Discussing new home sales, existing home sales, low inventory, mortgage rates, home prices and much more!
I hope everyone had a great Thanksgiving and did not eat too much! Let’s dive right in..
New Home Sales Hit Highest Level in 10 Years
New Home Sales
Sales of new single-family houses in October 2017 were at a seasonally adjusted annual rate of 685,000. This is 6.2% above the revised September rate of 645,000, and 18.7% above the October 2016 estimate of 577,000.
The median sales price of new houses sold in October 2017 was $312,800. The average sales price was $400,200.
For Sale Inventory and Months’ Supply
The seasonally adjusted estimate of new houses for sale at the end of October was 312,800. This represents a supply of 4.9 months at the current sales rate.
This is great news and hopefully a good sign for 2018! Some of this rebound is probably due to rebuilding after the hurricanes.
Looking at the chart you can see where we are and how far we have come:
Also consider this quote from Logan Mohtashami:
Even with this healthy growth, new home sales are still very low considering the economic context. New home sales and housing starts should continue to have only slow and steady growth until about 2019 when our demographics for housing improve.
There is no housing crisis or labor crisis in this economic cycle. Demand is soft and housing starts are going to be slow but don’t fall prey to the myths about low inventory or a construction labor crisis. This cycle that looks as it should considering our current demographics.
Interesting stuff especially since we hear about low inventory causing problems all the time:
Remember that both the NAR Existing Home Sales report and the new home sales numbers are national and not local reports. I wonder if instead of saying we have limited inventory we should say it is a seller’s market?
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 3.92% with an average 0.5 point
- This is down from last week when it averaged 3.95%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.03%
- 15-year fixed-rate mortgages averaged 3.32% with an average 0.4 point
- This is up from last week when it averaged 3.31%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.25%
The MBA reported:
Mortgage applications increased 0.1 percent from one week earlier. The unadjusted Purchase Index increased 1% compared with the previous week and was 4% higher than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased to 4.20% from 4.18%, with points increasing to 0.42 from 0.40 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) increased to 4.16% from 4.12%, with points increasing to 0.30 from 0.26 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.56% from 3.54%, with points decreasing to 0.42 from 0.43 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
Not too many big changes but we did see some increases. We do have to wonder what will happen as Yellen leaves the Fed, especially after a recent article suggested that the Fed may not increase rates in December.
Much of the Fed’s uncertainty about rates has to do with low inflation and weak wage growth. It is impossible to say what the Fed will do and if it will affect mortgage rates.
Plus, the average mortgage rates do NOT tell every home buyer what is possible for them. I suggest that all serious buyers speak to the lender of their choice to find out what they can expect and their options.
Home Prices Increase 6.36%
From Black Knight:
- U.S. home prices increased 0.16% MoM in September
- U.S. home prices increased 6.36% YoY in September
- This is the 6th consecutive month of slowing home price growth
This is talking about the entire US and does not directly translate into what is happening in every local real estate market.
Looking at Anderson County SC, there were 192 homes reported sold during September 2017 and 223 reported sold during September 2016. So while the number decreased, it is talking about ALL types of homes in ALL price ranges.
Number of Single Family Homes Built for Rent Increases
The number of single-family homes built-for-rent increased in the third quarter. Over the last four quarters, total production of this type of housing was 32,000 homes, compared to 33,000 during the four quarters prior. However, there were 10,000 starts in the third quarter alone.
According to data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design and NAHB analysis, the market share of single-family homes built-for-rent, as measured on a one-year moving average, stood at 3.8% of total starts as of the third quarter of 2017.
This is a very small portion of the homes being built and the NAHB’s analysis only includes homes built and held for rental purposes. Most investors buy existing homes to use as rentals. So the demand for rentals must be pretty strong if someone is building homes to use as a rental.
You and I Would Be in Prison If We Had Citigroup’s Rap Sheet
From Wall Street on Parade:
Since its financial meltdown in 2008 and unprecedented bailout by the U.S. taxpayer, Citigroup (parent of Citibank) has been repeatedly charged by its Federal regulators with odious crimes against its pooled mortgage investors, credit card and banking customers, student loan borrowers, and for its foreclosure frauds. It has paid billions of dollars in fines for its past misdeeds while new charges pile up. In 2015, it became an admitted felon for participating in rigging foreign exchange markets. In short, Citigroup is a lawbreaking recidivist. If it were a mere human, it would be serving a long prison term. Instead, its fines for charges of egregious acts are getting smaller, not larger.
Last Tuesday, the Consumer Financial Protection Bureau (CFPB), which typically has a good track record of holding the big Wall Street banks accountable for their misdeeds, imposed an unusually feeble fine against Citibank for a litany of abuses against student loan borrowers. The CFPB ordered Citi to pay $3.75 million in restitution and to pay a $2.75 million fine. When combined with the fact that the CFPB did not make Citibank admit to the charges, this amounts to a slap on the wrist to a serial lawbreaker.
Sad that this kind of behavior is given the positive reinforcement of a wrist slap fine.
Millennials Want to Own Homes Too
For now, realtors are celebrating a small but noticeable uptick in buying among millennials, the country’s largest age-group. Nationwide, for two straight quarters, the homeownership rate among those aged 35 and younger has increased.
This article goes on to talk about the various reasons why millennials are not buying homes in larger numbers. The key thing is that we are starting to an increase in the home ownership rate for this demographic group.
We will need to see at least 3 or 4 consecutive quarters of increases before I would call it a victory…
What’s Behind September’s Surprise Increase in Affordability?
Interesting stuff from First American Chief Economist Mark Fleming:
Consumer house-buying power improved in September due to a combination of slightly lower rates and rising wages compared with August. However, over the past 12 months, affordability has declined by 8 percent as nominal prices have increased faster than buying power. Demand continues to outpace supply as existing homeowners remain reluctant to list their homes for sale for fear of not being able to find a home to buy, while home buyers, enticed by low mortgage rates, continue to enter the market. This short-term boost for home buyers is not expected to last, as supply constraints continue to drive unadjusted prices higher.
You and only you can decide what is affordable for you but this is a good sign for home buyers. Always make sure you set your maximum home price by selecting a very affordable monthly housing budget!
That is all I have time for today. Be sure to hit those share buttons to impress your friends and family!