The Housing Market Is Outperforming Forecast

The housing market has been off to a roar this spring. In fact, the market is performing so strongly that the National Association of REALTORS® has upgraded its forecast for the year.

At the start of the year, home sales were expected to match last year’s pace due to higher mortgage rates and diminishing affordability. But the market is hardly slowing down, notes Lawrence Yun, NAR’s chief economist. He now predicts existing-home sales to rise by 3.5 percent, and home prices likely will increase 5 percent this year.

“With no imminent threat of a recession, the housing market’s strong first quarter sets the foundation for continued gains the rest of the year,” Yun writes.

Source: “First Quarter GDP May Be Cool, But Housing Market Downright Balmy,” The Hill (May 1, 2017)

Predictions Roll in: 2017 Housing Forecasts

We can expect a hot year for home sales in 2017, according to recent forecasts from the National Association of REALTORS®, the Mortgage Bankers’ Association, Freddie Mac and Fannie Mae, etc!

NAR is predicting existing-home sales to reach 6 million in 2017, higher than its 5.8 million forecast for this year. But other entities are even more bullish. MBA is predicting home sales to eclipse 6.5 million next year, while Fannie Mae and Freddie Mac are both predicting 6.2 million.

A huge wave of Generation Yers, who have delayed home buying, are emerging into their key buying years. They are predicted to keep home sales and condo sales strong well into 2020, according to economists.

Source: “Home Sales Expected to Increase Nicely in 2017,” Keeping Current Matters (Sept. 29, 2016) and “U.S. Housing Market Forecast – Strong 2017 to 2020,” GordinCollins.com (Sept. 24, 2016)

Is Summer Truly Housing’s Hottest Season?

The spring is traditionally real estate’s busiest time of year. But one real estate economist believes that this summer may trump the spring as the most robust time of buying or selling a home for 2016.

“From a buyer’s perspective you have more choice, but you’re also competing against far more buyers,” says Ken Johnson, a real estate broker as well as a professor of finance and associate dean at Florida Atlantic University’s College of Business. “Sellers are also looking to sell over the summer, particularly if they have children and want to get a deal done before school starts again.”

The groundwork for a booming summer market has already been laid out. New-home sales in April posted their strongest month in more than eight years. Existing-home sales were up for the second consecutive month. What’s more, historically low mortgage rates may increase the demand for housing this summer.

Source: “Economist Says Summer May Be the Hottest Season to Buy and Sell,” RISMedia (June 5, 2016)

Mortgage Rates Staying Near Yearly Lows

Home buyers and owners can still lock in low mortgage rates. Freddie Mac reports in its weekly mortgage market survey that rates mostly remained unchanged this week.

“Volatility in financial markets subsided over the past week, allowing Treasury yields to stabilize,” says Sean Becketti, Freddie Mac’s chief economist. “As a result, the 30-year mortgage rate was mostly flat, up only 1 basis point to 3.59 percent. The release of March’s existing-home sales report, which shows monthly growth at 5.1 percent, suggests home buyers are taking advantage of low mortgage rates.”

Freddie Mac reports the following national averages for the week ending April 21:

30-year fixed-rate mortgages: averaged 3.59 percent, with an average 0.6 point, rising from last week’s 3.58 percent average. A year ago, 30-year rates averaged 3.65 percent.

15-year fixed-rate mortgages: averaged 2.85 percent, with an average 0.5 point, falling from last week’s 2.86 percent average. Last year at this time, 15-year rates averaged 2.92 percent.

Source: Freddie Mac

NAR: Sales Make Gains, Prices ‘Rising Too Fast’

Existing-home sales kicked off 2016 on solid footing, according to the National Association of REALTORS®’ latest housing report, released Tuesday. Existing-home sales in January moved to their highest annual rate in six months, while constrained inventory levels also pushed home prices to their fastest increase since last April, according to the report.

Total existing-home sales, which encompass completed transactions for single-family homes, condos, town homes, and co-ops, inched up slightly by 0.4 percent in January to a seasonally adjusted annual rate of 5.47 million. Sales are 11 percent higher than a year ago, which is the largest year-over-year increase since July 2013.

“The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints,” says Lawrence Yun, NAR’s chief economist. “Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession.”

In January, properties typically stayed on the market for 64 days, below the 69 days average from January 2015. Thirty-two percent of homes for sale in January sold last month in less than a month.

Source: National Association of REALTORS®

The Prime Time to List a Home for Sale?

Thursday and Friday are the most common days of the week when real estate professionals list a home, according to 2014 home sales data analyzed by the National Association of REALTORS®. Monday, Tuesday, and Wednesday follow in popularity in that order. The least popular days to post a new listing are Saturday and Sunday.

Also, “while home closings exhibit a strong tendency to get done at the end of the month, listings are much steadier throughout the course of the month, with a slight tendency to be posted earlier rather than later,” researchers write at NAR’s Economists’ Outlook blog.

Source: “EHS in 2014 by the Numbers – Part 3 – Popular Listing Dates,” National Association of REALTORS® Economists’ Outlook Blog (Jan. 14, 2015)

Home Sales Only Going Up From Here!

Existing-home sales will likely rise about 7 percent this year, as a strengthening economy and job growth leads to a healthier market, according to the National Association of REALTORS®’ 2015 housing forecast.

“Home prices have risen for the past three years cumulatively about 25 percent, which boosts confidence in the market and traditionally gives current home owners the ability to use their equity buildup as a down payment towards their next home purchase,” says Lawrence Yun, NAR’s chief economist. “Furthermore, first-time buyers are expected to slowly return as the economy improves and new mortgage products are made available in the marketplace with low down payments and private mortgage insurance.”

Yun is forecasting growth in home prices, but at a more moderate pace than recent years. The national median existing-home price for 2014 will likely near $208,000, up 5.6 % from 2013, but it’s expected to moderate between 4 % and 5 % growth in 2015.

Source: National Association of REALTORS®

Mortgage Rates Hold at Yearly Low This Week

The 30-year fixed-rate mortgage is heading into the holiday weekend at its yearly low, giving home shoppers and home owners another opportunity to snag the lowest rate of the year,  weekly mortgage market surveys in its weekly mortgage market survey.

“Mortgage rates were little changed following mixed housing news,” says Frank Nothaft, Freddie Mac’s chief economist. “Existing-home sales rose for the fourth consecutive month to an annualized pace of 5.15 million, the highest of the year. On the other hand, new-home sales fell for the third consecutive month to an annualized rate of 412,000 units.”

Freddie Mac reports the following national averages for the week ending Aug. 28:

  • 30-year fixed-rate mortgages: averaged 4.10 percent, with an average 0.5 point, holding the same as last week’s new low for 2014. A year ago at this time, 30-year rates averaged 4.51 percent.
  • 15-year fixed-rate mortgages: averaged 3.25 percent, with an average 0.6 point, rising from last week’s 3.23 percent average. Last year at this time, 15-year rates averaged 3.54 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.97 percent, with an average 0.5 point, rising from last week’s 2.95 percent average. Last year at this time, 5-year ARMs averaged 3.24 percent.

Source: Freddie Mac

3 Challenges Still Facing the Housing Market

Existing-home sales gained momentum in June, reaching an annual pace of 5 million sales for the first time since October 2013, according to the National Association of REALTORS®’ latest housing report. Rising inventories also are pushing the overall supply of homes for sale toward a more balanced market, with unsold inventories 6.5 percent higher than a year ago, NAR notes.

“Inventories are at their highest level in over a year and price gains have slowed to much more welcoming levels in many parts of the country,” says Lawrence Yun, NAR’s chief economist. “This bodes well for rising home sales in the upcoming months as consumers are provided with more choices.”

Still, the market is facing several headwinds that continue to subdue a more robust recovery. NAR noted three in its most recent housing report:

1. Sluggish new-home construction: While overall housing inventories showed improvement in June, inventory problems continue to weigh on the market and could become more problematic if new-home construction doesn’t increase in more markets, NAR notes. “New-home construction needs to rise by at least 50 percent for a complete return to a balanced market because supply shortages — particularly in the West — are still putting upward pressure on prices,” Yun notes.

2. Stagnant wage growth: Yun also noted that stagnant wage growth is holding back what should be a stronger pace of sales. “Hiring has been a bright spot in the economy this year, adding an average of 230,000 jobs each month,” Yun notes. “However, the lack of wage increases is leaving a large pool of potential home buyers on the sidelines who otherwise would be taking advantage of low interest rates. Income growth below price appreciation will hurt affordability.”

3. Dwindling first-time home buyers: The percentage of first-time buyers continues to be low by historical standards. First-time home buyers made up 28 percent of the market in June, down from a typical 40 percent of the market historically.

Source: National Association of REALTORS®

 

The Return of the First-Time Home Buyer?

Young people are starting to leave their parent’s home and move out on their own. The Current Population Survey for 2013 showed a drop in the percentage of 20-somethings living with parents, marking the first decline since 2005.

As of now, the percentage drop appears minimal: Those aged 18 to 24 living with parents or a related subgroup dropped from 56 percent to 55 percent in one year. However, Brad Hunter, chief economist at Metrostudy, notes in a Builder online article that the one-percentage-point decline represents 300,000 people who are now looking for a household of their own that who were previously living with their parents.

A recent report by Harvard University’s Joint Center for Housing Studies predicts that 2.7 million more households will form among people in their 30s over the next decade.

First-time buyers usually make up about 40 percent of home buyers. However, lately, the share has been in the 35 percent to 38 percent range, Hunter says. For existing-home sales, first-time buyers’ share is less than one-third of all buyers, at 27 percent in May, according to the National Association of REALTORS®.

The delay in millennials branching out on their own has greatly reduced household formation in recent years. Household formation rates usually average 1.4 million per year. Lately, the rate has been a fraction of that, about 500,000 to 700,000 a year.

“We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place,” Hunter notes. “While most of these newly-emerging twenty-somethings will be going into rentals, the movement out of the parental home is nonetheless expected to support a series of positive steps from rentals to entry-level re-sales to entry-level new homes, and on up the ladder.”

Source: “First-Time Buyers and New-Home Demand: Reverting to Normal,” Builder (July 10, 2014)