Whether you’re looking to buy a new house or not, what’s happening in the new home market should matter to you. That’s because, when the new home market is doing well. builders build more houses. And when more new homes are built, it creates additional supply which helps keep home prices from spiking. In short, if builders are optimistic about the market, it’s an encouraging sign. That’s why the National Association of Home Builders conducts a monthly survey tracking how builders feel about current conditions and their expectations for the coming months. In July, their Housing Market Index – which is scored on a scale where any number above 50 indicates more builders view conditions as good than poor – jumped 14 points to 72. Chuck Fowke, NAHB’s chairman, says there are a number of factors boosting builder confidence right now. “Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” Fowke said. “Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring. Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.” Among its components, the index found current sales conditions and expectations for the next six months experienced the biggest month-over-month rebound. (source)
Archive for July 2020
Mortgage Rates Continue Downward Trend
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell again last week, with rates down for 30-year fixed-rate mortgages with conforming loan balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Rates for jumbo loans were flat from the week before. The drop in rates led to a 12 percent increase in refinance activity. Purchase demand, on the other hand, was down for the week, though still 16 percent higher than last year at the same time. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says demand from buyers remains strong. “The drop in rates led to a jump in refinance activity to the highest level in a month, with refinance loan balances also climbing to a high last seen in March,” Kan said. “Purchase applications fell over the week but remained 16 percent higher than a year ago – the eight consecutive week of year-over-year increases. Purchase activity remains relatively strong, despite the continued economic uncertainty and high unemployment caused by the ongoing pandemic.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)
Today’s Movers Motivated By A Desire For Space
While the features we look for in a house often change from one season to the next, the reasons we decide to move in the first place remain fairly consistent. Things like marriage, starting a family, or wanting to be closer to loved ones and friends are common factors that might influence a move. But, in the wake of the coronavirus, there have been some changes. For example, according to one new analysis, the number one thing motivating people to move these days was a desire for more space. It seems spending more time at home has Americans reconsidering what’s important to them in a house. That would explain the current trend toward home offices, bigger yards, more privacy, and homes in suburban and rural areas. It’s obvious that the pandemic has had an influence on today’s buyers, what’s less obvious is whether or not these trends are here to stay. Only time will tell. But with an increasing number of businesses allowing their employees to work remotely, the popularity of bigger, suburban houses with a dedicated home office may not just be another passing fad. (source)
Mortgage Credit Tightens Most For Jumbo Loans
Mortgage credit availability refers to how easy it is for a borrower to get approved for a loan. When credit is less available or tighter, prospective borrowers’ financial standing and credit history have to meet a higher standard than when it’s more available or looser. The Mortgage Bankers Association tracks changes in credit availability with their monthly Mortgage Credit Availability Index. In June, it found that credit availability fell 3.3 percent from the month before, indicating that lending standards tightened. Joel Kan, MBA’s vice president of economic and industry forecasting, says jumbo loans saw the the biggest change. “Mortgage credit supply dropped again in June, as investors further reduced their willingness to purchase jumbo loans and those with lower credit scores,” Kan said. “Lenders are navigating a gradual economic and housing recovery that is still facing headwinds from the ongoing COVID-19 pandemic.” The index shows that the availability of jumbo loans suffered the biggest decline, dropping 7.3 percent. Conforming loans, on the other hand, were down just 1 percent, while government loans fell 2.8 percent. The conventional MCAI was down 4.1 percent from May. (source)
Competition Rises As Summer Market Heats Up
When there are more home buyers than there are homes for sale, prices rise. Mostly, that’s because buyers have to compete with each other for available homes by offering to pay more than the seller is asking. But while competition and bidding wars are good for home sellers, it can cause stress for buyers. That’s why home shoppers in today’s market need to be prepared. In most metros, buyer demand is high while the inventory of homes for sale is low. That means, a lot of hopeful home buyers are facing competition. So how likely is it that you will? Well, according to one recent analysis, 53.7 percent of buyers faced a bidding war in June, which is up from 44.4 percent in April. Of course, how likely you are to find competition depends on where you’re looking and what you’re looking to buy. For example, buyers in Boston, San Diego, and Salt Lake City were almost twice as likely to face bidding wars than buyers in Miami, Chicago, Las Vegas, and Tampa. Similarly, buyers of single-family homes were more likely to face competition than those looking for townhouses or condos. (source)
Home Buyers Return With Updated Wish Lists
A new survey of Realtors found that the vast majority say home buyers have returned and are eager to make a move. The survey, conducted by the National Association of Realtors, found 92 percent of respondents said their buyers have either returned or never left the market. But while buyers are coming back, they’re doing so with updated wish lists. In fact, 35 percent of Realtors said, because of the coronavirus outbreak, buyers have modified which home features are important to them. Additionally, nearly a quarter said buyers have changed the locations they’d like to target. Lawrence Yun, NAR’s chief economist, says being on hold because of the pandemic helped Americans focus on what’s most important to them. “A number of potential buyers noted stalled plans due to the pandemic and that has led to more urgency and a pent-up demand to buy,” Yun said. “After being home for months on end – in a home they already wanted to leave – buyers are reminded how much their current home may lack certain desired features or amenities.” Among the top features buyers added to their must-have list, home offices, more space, and a larger yard were the most commonly cited. (source)
Home Purchase Loans Up 33% From Last Year
According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes is now 33 percent higher than it was at the same time last year. The improvement comes after another week-over-week increase. It also comes during a week when mortgage rates hit an all-time survey low. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says coronavirus news kept rates down. “Mortgage rates declined to another record low as renewed fears of a coronavirus resurgence offset the impacts from a week of mostly positive economic data, such as June factory orders and payroll employment,” Kan said. “Purchase applications continued their recovery, increasing 5 percent to the highest level in almost a month and 33 percent from a year ago.” In addition to finding purchase demand up from last week, the report found the size of the average loan is rising. In fact, the average purchase loan last week was $365,700 – further evidence that low inventory is driving home prices higher. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)
Americans More Optimistic About Housing Market
It’s no surprise that Americans surveyed in March and April didn’t feel it was a good time to buy or sell a house. Coronavirus mitigation efforts had most of the country at home and unemployment was rising rapidly. But, since then, optimism has started to return. In fact, according to Fannie Mae’s monthly Home Purchase Sentiment Index – which tracks consumers’ perception of the market, jobs, and their financial situation – June saw a significant increase in the number of survey respondents who view home buying and selling conditions positively. In fact, the net share of participants who said it was a good time to buy rose 21 percent over the previous month, while optimism about selling rose 23 percent. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says the rebound is encouraging, but challenges remain. “A second month of improvement in June allowed the HPSI to regain some of the sharp losses in optimism observed in March and April,” Duncan said. “However, this activity may cool again in the coming months, depending on the extent to which it can be attributed to consumers having chosen to delay or to accelerate home buying plans due to the pandemic.” (source)
Homes Are Affordable In 49% Of US Counties
In an effort to determine how affordable it is to buy a home, ATTOM Data Solutions looked at how much of the average wage earner’s monthly income is needed to make the mortgage payment on a median-priced home in counties across the country. The results of their recently released Q2 U.S. Home Affordability Report show 49 percent of US counties are now more affordable than their long-term historical average. That’s a significant improvement from last year, when the report found just 31 percent of counties affordable. Todd Teta, ATTOM’s chief product officer, says current market dynamics are encouraging for both buyers and sellers. “The latest affordability numbers reveal a win-win situation for sellers as well as buyers,” Teta said. “Prices are rising again around the country during the current home-buying season, despite worries that the economic impact of the coronavirus pandemic would halt the nine-year run up in home values. But a combination of wage gains and declining mortgage rates are helping to override the increases and make homes more affordable in large swaths of the United State.” The report found the counties where payments required the smallest percentage of wages were in the Midwest, with counties in Ohio, Wisconsin, and Michigan making up the top 5 most affordable. (source)
What’s Happening In The Luxury Home Market?
Luxury can mean different things to different people. So when you’re talking about the luxury home market, it’s good to define the parameters. After all, a $1 million home in Los Angeles isn’t the same as a $1 million home in Kansas City. Generally speaking, though, the luxury market is categorized as homes in the top 5-to-10 percent based on home value. And naturally, the high end of the market doesn’t always behave the same as other tiers do. So what’s been happening in the luxury market lately? Well, according to one recent analysis, the median home price in luxury markets has fallen 2.3 percent in recent weeks – at the same time the overall market has seen prices go up. Part of the reason for this is that the typical home buyer plans to live in the home they buy for many years, giving them some protection against temporary economic turmoil. Luxury buyers, on the other hand, may be more reluctant to make a large investment in times of uncertainty. Because of this, the ratio of available homes to interested buyers is different in high-end markets and can cause prices to move independent from the overall trend. (source)
