‘Tear-Downs’ Account for More New Homes

More than 10 percent of new single-family homes that began construction in 2016 were part of a tear-down project, according to new data from the National Association of Home Builders. That’s up from 7.7 percent in 2015. NAHB defines a tear-down as a home that is built on a site where a previous structure existed. Nationwide, there were 79,300 single-family tear-downs started in 2016, up from 55,200 in 2015, NAHB estimates.

Builders continue to cite lot shortages as a major setback to new-home construction. Home shoppers and builders are now eyeing tear-downs because many of the properties are in prime locations. Take a look at the charts posted on below ‘source’ blog to see the breakdown of tear-down starts by region.

Source: “NAHB Estimates 79,000 Single-Family Tear-Down Starts in 2016,” National Association of Home Builder’s Eye on Housing blog (June 19, 2017)

Sellers Happy, But Home Buyers Are Frustrated

The number of home buyers who say now is a good time to buy dipped to an all-time survey low in Fannie Mae’s latest Home Purchase Sentiment Index. Meanwhile, home owners who say now is a good time to sell soared to an all-time survey high.

Some highlights from Fannie Mae’s latest Home Purchase Sentiment Index:

  • 30% of Americans say now is a good time to purchase a home, a drop of 3 percentage points from the previous month and now at an all-time survey low.
  • 15% of Americans say now is a good time to sell a home, now at an all-time survey high.
  • More consumers think home prices will rise over the next 12 months compared to March, and slightly fewer consumers also expect mortgage rates to go up over the next year.
  • The percentage of respondents who say they are not concerned with losing their job increased 6 percentage points to 74%, nearly a 7 percentage point decrease in March.
  • The percentage of respondents who say their household income is higher than it was 12 months ago held at 11%.

Source: Fannie Mae

3 Housing Trends Emerging This Spring

The spring tends to be real estate’s most active season of buying and selling. So what housing trends are emerging right now that you should be aware of? The Street recently took a look at three trends it sees as getting bigger this spring:

1. Inventories are favoring the seller. With a limited number of homes for sale across the country, home sellers have the upper hand as home buyers are forced to compete for limited inventories. Inventories of less expensive “starter homes,” in particular have dropped, which is making it difficult for first-time buyers to break into the market. Home buyers need to be ready to act when they see a home they want.

2. More buyers may consider a new home. Some home buyers may seek greater alternatives to limited inventories and consider building a home and buying new. Ralph McLaughlin, chief economist with Trulia, says there’s a 10-year high for homes being bought off of a plan alone. “Why? The inventory of existing homes continues to fall,” he notes.

3. Buying is cheaper than renting. Seven in 10 respondents of a recent Freddie Mac survey believe it’s cheaper to pay rent than a monthly mortgage on a home. Saving for a down payment may a big hurdle for many. However, studies show that buying trumps renting in 98 of the 100 largest metros in the nation.

Source: “3 Real Estate Trends to Watch This Spring,” The Street (April 20, 2016)

Survey: Real Estate Is the Best Investment

Americans ranked real estate as the best long-term investment, even over stocks and gold, according to a recent Gallup Poll of about 1,000 U.S. adults. Real estate has been the top investment choice for the past two years, and it’s lead is increasing over four other popular investment choices.

Thirty-five percent of Americans selected real estate as their top investment choice compared to 22 percent for stocks and mutual funds; 17 percent for gold; 15 percent for savings accounts/CDs; and 7 percent for bonds. By comparison, 34 percent of Americans said gold was their top long-term investment choice in 2011 while 19 percent said real estate.

“As the average sale price of new homes in the U.S. increased from $259,300 in August 2011 to $348,900 in February of this year, the percentage of Americans picking real estate as the best long-term investment almost doubled,” according to Gallup. “During approximately the same time span—from August 2011 to April of this year—gold prices plunged from $1,910 to $1,254 per ounce, and the percentage thinking gold would be the best investment was cut in half.”

Source: Gallup.com

Home Buyers in No Rush to Snag Low Interest Rates

Mortgage rates continue to hover at yearly lows, but home buyers aren’t flocking to lock in the rates. Applications for mortgages dropped 6.6 percent last week for both home purchases and refinances, the Mortgage Bankers Association report.

Broken out, refinancing applications dropped 7.4 percent last week, while applications for home purchases, viewed as a gauge of future home sales, continued its drop, falling 5 percent last week. Last week, home purchase applications had fallen by another 5 percent and were about 9 percent from year-ago levels, the MBA reported.

Meanwhile, the 30-year fixed-rate mortgage continues to stay low by historical standards. The average rate nationwide was 4.13 percent week, up 3 basis points from 4.10 percent the week prior, according to the MBA’s survey, which reflects about 75 percent of the U.S. retail residential mortgage application market.

Source: “U.S. Mortgage Applications Fall in Latest Week as Rates Rise: MBA,” Reuters (Oct. 29, 2014)

$22B Still Unclaimed in Government Mortgage Relief

Nearly $22 billion remains available to help struggling home owners reduce their monthly mortgage payments and avoid foreclosure through the government’s Making Home Affordable program, according to a quarterly report by the special inspector general for the Troubled Asset Relief Program. TARP has only spent $12.8 billion to date of the $45.6 billion in funds it’s been allocated for housing programs. An additional $3.4 billion is still available for the Hardest Hit Funds Program as well.

The “Treasury should improve coordination between these programs so that they work together as seamlessly as possible to provide effective, sustainable mortgage relief to as many struggling home owners as possible,” the report states.

HAMP has suffered from low participation. Only 1 in 6 home owners who have applied for HAMP have received a permanent loan modification, according to the report. The program has had a high redefaulting rate. To date, 389,222 home owners who have participated in HAMP have not been able to keep up with their new modified mortgage payments. Twenty-nine percent of home owners who qualified for HAMP have had to drop out of the program.

Many home owners are soon set for an increase in their rate. After five years, the rate on HAMP loans rises 1 percent until reaching its previous rate prior to the loan modification.

Source: “$22B in Government Mortgage Relief Still Left for Struggling Homeowners,” Housingwire (July 30, 2014)

Foreclosures Jump in Northeast, West Coast

Nationwide, foreclosures dropped 26 percent in May compared to year-ago levels, reaching the lowest monthly level since December 2006. However, that does not reflect the recent foreclosure activity in Northeastern and West Coast markets, according to the latest report from RealtyTrac.

“It’s not surprising that some of the states with the longest foreclosure timelines are those with markets still dealing with increasing foreclosure activity even as the country as a whole continues to hit new lows,” says Daren Blomquist, vice president at RealtyTrac. “On the other hand, the increase in bank repossessions in some states with shorter foreclosure timelines like California and Oregon demonstrates there is still some pent-up foreclosure activity in those states as well.”

Bank repossessions were up by the largest amounts year-over-year in New York (up 117 percent), New Jersey (up 96 percent), Connecticut (up 85 percent), Maryland (up 40 percent), Oregon (up 29 percent), and California (up 26 percent).

Source: “Foreclosures Skyrocket in Northeast, West Coast,” HousingWire (June 10, 2014)

Housing Market Reaching Equilibrium

Home prices have already begun moderating over the past year and appreciation likely will continue to gradually slow over the next two years, according to a forecast of 31 analysts recently surveyed by Reuters. Analysts predict home prices to rise 7.5 percent this year and then curtail to 4 percent by 2016.

That marks a sharp slowdown from the double-digit increases reported last year. Analysts surveyed by Reuters say they expect prices to slow in the coming months due to tight lending standards, slow wage growth, and a lack of first-time buyers.

“Growth would be more robust if we saw more first-time homebuyers in the market,” says David Nice, economist at Mesirow Financial. “That would put the housing market on a sustainable growth trajectory.”

Analysts surveyed expect existing home sales to reach a 4.75 million annual rate in the second quarter of this year and rise to 5.10 million in the first quarter of 2015.

“We are seeing a state of equilibrium,” says Mark Goldman, a real estate expert at San Diego State University in California. “I don’t see any symptoms that would cause housing prices to go up or down significantly.”

Source: “U.S. House Price Gains Seen Moderating Over Next Few Years: Poll,” Reuters (May 30, 2014)

Mortgage Rates Drop Slightly This Week

Mortgage rates have been seesawing in recent weeks. Overall rates inched down this week with the 30-year fixed-rate mortgage, the most popular choice among homebuyers, averaging 4.29 percent, Freddie Mac reports in its weekly mortgage market survey.

Freddie Mac reports the following national averages for the week ending May 1:

  • 30-year fixed-rate mortgages averaged 4.29 percent, with an average 0.7 point, dropping from last week’s 4.33 percent average. Last year at this time, 30-year rates averaged 3.35 percent.
  • 15-year fixed-rate mortgages averaged 3.38 percent, with an average 0.6 point, falling from last week’s 3.39 percent average. A year ago, 15-year rates averaged 2.56 percent.
  • 5-year hybrid adjustable-rate mortgages averaged 3.05 percent, with an average 0.4 point, rising from last week’s 3.03 percent average. Last year at this time, 5-year ARMs averaged 2.56 percent.
  • 1-year ARMs averaged 2.45 percent, with an average 0.5 point, rising from last week’s 2.44 percent average. A year ago, 1-year ARMs averaged 2.56 percent.

Source: Freddie Mac

Analysts Still Bank On 7% Home Appreciation

Despite a weak quarter in existing-home and new-home sales, Wall Street analysts say they still expect home prices to increase by 7 percent this year.

“We continue to expect home-price appreciation to moderate from the torrid pace of mid-2012 to 2013, supported by improving employment and growth prospects,” according to analysts from Morgan Stanley. Analysts from Barclays echoed that, saying they are keeping their projection for home prices unchanged at 7 percent.

Barclays analysts are most upbeat about home-price appreciation in four “sand states”: Arizona (projection of 8.2%), California (9.4%), Florida (8.3%), and Nevada (11%).

Morgan Stanley acknowledged the sluggish spring start. “In our view, the rationale for the weakness comes from a combination of three factors: severe winter weather; a transition away from investors reliant on distressed and cash purchases to mortgage credit-dependent buyers; and affordability challenges for first-time home buyers,” says Morgan Stanley’s analysts, adding that nearly 20 percent of home owners remain underwater on their mortgage, which is also preventing many from moving.

Nevertheless, Morgan Stanley analysts say they’re still upbeat about the prospects for an ongoing housing recovery.

Source: “Wall Street Home Price Appreciation Still Expected to Hit 7%,” HousingWire (April 28, 2014)