Homebuilder confidence has been rising over the past few months, and housing starts rose 21.7% from April. Strong new home sales have gotten the new construction industry back on track to deliver much-needed inventory for this undersupplied market. They now supply about 30% of the residential sales market.
“This spring shopping season has buyers searching for listings and affordability – both of which can be found in new construction – with many builders offering incentives and fresh inventory,” said Zillow Senior Economist Nicole Bachaud in a statement. “This has brought a resurgence to the new construction industry with sales rising and home builder confidence climbing.’
The new home market stands in contrast to the existing re-sales market, which has sputtered due to record-low inventory and high listing prices. Still, Zillow economists said, there are signs that the existing home sales market might be growing.
The median sales price of new homes sold in May 2023 was $416,300 versus $396,100 for existing home sales. The average sales price for new homes was $487,300.
The seasonally‐adjusted estimate of new houses for sale at the end of May was 428,000. This represents a supply of 6.7 months at the current sales rate.
Demand has been resilient as people grow accustomed to interest rates in the 6%-7% range, and existing inventory remains tight, economists said. These factors are making new homes more visible on the market, while homeowners looking to trade up are attracted by new floor plans, more technology, as well as higher efficiency, noted George Ratiu, chief economist at Keeping Current Matters.
Housing starts data, like new home sales data, can be wild month to month, so the trend is always more important than any one report and the revisions are critical. We can have one monthly report with an extremely positive or negative print that is revised higher or lower the next month. The fact that the headline number on this report was good and the revisions were positive is a good sign. So far, housing construction has done well during 2020-2022 considering the economic drama. The housing sector has had to deal with a global pandemic, shortages of products and skyrocketing lumber costs, but in the end, mother demographics wins.
Housing starts
From Census: Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1,769,000. This is 6.8 percent (±14.9 percent)* above the revised January estimate of 1,657,000 and is 22.3 percent (±14.3 percent) above the February 2021 rate of 1,447,000. Single‐family housing starts in February were at a rate of 1,215,000; this is 5.7 percent (±11.8 percent)* above the revised January figure of 1,150,000. The February rate for units in buildings with five units or more was 501,000.
As we can see below, slow and steady wins this race. We had more housing starts during the bubble years because from 2002 to 2005 that demand curve was higher, but it was facilitated by unhealthy credit growth. The homebuyers of new homes today are very solid, but since we don’t have a credit boom in housing, housing starts will move up slowly. This is a very positive thing because it’s real. When you have a speculative credit bubble, you’re prone to a massive correction.
Remember that back in 2018, the new home sales and housing starts sector had a slowdown when mortgage rates got to 5%. It wasn’t a crash in demand but a slowdown for sure. Since the previous expansion was slow and steady, we weren’t ever working from an overheated new home sales sector, so the slowdown never created a crash. Since then, housing starts have been increasing as new home sales have been growing.
Housing permits
From Census: Privately‐owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,859,000. This is 1.9 percent below the revised January rate of 1,895,000, but is 7.7 percent above the February 2021 rate of 1,726,000. Single‐family authorizations in February were at a rate of 1,207,000; this is 0.5 percent below the revised January figure of 1,213,000. Authorizations of units in buildings with five units or more were at a rate of 597,000 in February.
I see a similar story here with housing permits: the trend is your friend and slow and steady wins the race. The big difference for me in the years 2020-2022 from 2008-2019 is that the low bar in housing starts is gone. The previous economic expansion had the weakest housing recovery ever; new home sales and housing starts were working from deficient levels and didn’t have the boom that many people had hoped for. It looked pretty normal to me; I didn’t anticipate housing starting a year at 1.5 million until 2020-2024 because then the demand for new homes would warrant that much construction.
People forget that housing construction is built on the need for new homes, which are more expensive than the existing home sales market. So the meager inventory in the existing home sales market has benefited the builders because it makes their products more valuable.
Housing completions
From Census: Privately‐owned housing completions in February were at a seasonally adjusted annual rate of 1,309,000. This is 5.9 percent (±13.3 percent)* above the revised January estimate of 1,236,000, but is 2.8 percent (±12.0 percent)* below the February 2021 rate of 1,347,000. Single‐family housing completions in February were at a rate of 1,034,000; this is 12.1 percent (±14.7 percent)* above the revised January rate of 922,000. The February rate for units in buildings with five units or more was 266,000.
As you can see below, we haven’t gone anywhere for years now. It’s a shame that the housing market has to deal with so much drama while the U.S. has the most prolific housing demographic patch in history.
Here is where we can talk about some risks looking out to the housing market. Mortgage rates have risen since the lows we saw last year. You can make a case that a few people, not many, might not want to buy their expensive new home now that rates have just moved higher.
However, I will give a personal take on this after talking to a friend who sells new homes. The buyers are frustrated beyond belief with how long the process is taking while they watch rates rise. However, what my friend said was: What else are they going to do? The fact that total existing inventory is at all-time lows and it’s been a madhouse trying to buy a house has kept some new home buyers in line.
The recent builder’s confidence data took a noticeable fall, and there is some concern about future sales. I believe the homebuilders confidence index showing you the directional changes in the housing market landscape is critical. In 2020, we had an abnormal surge in housing data which was just showing make-up demand toward the end of the year in 2021. Naturally, the housing data was going to moderate from this pace in 2021. The housing data to me outperformed toward the end of 2021, so look for some moderation in the data coming up as well.
Regardless of that premise, keep an eye out on the builder’s confidence and the monthly supply of new homes data to gauge the health of this sector of our economy.
From NAHB:
All in all, the Census Bureau’s construction report was solid and had positive revisions. However, we are still hampered by the limits of being able to finish building homes promptly. Now that rates have risen, we need to wait and see if that impacts buyers wanting their homes with much higher rates. The new home sales market is more sensitive to mortgage rates than the existing home sales market. History has shown us that when demand isn’t growing, the builders will slow down the growth rate of construction.
Housing starts data, like new home sales data, can be wild month to month, so the trend is always more important than any one report and the revisions are critical. We can have one monthly report with an extremely positive or negative print that is revised higher or lower the next month. The fact that the headline number on this report was good and the revisions were positive is a good sign. So far, housing construction has done well during 2020-2022 considering the economic drama. The housing sector has had to deal with a global pandemic, shortages of products and skyrocketing lumber costs, but in the end, mother demographics wins.
Housing starts
From Census: Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1,769,000. This is 6.8 percent (±14.9 percent)* above the revised January estimate of 1,657,000 and is 22.3 percent (±14.3 percent) above the February 2021 rate of 1,447,000. Single‐family housing starts in February were at a rate of 1,215,000; this is 5.7 percent (±11.8 percent)* above the revised January figure of 1,150,000. The February rate for units in buildings with five units or more was 501,000.
As we can see below, slow and steady wins this race. We had more housing starts during the bubble years because from 2002 to 2005 that demand curve was higher, but it was facilitated by unhealthy credit growth. The homebuyers of new homes today are very solid, but since we don’t have a credit boom in housing, housing starts will move up slowly. This is a very positive thing because it’s real. When you have a speculative credit bubble, you’re prone to a massive correction.
Remember that back in 2018, the new home sales and housing starts sector had a slowdown when mortgage rates got to 5%. It wasn’t a crash in demand but a slowdown for sure. Since the previous expansion was slow and steady, we weren’t ever working from an overheated new home sales sector, so the slowdown never created a crash. Since then, housing starts have been increasing as new home sales have been growing.
Housing permits
From Census: Privately‐owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,859,000. This is 1.9 percent below the revised January rate of 1,895,000, but is 7.7 percent above the February 2021 rate of 1,726,000. Single‐family authorizations in February were at a rate of 1,207,000; this is 0.5 percent below the revised January figure of 1,213,000. Authorizations of units in buildings with five units or more were at a rate of 597,000 in February.
I see a similar story here with housing permits: the trend is your friend and slow and steady wins the race. The big difference for me in the years 2020-2022 from 2008-2019 is that the low bar in housing starts is gone. The previous economic expansion had the weakest housing recovery ever; new home sales and housing starts were working from deficient levels and didn’t have the boom that many people had hoped for. It looked pretty normal to me; I didn’t anticipate housing starting a year at 1.5 million until 2020-2024 because then the demand for new homes would warrant that much construction.
People forget that housing construction is built on the need for new homes, which are more expensive than the existing home sales market. So the meager inventory in the existing home sales market has benefited the builders because it makes their products more valuable.
Housing completions
From Census: Privately‐owned housing completions in February were at a seasonally adjusted annual rate of 1,309,000. This is 5.9 percent (±13.3 percent)* above the revised January estimate of 1,236,000, but is 2.8 percent (±12.0 percent)* below the February 2021 rate of 1,347,000. Single‐family housing completions in February were at a rate of 1,034,000; this is 12.1 percent (±14.7 percent)* above the revised January rate of 922,000. The February rate for units in buildings with five units or more was 266,000.
As you can see below, we haven’t gone anywhere for years now. It’s a shame that the housing market has to deal with so much drama while the U.S. has the most prolific housing demographic patch in history.
Here is where we can talk about some risks looking out to the housing market. Mortgage rates have risen since the lows we saw last year. You can make a case that a few people, not many, might not want to buy their expensive new home now that rates have just moved higher.
However, I will give a personal take on this after talking to a friend who sells new homes. The buyers are frustrated beyond belief with how long the process is taking while they watch rates rise. However, what my friend said was: What else are they going to do? The fact that total existing inventory is at all-time lows and it’s been a madhouse trying to buy a house has kept some new home buyers in line.
The recent builder’s confidence data took a noticeable fall, and there is some concern about future sales. I believe the homebuilders confidence index showing you the directional changes in the housing market landscape is critical. In 2020, we had an abnormal surge in housing data which was just showing make-up demand toward the end of the year in 2021. Naturally, the housing data was going to moderate from this pace in 2021. The housing data to me outperformed toward the end of 2021, so look for some moderation in the data coming up as well.
Regardless of that premise, keep an eye out on the builder’s confidence and the monthly supply of new homes data to gauge the health of this sector of our economy.
From NAHB:
All in all, the Census Bureau’s construction report was solid and had positive revisions. However, we are still hampered by the limits of being able to finish building homes promptly. Now that rates have risen, we need to wait and see if that impacts buyers wanting their homes with much higher rates. The new home sales market is more sensitive to mortgage rates than the existing home sales market. History has shown us that when demand isn’t growing, the builders will slow down the growth rate of construction.
From the hustle and bustle of Union Square to the peaceful tranquility of small villages like Cold Spring, New York is a great pace to live and work. New York residents have plenty of options when it comes to financial institutions, including some of the best credit unions and community banks in the country. Our goal is to make finding the right bank easier with this list of the best banks and credit unions in New York.
11 Best Banks in New York
New York City is known for Wall Street, but there’s far more to New York than its financial center. No matter where you live in the state, you can choose to go with a credit union, regional bank, local bank, or the biggest bank in the country. Don’t rule out online banks, either, since many have competitive offerings.
Here’s our list of the 11 best banks and credit unions in New York to help you narrow it down to one solid option.
1. New York Community Bank
It may be a New York bank, but New York Community Bank is one of the largest banks in the country. NYCB’s parent company is New York Community Bancorp, Inc., which also owns Flagstar Bank and has branches in New York, New Jersey, Ohio, Florida, and Arizona.
You’ll get access to more than 56,000 ATMs through NYCB’s ATM network, which includes both Allpoint and Presto! machines nationwide. NYCB also offers great rates on CDs. You can get a 6-month CD that earns 4.50% APY or a 12-month CD with a rate of 4.25% APY.
Fees:
No monthly maintenance fees
No overdraft fees
Balance requirements:
$1 minimum deposit to open
ATMs:
Fee-free at New York Community Bank ATMs
Fee-free at Allpoint and Presto! ATMs nationwide
$2.50 fee for each out-of-network ATM transaction
Interest on balance:
Up to 4.50% APY on CDs
Additional perks:
2. Chime
Chime is a modern online banking service that features a wide array of benefits, including fee-free overdrafts up to $200, early direct deposit access, and no monthly fees or foreign transaction charges.
With Chime, you can also get a secured credit card to help boost your FICO Score® with no interest or annual fees. In addition, it allows for fee-free transfers and savings growth with an APY of 2.00%.
You also stay informed with daily balance notifications and transaction alerts. Safety is a priority with secure processes in place, FDIC insured funds up to $250,000, and round-the-clock support channels for any assistance required.
Fees:
No monthly service fees
No overdraft fees
Balance requirements:
No minimum opening deposit required
No minimum daily balance required
ATMs:
Fee-free at 60,000+ ATMs nationwide
$2.50 fee for out-of-network ATMs
Interest on balance:
2.00% APY on savings
Additional perks:
Secured credit card helps you build credit with no credit check required
SpotMe covers up to $200 in overdrafts
3. Chase Bank
National banks have plenty to offer, including expanded brick-and-mortar branches and a wide range of banking products. Chase Bank is one of the largest banks in the U.S., with branches and ATMs in 48 states and the District of Columbia.
Currently, Chase is offering a $200 bonus for its Chase Total Checking account. This account comes with a $12 monthly fee, but Chase will waive it if you receive at least $500 monthly in direct deposits, maintain a $1,500 daily balance, or have an average $500 daily balance across all your Chase accounts.
Fees:
$12 monthly fee (waived with requirements)
$34 overdraft fee
Balance requirements:
No deposit to open
No minimum balance requirement
ATMs:
Fee-free at 15,000+ Chase Bank ATMs nationwide
$3-$5 out-of-network ATM fee
Interest on balance:
0.01% APY on savings accounts
Up to 3.75% on CDs
Additional perks:
$200 bonus for new checking account
Bonus and 1.5% unlimited cash back on credit card
4. NBT Bank
Based in Norwich, New York, NBT Bank has branch locations in New York, Pennsylvania, Vermont, Massachusetts, New Hampshire, Maine, and Connecticut. You’ll find two checking accounts that don’t charge monthly fees.
Classic Checking includes unlimited check writing and is designed for those who prefer the experience that comes with traditional banks. NBT’s eChecking account has you managing everything. The biggest benefit to eChecking is that your balance earns interest.
Fees:
No monthly fees
$35 overdraft fee
Balance requirements:
No deposit to open
No minimum daily balance requirements
ATMs:
Fee-free at NBT Bank ATMs
$1.50 fee for out-of-network ATM withdrawals
Interest on balance:
0.01% APY on eChecking
Up to 0.03% APY on savings
Additional perks:
Competitive rates on loans
Multiple business checking accounts
5. Capital One
One of the top national banks in New York is Capital One, which has branches and cafés across the country. Although there are fewer branches these days, some locations have been turned into cafés with coffee and free Wi-Fi along with banking services. But wherever you are, chances are you’ll find a Capital One ATM. You can withdraw cash at any Capital One, MoneyPass, or Allpoint ATM nationwide.
Fees:
No monthly maintenance fees
No overdraft fee
Balance requirements:
No deposit to open
No minimum daily balance requirements
ATMs:
Fee-free at Capital One ATMs
Fee-free at any MoneyPass or Allpoint ATM
$2 fee for out-of-network ATM transactions
Interest on balance:
Up to 4.10% APY on savings
Up to 4.75% APY on CDs
Additional perks:
Cash deposits at any CVS location
Some branch locations have cafés and free Wi-Fi access
6. GO2bank
Online banks like GO2bank have their perks. You’ll often find competitive interest rates and low fees. However, mobile banking does have its limits, and that’s where GO2bank stands out.
You’ll not only be able to withdraw cash at any Allpoint ATM, but you can also deposit cash at more than 90,000 retailers across the country. As long as you’re okay with not having an in-person banking experience, GO2bank could be a solid option.
Fees:
$5 monthly fee (waived with requirements)
$15 overdraft fee
Balance requirements:
No opening deposit minimum
No minimum daily balance required
ATMs:
Fee-free at Allpoint ATMs nationwide
$3 fee for out-of-network ATM transactions
Interest on balance:
Up to 4.50% APY on savings
Additional perks:
Secured credit card helps you build credit with no credit check required
Deposit cash at 90,000+ retail locations nationwide
7. Santander Bank
Santander Bank is a regional bank with branch locations in New York, Connecticut, Delaware, Florida, Massachusetts, New Hampshire, New Jersey, Pennsylvania, and Rhode Island. The free checking account option is Simply Right Checking, which waives the $10 monthly fee as long as you have at least one activity on the account each month. This includes any deposit, withdrawal, transfer, or payment posted to the account within each calendar month.
Fees:
$10 monthly fee (waived with requirements)
$15 overdraft fee
Balance requirements:
$25 opening deposit
No minimum daily balance required
ATMs:
Fee-free at 2,000+ Santander Bank ATMs
$3 fee for out-of-network ATM transactions
Interest on balance:
0.03% APY on savings accounts
Up to 5.50% APY on CDs
Additional perks:
8. HSBC
HSBC isn’t just a national bank. It’s multinational, with locations across the U.S., as well as in Latin America, Europe, Africa, the Middle East, and Asia. This is a bank for high rollers, with a steep fee of $50 monthly if you don’t meet minimum requirements. Those requirements are either a $75,000 balance, monthly direct deposits of at least $5,000, or a residential mortgage loan of at least $500,000.
If you travel internationally, though, HSBC is worth considering since you can use your debit card at any ATM worldwide with no fees. HSBC also rebates up to five U.S. third-party ATM fees each month.
Fees:
$50 monthly fee (waived with requirements)
No overdraft fee
Balance requirements:
No minimum opening deposit
No minimum daily balance required ($5 to earn interest)
ATMs:
Fee-free at 55,000+ Allpoint ATMs nationwide
No fees for out-of-network ATM transactions
Up to five third-party U.S.-based ATM fees rebated monthly
Interest on balance:
0.01% APY on checking
Up to 4.15% APY on savings account
Up to 4.50% APY on CDs
Additional perks:
Unlimited rewards credit cards available
In-app support for international transactions
9. Corning Credit Union
Corning Credit Union membership is open to anyone who lives, works, worships, or attends school in Chemung County or Corning, New York. Membership is also open to residents of select areas in North Carolina, Pennsylvania, and South Carolina. The best thing about Corning Credit union is that its basic checking account earns 3.00% APY.
Fees:
No monthly fee
$32 overdraft fee
Balance requirements:
No minimum daily balance required
ATMs:
Fee-free at Corning Credit Union ATMs
$1 fee for out-of-network ATMs (waived for first four each month)
Interest on balance:
Up to 3.00% APY on checking
Up to 1.00% APY on savings
Up to 4.60% APY on share certificates
Additional perks:
Competitive rates on loans
Wide range of rewards-earning credit cards available
10. Dime Community Bank
If you run a business in the New York City or Long Island area, Dime Community Bank has plenty to offer. Dime’s business checking accounts come with a $12 monthly fee for up to 250 items, but Dime will waive it as long as you have an average daily balance of $10,000 each month.
Small business owners might find this on the high side, but if you have more than 250 items each month, that fee goes up to $25 with a balance requirement of $20,000 to waive it. But if you can meet the minimums, or you don’t mind the fee, you might like the extra services offered to members.
Fees:
$12 monthly fee (waived with requirements)
$35 overdraft fee
Balance requirements:
No minimum opening deposit required
ATMs:
Fee-free at Dime Community Bank ATMs
$1.50 fee for out-of-network ATMs
Interest on balance:
Rates not publicly disclosed
Additional perks:
Wide range of loans that serve small businesses
Access to legal, real estate, and accounting services
11. TD Bank
TD Bank is a national bank with hundreds of branches across New York. Although TD’s checking account comes with a $4.95 monthly fee, everything else is free, including overdrafts. One of this bank’s standout features, though, is its CD rates. Currently, you’ll get 5.00% APY on a six-month CD, with the option to bump up the rate if the market changes.
Fees:
$4.95 monthly fee
No overdraft fees
Balance requirements:
No minimum opening deposit required
No minimum daily balance required
ATMs:
Fee-free at 2,600+ TD Bank ATMs nationwide
$3 fee for out-of-network ATMs
Interest on balance:
Up to 3.51% APY on savings account
Up to 5.00% APY on CDs
Additional perks:
Live 24/7 customer service available online
Same-day replacement for lost debit card
Methodology
If you live in New York, chances are you know there’s no shortage of options. But we strove to create a list that brings together a little of everything. Not every customer wants the biggest bank, but plenty of customers would rather have a larger bank with a robust set of features. We combined small, local banks, credit unions, and large, corporate banks to ensure you can find the best bank for you.
Of course, it’s vital to make sure you’re going with a secure bank. We narrowed our list to those banks that had solid reputations and a history of serving New York residents. Beyond that, we made sure each bank offers savings accounts as well as checking, and we included a few that have features that would appeal to small business owners.
When you’re ready to open a bank account, it’s important to compare banks to make sure you’re getting the best rates. Many banks and credit unions can offer a great banking app and chat support, but you might prefer the personal touch you get with a local bank. Whatever your choice, pay close attention to fees and interest rates to ensure you’re getting the best deal for parking your money.
BlackRock, one of the world’s largest financial firms, says three key moves can sharply boost retirement income. Most people focus on building up their savings when they make retirement plans. However, by also focusing on the drawdown phase, the duration of the nest egg that you have accumulated can be significantly extended, BlackRock says in a recent report.
Consider working with a financial advisor as you develop a long-term retirement plan for yourself.
Add Guaranteed Lifetime Income via an Annuity
Annuities have become a hot topic in recent years, as financial professionals have increasingly debated their pros and cons. On the upside, they hedge against longevity risk. A lifetime annuity can guarantee, aside from catastrophic failure on the part of the insurance company, that you will receive a minimum income for life. On the downside, annuities can sometimes post weaker growth than even the standard S&P 500 index fund.
BlackRock argues that the benefit of hedging against longevity risk, though, is quite powerful. By putting up to 30% of your portfolio savings into a retirement annuity, you can create a strong base for the future of your retirement income. Alongside Social Security, this gives you an income that never draws down and will not fade.
Shift to an Aggressive Asset Allocation
There’s a catch to an annuity plan, though. Perhaps the biggest risk with annuities, as noted, is their low rate of return. In fact, Fidelity says that in recent years annuities often return one-eighth the amount of a simple S&P 500 index fund. That’s a recipe for low, slow growth.
So, BlackRock suggests balancing your annuity investments with a more aggressive market portfolio. In other words, leverage the security that you have with your annuity to rebalance your portfolio toward higher-return assets like stocks, if even just a stock market index fund, like the S&P.
By doing this, you’re more protected against loss by the guaranteed income of the annuity, while also boosting your overall spending power in retirement with the projected growth of the equities. This lets you retain a strong equity portfolio later in life, when many investors would otherwise start shifting their investments in favor of more stable, fixed-income assets, like bonds or CDs.
“Adding guaranteed lifetime income combined with a more aggressive asset allocation generates 29% more annual spending ability from one’s retirement savings (excluding Social Security) and reduces downside risk by 33%,” BlackRock states in the report.
Retire (and Take Benefits) Later in Life
Finally, BlackRock recommends delaying retirement by two years. The firm suggests delaying retirement, along with Social Security benefits and annuity payouts, from age 65 until age 67. This is not, however, a delayed retirement. For anyone born after the year 1960, the goalposts have been moved back and full retirement age is set at 67.
The firm’s basic analysis still stands though. As the firm writes, “[a]mong all retirement decisions, the choice of when to retire and claim Social Security often has the single greatest impact on one’s financial security.”
Putting this off even by just two years can significantly boost your Social Security benefits. It will also give your annuities time to continue growing, making their lifetime benefits stronger, while allowing your portfolio to accumulate extra years of high-value growth as well.
BlackRock finds that pushing back retirement by two years can boost a retiree’s lifetime spending power by 16% and reduce downside risk by an additional 15%. In combination with the 29% retirement increase gained by getting an annuity and having an aggressive, stock market-based asset allocation, retirees can sharply extend the duration of their retirement income.
Bottom Line
For many investors, the good news here is that BlackRock probably recommends a version of what you are already pursuing: diversification. This approach suggests that you should balance high-security assets, in the form of lifetime annuities, against high-return assets, such as stocks. It recommends delaying retirement as a way of boosting your lifetime Social Security benefits and maximizing your late-in-life portfolio returns. For the average investor and saver, this is all very doable.
Retirement Savings Tips
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Longevity risk is the possibility that you will live too long, and that’s a perverse way of looking at life. So start making plans right now to celebrate your hundredth birthday in style.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Case in point: Today we have 69,000 new homes completed and ready to sell, as shown below. The builders have managed their backlog nicely to ensure this data line doesn’t explode higher on them like we saw in 2008. An average number would be around 80,000 homes for sale, so we are returning to normal.
But a bigger story here is that the builders’ biggest competition isn’t other builders — it’s the number of existing homes on the market. Existing homes are cheaper and have a geographical advantage because they’re all over the map. In 2007, we had more than 4 million total active listings, which was too much supply for the builders to compete effectively. Today, the total number of active listings according to NAR is 1.080 million, and that number is down year over year.
NAR total active listings data going back to 1982:
This explains why the builders and new homes are doing better than the existing home sales market, which deals with higher mortgage rates and low active listings. Some people prefer something other than the current active existing inventory. This means new homes — with all the bells and whistles — can peel some buyers from the existing home sales market, especially if they pay down mortgage rates.
Now on to the report.
From Census:
New Home Sales: Sales of new single‐family houses in May 2023 were at a seasonally adjusted annual rate of 763,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.2 percent (±12.8 percent)* above the revised April rate of 680,000 and is 20.0 percent (±15.5 percent) above the May 2022 estimate of 636,000.
As we can see in the chart below, new home sales aren’t booming like what we saw at the peak of 2005 but are getting back to trend sales growth from the bottom we saw when rates got 5% in 2018. New home sales can be wild monthly, so if we see some negative revisions to this report, just remember: it’s the trend that matters, and it’s gotten much better here.
Also, in the chart below, we can all agree it isn’t housing 2005 or housing 2008 with new home sales.
For Sale Inventory and Months’ Supply: The seasonally‐adjusted estimate of new houses for sale at the end of May was 428,000. This represents a supply of 6.7 months at the current sales rate.
As home sales improve, the builders are winding down their monthly supply, which is good for the economy. I have a straightforward model for when the homebuilders will start issuing new permits with some kick. My rule of thumb for anticipating builder behavior is based on the three-month supply average. This has nothing to do with the existing home sales market — this monthly supply data only applies to the new home sales market and the current level of 6.7 months.
Housing permits will follow since this data line improves as new home sales keep growing. The model below has been my bread and butter for years:
When supply is 4.3 months and below, this is an excellent market for builders.
When supply is 4.4-6.4months, this is just an OK market for builders. They will build as long as new home sales are growing.
When supply is 6.5 months and above, the builders will pull back on construction
The current data has seen significant improvement, as the chart below shows. Also, the only bubble crash this year has been in cancellation rates, not existing home sales prices.
Also, it’s vital to break down the monthly supply data into different supply categories.
1.1 months of the supply are homes completed and ready for sale, about 69,000 homes
4.1 months of the supply are homes that are still under construction, about 259,000 homes
1.6 months of the supply are homes that haven’t started yet, about 100,000 homes
This is a solid report today as the builders are moving products and making deals to get buyers in. I love it.
Housing has always been used as an indicator of the economy. As the builder confidence data rose, many pessimists ignored it because they assumed it was a dead-cat bounce. Now that we are almost to July 4, 2023, it’s a wake-up call. I ask my bearish friends who use housing as a leading indicator going into recession and out what they believe the data is telling them now. So far, I haven’t heard back.
Home Builder Confidence Index
The builder’s confidence index is gold because the builders are thinking about making money, whereas some indexes might have a political or ideological twist. I track the builders’ confidence and the 10-year yield because these two are essential for housing. This report is a plus for the economy because construction worker employment risk will decrease if sales continue to higher and mortgage rates can fall.
This article aims to show how much progress we have made in this sector and why it’s happening. The report today is a positive story for the U.S. Hopefully, this trend continues to go higher because the best way to deal with inflation is always with supply, not demand destruction. Demand destruction is a short-term fix, but supply needs to grow over time to beat inflation.
A lack of existing homes for sale and robust demand are fueling a rally in homebuilder stocks, according to Citigroup.
The sector gauge outperformed the S&P 500 Index last week, rising as much as 3% compared with a 1.4% decline in the broader gauge. Both indexes slipped about 0.5% on Monday as traders weighed the Federal Reserve’s next move on interest rates this year. The housing supply shortage is lifting homebuilders, despite a strong May housing starts that led investors to wonder if the market is in the early stages of overbuilding, Citigroup said in a note on Monday.
Single-family inventories are still down 19% in April, below pre-pandemic levels, and under-building after the global financial crisis has caused a significant deficit of more than 1 million homes in the U.S., Citigroup analysts led by Anthony Pettinari wrote. As it currently stands, most measures suggest “the market does not have a path to close the housing deficit in the near-term,” the note said.
Adding to the crunch, current homeowners are locked into their lower mortgage rates, and it doesn’t appear they’ll be “unlocking” from that anytime soon, according to Citi. Tight resale inventory is in part due to a large group of potential move-up buyers opting not to sell their current properties, as to not lose their highly favorable mortgage rates.
The tight supply “may provide a multi-year tailwind for builders,” the note said. The bank remains positive on homebuilders, with buy-ratings for PulteGroup Inc., D.R. Horton Inc. and Lennar Corp., citing favorable net order growth as a near-term catalyst in the second half of 2023.
Citi estimates that benchmark Fed interest rates would have to fall to about 5% before total supply could reach pre-pandemic levels, and rates would need to fall to roughly 3% before supply could reach pre-global financial crisis average levels. The analysts view the latter scenario as highly unlikely.
Last week, the Fed unanimously voted to hold the benchmark rate in the target range of 5% to 5.25%, its first pause since it began aggressive rate hikes in early 2022.
“We expect that as mortgage rates fall, some of this pent-up supply may come to market; however, it would require a significant decline in benchmark FRM rates before supply normalizes to pre-pandemic levels,” the analysts wrote.
After a winter of dire housing market forecasts, the housing market regained its footing this spring, with home prices rising month-over-month for the third consecutive month in April, according to the S&P CoreLogic Case-Shiller National Home Price Index, which was released Tuesday. These increases came after seven consecutive months of decline.
“The index tracks price changes from the months of February, March, and April of 2023, and spotlights a growing number of buyers coming to terms with higher rates and looking for a path toward homeownership,” George Ratiu, the chief economist at Keeping Current Matters, said in a statement. “Inflation has been a headlining concern for most consumers over the past year, even as price growth had moderated noticeably. At the same time, households have seen interest rates push borrowing costs higher across the board for credit cards, auto loans, and home mortgages. At the same time, the official end of the pandemic signaled a return toward a new normal, encouraging Americans to embrace their next stage of life.”
On a monthly basis, the national index was up 1.3% in April. However, on a year-over-year basis, the index was down 0.2%, compared to an annual gain of 0.7% in March.
“The U.S. housing market continued to strengthen in April 2023,” Craig Lazzara, the managing director at S&P DJI, said in a statement. “Home prices peaked in June 2022, declined until January 2023, and then began to recover.”
Just like in March, both the 10-city and 20-city composite price indexes posted annual declines but monthly gains. For the 20-city composite, after seasonal adjustment, 17 out of the 20 cities reported lower prices in the year ending April 2023 versus the year ending March 2023. Boston, San Francisco and Cleveland all showed slight increases at 0.1%, 0.1%, and 0.9%, respectively.
Miami topped the list yet again with the highest annual price gain at 5.2%, with Chicago (4.1%) and Atlanta (3.5%), rounding out the top three.
“At the other end of the scale, however, the worst eight performers are all in the Mountain or Pacific time zones, with Seattle (-12.4%) and San Francisco (-11.1%) at the bottom,” Lazzara said. “The Southeast (+3.6%) continues as the country’s strongest region, while the West (-6.9%) remains the weakest.”
Overall, the 20-city index was down 1.7% on an annual basis, but up 1.7% on a monthly basis, while the 10-city index fell 1.2% year-over-year and rose 1.7% month-over-month.
“If I were trying to make a case that the decline in home prices that began in June 2022 had definitively ended in January 2023, April’s data would bolster my argument,” Lazzara said. “Whether we see further support for that view in coming months will depend on the how well the market navigates the challenges posed by current mortgage rates and the continuing possibility of economic weakness.”
With the national default deadline looming, the federal government reached an agreement to raise the debt ceiling.
The economy’s resilience and uncertainty surrounding the debt ceiling negotiations caused mortgage rates to climb, according to Freddie Mac Chief Economist Sam Khater.
Many homeowners and potential home buyers hope this means lower interest rates as we head into summer. Read on to learn more about the debt ceiling and its impact on the housing market and mortgage rates.
What is the debt ceiling?
Also known as the debt limit, the debt ceiling represents the maximum amount of money that the United States Treasury can borrow to pay the nation’s bills.
The U.S. hit its current borrowing limit of $31.4 trillion in January. That means the federal government cannot currently increase the amount of its outstanding debt, and paying the nation’s bills becomes more complicated.
In a letter to Congress, Treasury Secretary Janet Yellen said the U.S. could be incapable of paying its debt as early as June 1. If so, the federal government is at risk of defaulting for the first time in U.S. history.
She goes on to say the U.S. defaulting on its bills could cause “irreparable harm” to the U.S. economy. Interest rates on credit cards, auto loans and mortgage rates could skyrocket.
By increasing the debt ceiling, the Treasury can borrow funds to pay for government obligations, such as Social Security and Medicare benefits, tax refunds, military salaries, and interest payments on national debt.
What is the relationship between the debt ceiling and mortgage rates?
Although the debt ceiling itself doesn’t directly determine mortgage rates, its impact on the overall economy could wreak havoc on rates. The potential consequences and uncertainty associated with reaching the debt ceiling could impact investor confidence and lead to changes in interest rates, including mortgage rates.
“The debt ceiling debate can have a direct impact on the economy and mortgage rates. Continued delays will lead to increased uncertainty and result in upward pressure on mortgage rates,” said Shane Spink, regional manager for Acopia Home Loans.
What happens to mortgage rates if the debt ceiling is raised?
With a resolution reached and the debt ceiling raised, things should mostly return to normal. The U.S. never hit the ceiling before — although it’s gotten close in a few instances and those came with minor economic repercussions.
With the fear of a default removed and stability reestablished, consumer confidence will likely be restored and interest rates should slowly start coming down over the next 60 days.
What happens if the federal government does not raise the debt ceiling?
Not raising the debt ceiling could lead to dire consequences for the U.S. economy.
If the debt ceiling isn’t raised in time, the added uncertainty in our nation’s economy could negatively affect financial markets and interest rates across many sectors, including mortgage rates. This is because a debt default would force the Treasury Department to pay higher interest on its bonds to convince investors to stay the course.
Mortgage rates typically move in lockstep with yields on 10-year Treasury notes. Unless Congress moves quickly, yields could rise as the demand for Treasury notes could temporarily halt if investors worry that Treasuries are now a risky investment. Additionally, bondholders could seek higher rates to balance the increased exposure.
In either of these scenarios, rising yields could push mortgage rates higher. Higher mortgage rates can have several effects on the housing market and potential homebuyers.
First, higher rates increase the cost of borrowing, making mortgages less affordable for many buyers. This could also reduce overall demand for homes and potentially slow down an already struggling housing market.
Second, higher mortgage rates can impact the ability for existing homeowners to refinance their mortgages. When rates rise, refinancing becomes less popular, as the potential savings from refinancing decrease. This can impact a homeowner’s ability to access lower rates and potentially reduce their monthly mortgage payments.
Higher mortgage rates can also result in a ripple effect within other sectors of the economy. The housing market is deeply linked to a number of industries, such as construction, real estate and home improvement. Slower housing activity due to higher rates can dampen all these sectors, leading to job loss and decreased economic growth.
What happens to the housing market if US defaults on debt?
Any default, whether its short-lived or a lengthy road to recovery, could trigger a recession. The potential for job loss is massive, leading to an interruption in income for millions of Americans.
Consumers and workers could be hurt almost immediately as the federal government may be forced to cut back benefits and paychecks. As interest rates rise, so do borrowing costs. Rising rates in addition to withheld paychecks, could seriously impact housing, both in the short-term and long-term.
Investor sentiment would be impacted negatively, as it raises concerns about the government’s ability to repay its debts.
Not only would it add to an already struggling housing market that’s suffering from a lack of inventory and rising mortgage rates, getting a mortgage loan would become even more challenging. Small businesses would also struggle as getting a small business loan would become more difficult.
“We are already seeing what higher rates are doing to the overall housing market,” Spink says. “If the debt ceiling isn’t raised in time, this could be an unnecessary addition to already higher rates in a time where we would typically see accelerated applications during peak summer months”.
The bottom line
The debt ceiling has long been a contentious issue in the United States, with debates and political battles often becoming a major topic when the government nears its borrowing limit.
Whenever the risk of defaulting on the nation’s debt looms over the U.S economy, it’s important to keep a close eye on the debt ceiling debate, as well as its potential effect on mortgage rates and the housing market.
Whether you’re considering a new home purchase or a refinance, mortgage borrowers should speak with a lender about the available options for locking in a favorable rate prior to a potentially drastic jump in interest rates.
Inheriting a house with a mortgage requires making some decisions about what to do with the property. One option is to sell the home and pay off the loan with the sale proceeds. If you keep the home, you can assume the existing mortgage or refinance the loan. If you keep the home, you can live in it or rent it out. Your choices may be limited by the laws where you live. If the ownership of the house is split between one or more other heirs, you’ll have to consider their wishes. A financial advisor can help develop a plan to reach your personal financial goals.
Home Inheritance Basics
After someone passes away, a will can be used to bequeath property such as a private residence to a loved one. In the absence of a will, state laws may dictate where the property goes.
Often property or other assets inherited in this way goes through probate. When that happens, any debts owed by the estate must be paid off before assets are distributed to heirs. This means the mortgage has to be dealt with in some manner before the estate can be settled. State inheritance laws vary, so local requirements may limit your options.
Mortgage Inheritance Options
When you inherit a home with a mortgage, you’ll have two basic choices: sell it or keep it. Here are the pros and cons of each.
If you sell the home, you can use the proceeds to pay off the loan. If there is any money left after satisfying the lender, you can keep the cash as part of your inheritance.
Selling and paying off the loan relieves of you any responsibility to make future mortgage payments and keep up the property. And selling may be the only option if you share ownership of it with another beneficiary who wants cash. Taxes represent a potential complication. You may owe capital gains taxes on the money you receive after paying off the mortgage.
If you keep the home, you can assume the mortgage and start making payments. A federal law called the Garn-St. Germain Act generally requires lenders to let someone who has inherited a house assume an existing mortgage without getting credit approval or paying closing costs on a new loan. This can let you move into a place more desirable than you could buy on your own, in addition to possibly having pleasant memories associated with it.
Keeping the home gives you more options. You can live in the home if its location and other features meet your needs. Alternatively, you can rent it to tenants and, if the rent is more than the mortgage, collect passive income plus potential gains from price appreciation.
A major downside of keeping the property is that you have to make the mortgage payments, in addition to covering the taxes, insurance and other expenses. If you want to and can get approved for a new loan, however, you may be able to refinance the loan. Refinancing can let you take advantage of lower interest rates and possibly reduce the payments or, if you prefer, take cash out of the equity.
Potential Pitfalls
A lot of things can go right if you inherit a house with a mortgage. Some potential pitfalls to be aware of include these:
Negative Equity: If the house is underwater, meaning the outstanding balance of the mortgage is more than the property’s value, you won’t be able to sell it for enough to pay off the loan. Unless you can get the lender to agree to a short sale, you’ll still be responsible for the remaining balance.
Tax liability: Selling an inherited property and realizing a gain on it after settling the mortgage could create a tax obligation. The gain could even push you into a higher tax bracket so you’ll owe more on the other income you generate from work or investments.
Ownership costs: Repairs, maintenance, property taxes and homeowner association fees are some of the costs that can go with owning a home you inherit. Account for these costs before you decide what to do with the property.
Selling costs: Even if you sell the property, you’ll still have to pay a number of costs. These often include real estate agent commissions, closing costs and possibly repairs, among others. These costs will reduce the amount left after the transaction and can make the sale less appealing and worthwhile.
Picking the Right Approach
Deciding what to do when you’ve inherited a house with a mortgage involves balancing several considerations, including:
Your finances: Ask yourself whether you have the resources to keep making mortgage payments and maintaining the property.
Living situation: If you need a place to live and the inherited property suits your needs, it might make sense to assume the mortgage and move in.
Market factors: The real estate market in your area may suggest that it’s better to sell or rent than to keep the property and live in it.
Nostalgia: A family home could have pleasant memories or, for a variety of reasons, be someplace you’d prefer not to live.
Legal issues: If multiple heirs are involved, they might disagree about what to do with the property.
The Bottom Line
Inheriting a house with a mortgage presents options that need careful consideration. Selling the home and paying off the loan can relieve you of mortgage responsibilities. Alternatively, you can keep the home, assume the mortgage and either live in it or rent it out for passive income. State laws and the wishes of other heirs may limit your choices. Your finances, living situation, market conditions, emotions and legal issues will be part of the final decision.
Tips for Investing
Consider talking to a financial advisor before making any decisions about what to do with a home you have inherited. Finding a financial advisor doesn’t need to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you decide to sell an inherited home and pocket the cash, you may wonder what would happen if you invested the funds. SmartAsset’s Investment Return & Growth Calculator can give you an answer. Input the amount you’ll invest, how much and how often you’ll make additional contributions to your initial capital, the anticipated rate of return and your investment time horizon in years. The calculator will tell you what your portfolio will likely be worth at the end of that period.
Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.