If you’re considering buying a home, you’ve likely already thought about whether or not you can afford it. After all, buying a home is a major financial transaction, so there are few considerations more important than affordability. That’s why the National Association of Home Builders latest Housing Opportunity Index is good news for potential buyers. The report – which measures how affordable homes are for families earning the national median income – found that 59.6 percent of new and existing home sold between April and June were affordable. But while that’s positive news, affordability did fall from the first quarter, with the number of affordable homes down due to rising home prices. “Home prices appreciated robustly during the second quarter due to better-than-expected housing demand in the wake of the pandemic and because the coronavirus hindered the ability of builders to ramp up production,” Robert Dietz, NAHB’s chief economist, said. In fact, increasing prices let to a 1.7 percent drop in the number of affordable homes. During the first quarter, 61.3 percent of sold homes were considered affordable. (source)
Archive for August 2020
New Listings Grow Past Pre-Pandemic Pace
When the coronavirus pandemic began in mid-March, there were understandable concerns about how it would affect the housing market. But fortunately, though activity did fall, it rebounded just as quickly. Home buyers who delayed their plans adapted to new safety regulations and resumed their home search. But while buyers were quick to get back into the market, home sellers didn’t rebound quite as fast. The number of newly listed homes for sale lagged and it resulted in more competition among buyers, upward pressure on prices, and an increase in bidding wars. But according to the most recent Weekly Recovery Report from the National Association of Realtors’ consumer website, things may finally be turning around. In fact, the report, which covers numbers through the week ending August 8, found new listings grew passed their pre-pandemic baseline for the first time since the coronavirus’ onset. Javier Vivas, director of economic research for the site, says seller confidence has reached an important milestone. “Seller confidence has been improving gradually after reaching its bottom in mid-April, and now it appears to have reached an important recovery milestone,” Vivas said. “After five long months, sellers are back in the housing market.” (source)
Mortgage Rate Drop Stirs Up Loan Demand
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell last week, dropping to new survey lows. Rates were down across all loan categories, including 30-year fixed-rate loans with conforming loan balances, jumbo loans, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said favorable rates helped push demand for mortgage applications higher. “Refi activity responded to these lower rates, with the refi share reaching almost 66 percent of all applications, its highest level since May,” Kan said. “Home purchase activity continued its strong run with a 2 percent increase over the week and was up around 22 percent compared to the same week a year ago.” However, though low rates and rising demand are positive signs for the market, challenges remain. Among them, low housing inventory, the coronavirus’ spread, and the job market are lingering concerns that will continue in the week ahead. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)
Home Buyer Interest Moves To The Suburbs
The National Association of Realtors’ consumer website recently released the results of their quarterly Cross Market Demand Report, which looks at the homes and neighborhoods prospective buyers are searching online. According to the results, the coronavirus continues to influence home buyers’ needs and preferences. For example, 51 percent of views from residents of the country’s 100 biggest cities went to properties in the surrounding suburbs. That’s an all-time high and further evidence that the pandemic has caused a shift in what buyers are looking for in a house and neighborhood. Danielle Hale, the site’s chief economist, says home shoppers are increasingly interested in smaller towns, further from work. “We see lingering effects of the coronavirus on shopping behavior and preferences,” Hale said. “However, those looking elsewhere are much more likely to be looking in smaller, nearby markets. With remote work more common and accepted, it seems that people are looking to locate further from the office either to enjoy more space at a better price, or get closer to nature in the mountains or at the beach. At this point, they are not venturing too far away.” (source)
How Lumber Costs Affect The Price Of Homes
Housing conditions are largely dictated by supply and demand. Take a look at the balance of interested buyers to available homes and you can get a good idea where the market is headed. But while that seems simple enough, the underlying factors that cause shifts in supply and demand are less clear cut. That’s because there are an almost infinite number of things that might play a role. Everything from the global economy to the time of year can affect the balance of buyers and homes for sale. For example, the typical home buyer likely doesn’t think a lot about how the cost of lumber affects how much they’ll pay for a home. It does, though. In fact, according to the National Association of Home Builders, lumber prices have been high for a while now and, since mid-April, have moved even higher. The reasons have to do with a lack of domestic production and tariffs on Canadian lumber. However, the affect is that home builders have to add that cost to the price of new homes. That can slow the number of homes being built and drive the price up on the ones that are. Ultimately, that means high lumber costs hinder home building, which contributes to a lack of affordable inventory and higher home prices across the board. (source)
Americans Say Now Is A Good Time To Sell
Fannie Mae’s Home Purchase Sentiment Index surveys Americans about their feelings toward the housing market, buying and selling a home, job expectations, and their personal financial situation. The monthly survey aims to get a general sense of how optimistic Americans are about their money and the real estate market. In July, the index fell 2.3 points, following two consecutive months of gains. The decline was mostly due to a drop in the number of respondents who said it was a good time to buy a home. However, there was an uptick in participants who said it was a good time to sell. In fact, the net share of those who say it’s a good time to sell was up 4 percent. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says that’s mostly due to home price expectations. “Supply constraints appear to be applying upward pressure to consumers’ home price expectations, which in turn has contributed to both a sharp reversal in optimism about whether it is a good time to buy a home and further improvement in home-selling sentiment,” Duncan said. Also in the report, the number of respondents who said they weren’t concerned about losing their job in the next year was up 5 percent – potentially a good sign for future housing sentiment. (source)
Number Of Equity Rich Homeowners Grows
Simply put, having equity means your home is worth more than the amount you owe on it. And, according to ATTOM Data Solutions’ second-quarter 2020 U.S. Home Equity & Underwater Report, there are an increasing number of American homeowners who have it. The report looked at the number of mortgaged properties that could be considered equity rich, which was defined as homes whose estimated market value is at least 50 percent more than the amount owed on them. During the second quarter, 27.5 percent of the 55.2 million mortgaged homes in the country qualified as equity rich. That’s up from 26.5 percent during the first quarter. Todd Teta, chief product officer with ATTOM, says the improvement is another sign of the market’s strength despite a challenging environment. “Homeowners saw their equity rise far and wide throughout the United States during the second quarter of this year in yet another sign of the housing market punching back against the coronavirus pandemic,” Teta said. “More property owners rose into equity-rich territory and escaped the seriously underwater lane, putting more money into the average household.” (source)
Mortgage Rates Hit Another Record Low
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell to another record low last week, with rates declining for 30-year fixed-rate loans with conforming balances, jumbo loans, and 15-year fixed-rate loans. Rates for mortgages backed by the Federal Housing Administration were flat from one week earlier. But despite favorable rates, demand for mortgage applications still fell 5.1 percent from the week before. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says demand remains strong. “Purchase applications also fell slightly, but were still 20 percent higher than a year ago and have now risen year-over-year for 11 straight weeks,” Kan said. “Purchase loan balances continued to climb, which is perhaps a sign that the still-weak job market and tighter credit for government loans are constraining some first-time home buyers.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)
What Are The Top Challenges For Today’s Buyers?
Everybody’s home search is different. Where one buyer may fall in love, make an offer, and sign a contract after seeing a single house, another may spend weeks without finding a home that fits their needs and lifestyle. In short, how long it takes to locate and close on a house depends on a long list of factors, personal preferences, and conditions. So what do buyers who’ve been searching say is the number one thing making it difficult to find a home? Well, according to a new report from the National Association of Home Builders, it’s finding a home in their price range. In fact, 39 percent of respondents who have been actively searching for a home said that finding one at a price they could afford was the biggest obstacle. Another common factor was finding a house that had all of the buyer’s desired features. Among participants, 36 percent said they were having trouble finding a home that checked off the items on their wish list. Being outbid by another buyer and finding a home in the right neighborhood were also popular answers, with both being named by around 30 percent of survey participants. (source)
Homes For Sale Still Trailing Year Ago Levels
In a lot of ways, current housing market data looks almost unaffected by the coronavirus pandemic. Home sales have rebounded and are ahead of last year’s pace. Mortgage rates remain low, hovering just above, or at, all time lows. Buyer demand is up, competition is rising, and prices continue to climb. In short, from the numbers, the housing market is outpacing last year and in-line with forecasts from the beginning of the year. However, there is one housing stat that, more than the others, shows the coronavirus’ impact on the market. The number of homes available for sale is now, according to one analysis, 26.3 percent below where it was last year at the same time. Similarly, new for-sale listings are down 12.2 percent. In other words, low inventory – which was already the market’s main challenge – has been made worse by the pandemic. Homeowners aren’t putting their homes on the market and the imbalance could begin to dampen buyer demand and threaten affordability levels. Fortunately, since conditions are favorable for sellers right now, there’s reason to be optimistic that listings will increase and help bring better balance to the market. (source)
