rate.
While not explicitly calling for a higher minimum down payment, Moynihan said, “10 percent seems reasonable,” but argued that there is “nothing magic about a 20 percent down payment.”
He added that a solid down payment incentivizes the positive attributes of homeownership, such as the “delayed gratification of having worked for something,” along with an equity cushion if anything goes wrong.
Moynihan also questioned the FHA’s role in the mortgage market, going from serving the underserved to doling out the largest loans in the country, with as little as 3.5% down.
Speaking of questionable lending, he noted that Bank of America exited subprime lending back in 2001 and was criticized for doing so.
With regard to Fannie and Freddie, he highlighted the need for a return of private capital, seeing that the government backs about nine out of 10 mortgages these days, but noted that it would take time for such a shift to take place.
No, we can’t just kick the government out of housing overnight…
Despite all the perceived pessimism, he noted that the “housing market is showing signs of real, sustained recovery,” with home prices increasing and demand rising.
But added that we must continue moving forward, even if it means transitioning former owners into renters, largely because many can’t even make a modified mortgage payment.
Moynihan said Bank of America has 50,000 employees working on roughly 900,000 bad mortgages, and that it has already helped 1.5 million people avoid foreclosure via short sales, loan modifications, and other programs.
He argued that the bank must be more efficient in handling its distressed inventory, with 40% of the bank’s foreclosure sales involving vacant properties.
And that now is the time to take the lessons learned from the crisis to create a more sustainable housing market going forward.
In recent years, Bank of America has been actively minimizing its presence in the mortgage market, exiting the wholesale and reverse mortgage channels, and greatly reducing its share of total loan origination volume.
They even had a waiting list to refinance, meaning you might want to shop around elsewhere if you’re in the market for a new mortgage.
Source: thetruthaboutmortgage.com
Payrolls at nondepository mortgage bankers and brokers inched down as spring homebuying ended, according to the latest estimates from the Bureau of Labor Statistics.
The slight drop in representative payroll estimates to 340,000 from a downwardly revised 341,500 the previous month suggests some seasonality has returned to the market.
Spring homebuying this year boosted second-quarter volumes markedly above those seen in the previous fiscal period for the first time in two years, according to a report that Attom, a curator of land, property and real estate data, released Thursday.
The number of mortgages originated rose 21% on a consecutive-quarter basis to 1.56 million but was still 38% lower than a year ago.
“It looks like owners took advantage of the small rate drop to refinance existing loans, while a jump in mortgages for purchasers was likely fueled by a number of forces,” Attom CEO Rob Barber said in the report.
May appears to have been the strongest month for industry hiring this year, when job numbers peaked at an upwardly revised 343,900.
Meanwhile, in broader employment data that the BLS reports with less of a lag than industry estimates, the United States added 187,000 jobs in August as compared to a downwardly revised 157,000 the previous month.
“With the markdowns in the rate of job growth for June and July noted in this report, the cumulative effect is a noticeable slowdown in the job market,” said Mike Fratantoni, chief economist, Mortgage Bankers Association, in a report issued Friday.
Unemployment rose to 3.8% from 3.5%, as more people that left the job market returned to it but found it difficult to obtain work. The annualized rate of wage growth was a little slower at 4.3%.
The rate of wage growth is still likely above the level monetary policymakers would like to see given their 2% inflation target, but other employment numbers might deter further rate hikes, according to Fratantoni.
“This report should be enough for the Fed to keep the federal funds target rate on hold at its next meeting,” he said.
Some relief from rate pressure would be welcome in the mortgage market given a rise in financing costs since spring that’s likely contributed to the dip in industry hiring.
“With mortgage rates near 7%, consumers are feeling the pinch,” said Odeta Kushi, deputy chief economist at First American, in a report issued Friday.
However, there’s still enough household formation in the market to compel builders, who have shown a willingness to make selective price concessions, to provide additional supply.
“Demographic tailwinds from millennials aging into their prime homebuying years and a lack of existing-home inventory means new home construction is essential in meeting shelter demand,” Kushi said.
Residential construction jobs increased by 2,400 in August, Kushi noted.
“You need more hammers at work to build more homes. That’s why residential building jobs are still up more than 10% compared with prepandemic levels, despite the rate environment,” she said.
Source: nationalmortgagenews.com
When Warren Buffett-led conglomerate Berkshire Hathaway (BRK.A -0.07%) (BRK.B -0.11%) recently released an updated look at its massive stock portfolio, we learned that Buffett and his team added shares of not one, but three different homebuilders. Berkshire bought D.R. Horton (DHI 0.59%), NVR (NVR 0.96%), and Lennar (LEN 0.01%), with a combined investment value of nearly $800 million.
While these are all excellent homebuilders with strong track records of growth, as well as attractive valuations, there’s one homebuilder stock I’ve been buying in my own portfolio that I believe could perform even better for patient long-term investors. Here’s a rundown of why Buffett might be so attracted to homebuilder stocks right now, and why I prefer to invest in the homebuilding industry with smaller player Dream Finders Homes (DFH 0.80%) instead.
Let’s not sugar-coat it. The real estate market in the United States is pretty bad right now. A combination of soaring home prices and mortgage rates at multi-decade highs has pushed many would-be homebuyers to the sidelines.
However, there are always some people who need homes. People still get transferred to a different part of the country for their jobs, and some people need to move to be closer to relatives or friends. And this is where homebuilders are winning.
In simple terms, existing home inventory is extremely low. Roughly half of pre-pandemic levels. Millions of homeowners have mortgages with 3% (or even lower) interest rates and don’t want to give them up. So, new homes are making up a disproportionate percentage of available homes on the market. Not only that, but homebuilders have the ability to offer incentives – including promotional mortgage rates – that private sellers can’t.
There are two key factors that make Dream Finders stand out.
First, Dream Finders uses the same land-light business model that NVR uses. The short version is that unlike most homebuilders, Dream Finders and NVR don’t buy any land until they’re ready to start building a home on it. They don’t buy large tracts of land to gradually build on. This keeps capital requirements low and allows the business to regularly generate returns on equity of 40% or more.
Second, Dream Finders is in the relatively early stages of growth and focuses on some of the fastest-growing Sun Belt housing markets in the United States. In addition to its home market of Jacksonville, Dream Finders also has a large presence in Orlando, the Carolinas, Texas, and other markets where homes are still (relatively) affordable, and job and wage growth exceeds the national average.
The company’s track record has been impressive so far. Founder and CEO Patrick Zalupski started the building in the wake of the Great Recession in 2009 and has grown it to the point where it expects to close on 6,500 homes this year, despite the difficult market. And speaking of the difficult real estate market, in the second quarter, Dream Finders grew its revenue by 19% year-over-year and ended with a backlog of nearly 5,300 homes.
To be fair, we don’t know for sure that Buffett and his team don’t like Dream Finders. With a market cap of just $2.5 billion, it could simply be too small to attract Buffett’s attention. The smallest of Buffett’s three builders has a market cap that is about eight times Dream Finders’ size. But if you’re a long-term investor, Dream Finders is making all the right moves to evolve into one of the major players in the space in the years to come.
The market has certainly acknowledged Dream Finders’ strong results and the better-than-expected environment for homebuilders in general. Since the beginning of 2023, Dream Finders’ stock price has roughly tripled.
Even so, it looks like an attractive stock at these levels. The real estate market is bad all around – it’s just better for homebuilders than for existing homes, but it’s still not great. There is tremendous appetite for household formation, which could be a massive catalyst for the entry-level homes Dream Finders does so well, once inflation and economic fears normalize. Even after its tremendous performance so far this year, Dream Finders still trades for less than 13 times forward earnings. I’ve added to my own position at these levels, and plan to keep incrementally building it for as long as the company keeps producing strong results.
Matthew Frankel, CFP® has positions in Berkshire Hathaway and Dream Finders Homes. The Motley Fool has positions in and recommends Berkshire Hathaway, Dream Finders Homes, Lennar, and NVR. The Motley Fool has a disclosure policy.
Source: fool.com
After what seemed like a dismal few weeks, some good news is finally streaming back into the mortgage world.
First off, mortgage rates are super low again, with the 30-year fixed pricing below 4% at some lenders. It sounds like a broken record but I doubt anyone is complaining.
And because interest rates have returned to near-record lows, the Mortgage Bankers Association has upped its origination forecast for 2015.
The group revealed its forecast for 2015 this afternoon, guessing that total residential mortgage volume will be around $1.19 trillion next year.
If it happens, it’ll represent a seven percent increase from 2014, which is somewhat of a surprise given the recent downturn in lending.
Of course, things can shift pretty quickly in mortgage land, and anything contingent on interest rates will remain an estimate and nothing more.
However, the fact that Fannie and Freddie will again accept mortgages with 3% down payments should provide another boost, assuming such loans become widely available.
The MBA expects purchase originations to increase to $731 billion in 2015, up from $635 billion in 2014. That’s a healthy 15% increase, though not enough to get anywhere close to the numbers seen in 2012 and 2013.
The projected rise is partially related to the low rates and also the result of an improving labor market, which should translate into more home sales as household formation improves.
They believe monthly job growth will average 220,000 in 2015, while the unemployment rate is on pace to fall to 5.4% by the end of 2015 and to 5.2% in 2016.
Meanwhile, refinance loans are expected to dip to $457 billion in 2015 from $471 billion this year, though the MBA does expect an uptick as recent home price gains will allow more homeowners to refinance with positive home equity. Of course, that also means fewer borrowers will be utilizing HARP.
Either way, it won’t be enough to fend off home purchase loans. The purchase share of total mortgage volume should rise to roughly 62% in 2015, up from 57% this year.
And it is expected to increase to nearly 68% in 2016 as purchases continue to dominate the mortgage market, mainly because refinancing won’t benefit many individuals going forward.
For 2016, the MBA believes purchase origination volume will climb to $791 billion, while refinance originations are expected to dwindle down to $379 billion. Yikes.
That equates to total volume of $1.17 trillion, just below the 2015 forecast.
So the news is perhaps a little bittersweet, though home equity lending could also play a major role as homeowners look to tap equity without losing out on their ultra low first-mortgage rates.
For the record, the MBA also upwardly revised its 2014 origination estimate to $1.11 trillion from $1.01 trillion, and its 2013 estimate to $1.85 trillion from $1.76 trillion to reflect the most recent Home Mortgage Disclosure Act (HMDA) data release.
Source: thetruthaboutmortgage.com
With the July 4th weekend nearly upon us, it’s time to reflect on all that we have been through in the past year and how, as a country, we have overcome so many daunting obstacles, including what we have been through in the housing market.
The first thing that pops into my shriveled brain is how the housing market looked in February of 2020. Data from that month showed that housing was breaking out — but because we received this data in March of 2020, we were all too busy trying to survive to take notice.
Once the fear of the virus calmed down, we began a truly remarkable economic comeback, perhaps the fastest economic comeback from a significant economic downturn in the history of the U.S., with the housing market leading the way.
But for every silver lining there is a cloud.
The solid demographics for home purchasing and historically low mortgage rates — which have been in a downtrend for four decades — have created a housing market where prices are rising too fast. Even though we have good demographics for housing, we are not seeing a growth in sales that would account for the rate of growth in prices.
Before COVID-19 was even a whisper in our minds, I thought that in the years 2022 and 2023, price pressures for housing could be the big story. But I expected that higher mortgage rates of over 4% would keep prices from escalating out of control.
Instead, demand picked up early and because of the effects of COVID-19 on the world economies, mortgage rates are down to all-time lows. Rates haven’t even gotten to 3.5% recently — forget getting above 4%. These low mortgage rates are being sustained in a climate of some of the best economic growth in the 21st century and hotter-than-normal inflation data.
In this first year of economic expansion, we continue to have a good savings rate and healthy household formation demographics.
I anticipate that by September 2022, we will have all the jobs back that were lost due to COVID-19. When one considers that we currently have the most job openings ever recorded in U.S. history, (9.3 million) this date does not seem to be a stretch. Note, too, that all this good economic mojo is going on before we have even started fiscal spending on infrastructure.
With this recipe of excellent national economics, good demographics for housing, an improving employment picture and low mortgage rates, it makes sense that home prices would be hotter than normal. But as I have said before, the high rates of growth in home prices have been more a function of low housing inventory than extreme credit growth in demand.
But all is not hopeless: There are several reasons why housing inventory should pick up in the next several months and going into 2022.
First, the higher prices we are seeing in the current market are making it difficult for some buyers to compete. Clearly not all buyers, but enough to keep the extreme low housing inventory levels hard to maintain. This is a key point, but because we got to all-time lows in housing inventory, a move higher from these extreme low levels isn’t saying too much.
From the NAR:
Second, forbearance programs and the eviction moratorium will be ending soon. Because loan holders started their forbearance programs at different times they will exit the programs at different times, too, so don’t expect a flood of housing inventory to appear at once. Forbearance programs have gone from near 5 million loans to a tad over 2 million. A lot of primary-residence households on forbearance programs have already exited the program and housing inventory remains chronically low.
Nevertheless we can expect some of these homes to come on to the market. These homes might be mom and pop landlords who were unable to collect rent during COVID-19 and want out of the rental game or some investors looking to cash in on high home prices. In any case, to think that we would have zero housing inventory created from this crisis is highly unlikely.
Third, while demand is solid in 2021, and we should have slightly more total home sales than we had in 2020, we are not seeing growth in credit (number of mortgages taken out). To think that we would have double-digit price growth with essentially slight home sales growth is the essence of bad inflation. As you can see below, what we experienced from 2018 to 2021 looks nothing like the credit growth we saw from 2002-2005.
We got to all-time lows in housing inventory recently so any increase is going to be a high percentage increase and that is going to fool some folks that the housing inventory picture has changed dramatically. The actual number of homes making up that increase is not going to be much, however, so don’t look at it like that. Instead look to see if total housing inventory gets back to the levels we saw in early 2020.
Getting back to 2020 levels with days on market going past the teens is the No. 1 priority for the housing market. We need more than the typical rise due to seasonality that happens every spring. We want total inventory levels to go above 1,520,000 at minimum.
In 2018-2019, total housing inventory was in the range between 1,520,000 – 1,920,000 and that level of inventory helped to drive real home-price growth in 2019 into negative territory briefly. Existing home sales during those years stayed in the monthly sale range of 4,980,000 to 5,610,000 homes. More importantly, the days on market were higher than what we see today — and as such we had fewer bidding wars and less price growth.
The effect of higher mortgage rates, which in late 2018 got to 5%, also contributed to more stability in housing prices. 2018 and 2019 were more balanced markets, so in my view it was a healthier housing market compared to what we have today.
Once the 10-year yield gets above 1.94%, which should bring mortgage rates above 3.75%, then things should cool down enough to stabilize the unhealthy price gains we are currently experiencing. The 10-year at 1.94% is not a very high bar, but even so, that is higher than what I have forecasted for 2021.
If housing demand is better than I thought going into the demographic sweet spot years of 2022 and 2023, then housing inventory may not improve much. I still believe in my replacement buyer premise rather than a credit boom housing market. However, if I am wrong, then we will see it for sure in years 2022 and 2023. The price gains in 2020 and 2021 have already met the target that I anticipated to be cumulative for the five-year period of 2020 to 2024. This pathway explains my concern over what has happened recently.
During the years 2020 to 2024, I anticipated total sales (new and existing homes combined) to stay at 6.2 million or higher. The only way I saw this not happening was if home prices got out of hand early on, and guess what, that has happened. While we won’t break lower than 6.2 million in 2021, I am mindful of these recent price gains in both exiting and the new home sales market. Demand for existing homes will come from first-time homebuyers, cash buyers, investors, move-up and move-down buyers. The bump in demographics in the years 2020-2024 has already showed itself to be a powerful economic force for the United States of America.
All these buyer types will create steady replacement demand for the existing home market. The new home sales market, on the other hand, is driven by wealthier older buyers with mortgages. For this reason, new home sales are more dependent on mortgage rates. I recently expressed some concern in this market here.
More than anything, I am hoping that what happened in 2013-2014 and 2018-2019 happens again. During those periods, interest rates went up, which increased housing inventory and days on the market. The additional supply cooled the rate of growth of home prices and stopped the bidding wars. Unless we get an increase in housing inventory from softening demand or end-of-forbearance selling, only an interest rate increase will get us above 1,520,000 total housing inventory and out of the low housing inventory/high price quagmire we have been in since the summer of 2020, which has been most unhealthy housing market post-2008. Still, these are first world problems. I mean, come on, it’s not like we are having a bubble crash like some bros wanted to see.
Source: housingwire.com
Builders are increasingly focused on catering to so-called baby boomers, or those aged 55-years and up, with communities designed especially for their needs.
BUILDER reports that baby boomers are perhaps the most significant demographic for homebuilders, as they currently number around 76 million and hold around two-thirds of home equity in the U.S.
And so builders are trying to be proactive in addressing the housing needs of this all-important group. One idea that’s gaining momentum is age-restricted communities, which PulteGroup said is already proving to be a big hit. For example, its recently built “active adult” community Del Webb Bexley in Tampa Bay, Florida, saw more than 800 prospective buyers show up on the first day of an open house event, looking to buy one of just 850 available homes there. Due to the enormous response, PulteGroup says it’s now planning to build additional homes in the area.
Builders say that the retirement communities of yesteryear are unlikely to appeal to the baby boomer generation, and that the focus now is on much smaller-scale developments. Newer communities are also more focused on social activities, while golf and country club-type amenities are becoming less popular. Instead, baby boomers are looking for amenities such as nice restaurants and “pickleball-like setups”, BUILDER reported. They’re also seeking communities that are more accommodating to a variety of age groups, so that they’re children and grandchildren are more willing to visit.
“When it comes to serving the boomers, one size does not fit all,” Char Kurihara, vice president of sales and branding at Elevate Homes, told BUILDER. “Builders should recognize the need to offer multiple products and communities for these buyers.”
And builders are reaping the rewards of these baby boomer-focused efforts. According to BUILDER, 44 of the country’s top 100 building companies now offer an “active adult” line, and 13 of those firms say revenue from this accounts for more than 25% of their sales.
“There are really two groups of people to focus on right now when it comes to building new homes: millennials and baby boomers,” Jeff McQueen, division president at Shea Homes, which offers the Trilogy brand, told BUILDER. “But millennial household formation has been delayed, so, the other option is boomers. There’s been a huge pivot in the last five years, post-recession, where builders are now offering a single-level plan in almost all communities that cater to an empty nest buyer. Whether they call it active adult housing or not, they’re selling to more and more active adult customers.”
Source: realtybiznews.com
“The housing market tends to be ‘downside sticky,’ which means rents don’t typically fall much even when renter demand pulls back,” Redfin Deputy Chief Economist Taylor Marr said in a statement. “Instead of lowering rents when business is slow, many landlords offer perks like a free month’s rent or discounted parking, which tends to be less of a hit to profits.”
Marr added: “The steep slowdown in rent growth over the last year is providing some relief for renters, who now have more room to negotiate as their landlords grapple with rising vacancies. But with rents near their record high, most renters still aren’t finding big bargains.”
Though the $24 decline in rent growth from August 2022 isn’t much solace to renters, it has helped ease the inflation, according to Bureau of Labor Statistics data released Wednesday.
Consumer prices were up 3% this year through June, a deceleration from the 4% level reported in May and the peak of about 9% last summer. The cost of shelter, with rent being 70% of the indexes weight, rose 0.4% from a month earlier in June on a seasonally adjusted basis—a significant cooling from 0.8% at the end of last year. The slowdown in inflation reported Wednesday is in large part due to the deceleration in rent growth over the past year.
“Inflation should continue easing this year and into 2024, partly because the recent slowdown in rent growth isn’t fully baked into inflation data yet, and partly because rents have room to fall,” said Chen Zhao, an economist at Redfin. “Rents have room to come down because there remains a backlog of under-construction rentals that have yet to hit the market, which means landlords will continue grappling with vacancies and won’t be able to hike rents as rapidly.”
A year ago, most of the nation’s 150 largest markets were seeing asking rent growth north of 6% but in June only 18 were, noted Jay Parsons, rental housing economist at RealPage.
“And it’s definitely not the institutionally favored markets right now,” he said in a LinkedIn post. “The list is dominated by a mix of a) college towns, b) energy markets, and c) metros in the Northeast or Midwest.”
Per RealPage, the top asking rent growth leaders year-over-year in June were Midland/Odessa, Texas at 18%, followed by Madison, Wisconsin (10%), Champaign, Urbana, Illinois (8.6%), Springfield, Massachusetts (8.3%) and Knoxville, Tennessee (8.2%). Meanwhile, the metros with the biggest rent growth declines were Boise (-6.2%), Phoenix, Arizona (-4.7%), Las Vegas, Nevada (-4.0%), Vallejo/Fairfield/Napa, California (-3.9%), Fort Walton Beach, Florida (-3.5%).
Rent growth has cooled from its 2022 high partly because fewer people are moving due to economic uncertainty and slowing household formation, and partly because the number of options for renters has surged. Completed residential projects in buildings with five or more units rose 23.9% year over year to 493,000 on a seasonally adjusted basis in May. This means landlords have more vacancies to fill and less leeway to raise prices, according to the report.
While a homebuilding boom has led to more multifamily rentals on the market, it is letting up. The number of permitted residential projects in buildings with five or more units fell 12.2% year over year to 540,000 on a seasonally-adjusted basis in May.
In the Northeast, the median asking rent rose 4.3% year over year to a record $2,503 in June, according to Redfin. By comparison, asking rents rose 3.7% to $1,396 in the Midwest, 0.8% to $1,670 in the South, and fell 0.3% to $2,452 in the West. Rent growth has been slowing fastest in the West and South in part because it exploded so quickly during the pandemic, with renters scooping up apartments in Sun Belt cities like Phoenix, Miami and Dallas.
Source: housingwire.com