When there’s a lack of homes for sale, new home construction plays an important role in balancing the market. Not only does building more new homes help provide buyers with options, it also helps keep price increases from spiking. That’s why the National Association of Home Builders conducts a monthly survey to gauge how confident home builders are in the market for new homes. If builders are optimistic, it’s good news for prospective home buyers, since it likely means more new homes – and a better balanced market – are on the way. The NAHB’s survey is scored on a scale where any number above 50 indicates more builders view conditions as good than poor. In March, the survey fell two points to 82, mostly due to concerns over the cost of lumber. Lumber prices have risen nearly 200 percent over the past year and the added costs have made it more difficult for builders to build homes affordably. However, despite the supply-side issues, high buyer demand has kept confidence near all-time highs. In fact, the index is currently just eight points below its record high of 90, reached last November. (source)
Archive for March 2021
Lenders See Stable Credit, Higher Demand Ahead
Each quarter, Fannie Mae asks senior mortgage executives for their views on the upcoming mortgage market. Their Mortgage Lender Sentiment Survey can be a good predictor of what’s ahead for housing. So what are mortgage execs saying about the coming spring and summer market? Well, for starters, they expect access to credit to remain stable. After tightening last spring, credit standards have eased over the past year and are now at pre-COVID levels. That means, qualified buyers should feel confident in their ability to be approved for a loan. Lenders also expect buyer demand to remain high this year. In fact, the survey found “demand expectations over the next three months rose significantly across all loan types from last last quarter and remained similar to the levels seen in Q1 2020.” In short, lenders are expecting a hot purchase market. However, though optimistic about demand from buyers, lenders aren’t as confident in refinance activity. With mortgage rates expected to increase from all-time lows, they predict there will be fewer homeowners looking to refinance as the year progresses. (source)
Millennials Say They’re Comfortable Buying Online
Traditionally, before you make an offer on a house, you go see it in person. After all, buying a home is a major financial transaction. You wouldn’t want to make that kind of commitment without seeing exactly what you were purchasing. But these days, there are other ways to see a property and home buyers are becoming increasingly comfortable with them. In fact, digital and online tools have become more widely accepted among buyers since the coronavirus pandemic began – especially, younger ones. For example, according to a newly released survey, 59 percent of millennial buyers now say they would be, at least, somewhat confident making an offer on a home they only toured virtually. Additionally, 39 percent said they’d be comfortable buying a home entirely online. That’s a significant percentage of buyers. But while substantial, it still leaves a majority of home buyers who wouldn’t be comfortable making an offer sight unseen. Which means, most buyers probably prefer a mix of virtual and traditional access to the homes they’re interested in seeing. It also means digital tools, like 3D-virtual tours, digital-floor plans, and self-tour technology, are likely here to stay. (source)
A Look At The Market One Year Into COVID
The housing market has done pretty well in the year since the coronavirus’ onset. Following an initial slowdown, home buyers bounced back in the months after the pandemic began. Then, the market benefited from record low mortgage rates and remote work – which helped fuel Americans’ interest in making a move. As a result, buyer demand surged and stayed high through the end of 2020 and into 2021. But while most measures of the market show it now surpassing pre-pandemic levels, new listings are one that continues to lag. In fact, according to a new report from the National Association of Realtors’ consumer website, new listings were nearly 30 percent lower than last year at the beginning of March. And when the number of available homes falls that far behind the number of interested buyers, price increases accelerate. Fortunately, Danielle Hale, the website’s chief economist, says the gap between supply and demand should ease in the months ahead. “The housing market’s lopsided momentum could ease in the coming months,” Hale said. “We expect the vaccine’s rollout to alleviate some sellers’ anxieties, which could help the supply crunch.” As that happens, and the market becomes more balanced, prices and competition should begin to wane. (source)
Loans To Buy Homes See Pre-Spring Spike
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates increased last week from the week before. In fact, rates were up across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, loans backed by the Federal Housing Administration, and 15-year fixed-rate loans. As a result, demand for refinance applications fell 5 percent from the week before. Demand for loans to buy homes, however, increased 7 percent. Joel Kan, MBA’s associate vice president of economic and industry forecasting, said it was the purchase market’s best week in a month. “With the spring buying season at the doorstep, the purchase market had its strongest showing in four weeks, with gains in both conventional and government applications,” Kan said. “Overall activity was 2.4 percent higher than a year ago, and loan sizes moderated for the second straight week – potentially a sign that more first-time buyers are entering the market.” The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)
Median Down Payment Reaches New High
To buy a house, you need to make a down payment. But how much of a down payment you decide to make depends on a lot of factors, including your savings, the price of the house you’re buying, and the terms of your loan. Which means, the amount varies from one buyer to the next. There are, however, some new numbers that can help give prospective home buyers a rough idea of what to expect when the time comes. According to ATTOM Data Solutions’ fourth-quarter 2020 U.S. Residential Property Mortgage Origination Report, the median down payment on single-family homes and condos at the end of last year was $24,500. Based on the median sales price of homes sold in the fourth quarter, that represents a nearly 8 percent down payment. It’s also a new high and a significant jump from where it was one year earlier, when the median down payment was $13,441. Why the increase? Put simply, home prices. Already low inventory was driven lower last year by the pandemic and the lack of available homes for sale has driven prices higher. Those increases have caused down payments to grow as well. As the market balances and prices moderate, however, down payments should too. (source)
Americans Optimistic About Job Security
Fannie Mae’s Home Purchase Sentiment Index is a monthly survey that looks at how Americans feel about buying and selling homes in today’s market. The survey asks participants for their opinions on home prices, mortgage rates, their personal financial situation, job security, etc. In February, the index was relatively flat. Results show fewer respondents said it was a good time to buy or sell a home than did the month before. There was also an increase in the number of respondents who said they believe home prices and mortgage rates will rise in the next 12 months. The biggest change, though, was in job security numbers, with a 14 percent increase in the number of participants who said they aren’t concerned with losing their job. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says there are a number of reasons Americans may be feeling optimistic. “With the growing likelihood that lockdown restrictions will continue easing as vaccination efforts ramp up, and with warmer weather on the horizon and another round of fiscal stimulus pending … consumers may have good reason to feel more positive about the labor market,” he said. Duncan believes housing and economic attitudes will improve in the months ahead. (source)
How Much Income Do You Need To Buy A House?
It’d be easy to get the impression that buying a house is becoming unaffordable. After all, home price increases only seemed to accelerate after last year’s hot summer market. In fact, one recent report from the National Association of Realtors found that 88 percent of metro areas saw double-digit price gains during the fourth quarter of last year. But despite those price gains, the same report also found that the income required to afford a 30-year fixed-rate mortgage with a 20 percent down payment hadn’t changed all that much from the year before. That’s mostly due to favorable mortgage rates, which have helped keep affordability levels from getting out of reach. So how much money do you need to make to comfortably buy a house in today’s market? Well, the NAR found that you’d need to make $49,908, which is only up slightly from 2019 when it was $48,960. Additionally, their analysis showed that in 71 percent of the included metro areas a family could pay their mortgage with an income of less than $50,000 per year. Of course, where you’re buying matters. For example, that number more than doubles if you want to live somewhere like Los Angeles or Boulder, Colo. And, if you want to live in the San Jose-Sunnyvale area, you’ll need to make almost $225,000 to afford your mortgage comfortably. (source)
Are Urban Markets Starting To Heat Up Again?
The coronavirus caused a shift in home buying preferences. Mitigation efforts led to more Americans working from home, which then caused buyers to look for houses in areas where they could get more space and privacy for their money. Naturally, that shift caused home prices in rural and suburban markets to begin growing at a faster rate – even outpacing prices in urban centers. But, according to one recent analysis, things may be changing. That’s because, for the first time since the pandemic began, prices in cities are once again rising faster than they are in suburban and rural neighborhoods. Why the change? Well, one theory is that there is growing hope that life will soon get back to normal once the coronavirus vaccine has been distributed more widely. That hope, in turn, has caused growing interest in single-family homes in walkable urban areas close to recreation and amenities. So far, the trend has been more pronounced in metros like Baltimore, Detroit, and Cleveland where prices are up nearly 40 percent year-over-year. More expensive cities like New York, DC, and San Francisco, on the other hand, have seen much more modest increases. (source)
First-Time Buyers Pull Average Loan Lower
According to the Mortgage Bankers Association’s Weekly Applications Survey, demand for loans to buy homes was 2 percent higher last week than it was the week before. It is now 1 percent higher than it was last year at the same time. But while a relatively modest increase isn’t that noteworthy, who was behind it might be. That’s because, the increase may be coming from first-time home buyers – who haven’t been as active in the market the past few years. Joel Kan, MBA’s associate vice president of economic and industry forecasting, says the proof is the average loan size. “The housing market is entering the busy spring buying season with strong demand,” Kan said. “Purchase applications increased, with a rise in government applications – likely first-time buyers – pulling down the average loan size for the first time in six weeks.” The average loan amount had been rising, as affordability challenges and the economic impact of the coronavirus caused younger buyers to delay plans to buy. Indications that they may be returning to the market are a positive sign for the spring and summer season. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. (source)
