Discussing another fantastic report on home sales, why home prices are not over heating, more on tax reform and housing, some interesting mortgage statistics plus more!
New Home Sales Increase to 10 Year High
New Home Sales
Sales of new single-family houses in November 2017 were 17.5% above the revised October rate and 26.6% above the November 2016 estimate of 579,000.
The median sales price of new houses sold in November 2017 was $318,700. The average sales price was $377,100.
For Sale Inventory and Months’ Supply
The seasonally adjusted estimate of new houses for sale at the end of November was 283,000. This represents a supply of 4.6 months at the current sales rate.
This is the 3rd straight month of increases, the highest level in 10 years, the biggest monthly increase in 25 years and beat the consensus estimate.
I guess we can blame the low inventory for the incredible increase in home sales…
While this is great news, the chart shows we still have a long way to go! Combine this news with all the other positive reports this such as existing home sales and housing starts, and you can see the housing market is booming!
Which might cause you to think that home prices are increasing too quickly…
With home prices continuing to increase faster than the normal historic pace, it is understandable to be concerned. Could we be in a housing bubble or be headed for another housing market crash?
While home prices are increasing at a dramatic pace, they are NOT increasing like they were prior to the housing market melt down!
Check out this chart comparing how quickly home prices increased using data from Freddie Mac:
The way that home prices have been increasing during the last 4 years is NOT like what happened in the 4 years before the housing market crashed. Some of the dramatic increases in home prices is due to the real estate market catching back up after the melt down.
Home prices dropped and sales plummeted because of the crappy economy when the Great Recession hit. Today, home prices are increasing in a way that reflects the strength of the economy and strong buyer demand.
Of course, much of the talk about home prices ( including this ) is about home prices for the entire country. Buyers and seller MUST only use reliable local market information to make smart choices.
Mortgage Statistics for November 2017
- Closing time for all loans averaged 43 days
- Closing time for refinances averaged 40 days
- Closing time for purchase loans averaged 45 days
- The average 30-year rate for all loans increased to 4.24% in November from 4.20% in October
- Closing rates for all loans increased slightly to 70.9 percent in November
- The closing rate on purchases increased to 75.5% in November
- The average FICO score on all closed loans decreased for the first time since May to 722
- 69% of all closed loans had FICO scores over 700
- 70% of purchase loans had FICO scores over 700
- The average FHA purchase FICO score was 681 in November
- The average conventional purchase FICO scores was 751
Other than the average 30 year rate increasing, not too shabby!
The closing rate ( how many mortgages actually closed ) could always be better but sometimes buyers do not check their credit BEFORE they start looking at homes. How’s that for a not too subtle hint?
The average FICO score for someone buying a home with a FHA mortgage was 681 but this is the average. Which means that some buyers had a lower FICO score and some had a higher FICO score…
While I do not want to give anyone false hopes, checking your credit and taking steps to raise your credit score is part of preparing to buy a home.
More on Tax Reform
From Rolling Stone:
The House has passed the final version of the GOP tax plan – a bill that will deliver 83 percent of its benefits to the top 1 percent in 2027.
The Republican bill slashes the corporate tax rate by 40 percent. It offers corporations that have funnelled trillions offshore as much as a 77 percent break on their tax bill for those profits – while creating new incentives to offshore future profits.
While the GOP’s cuts to corporate taxes are permanent, new tax benefits for the middle class largely expire after a few years. The tax bill creates an across-the-board tax increase for Americans earning less than $75,000 by 2027, according to a distributional analysis by the Joint Committee on Taxation. These tax hikes will reportedly hit 86 million middle-class households.
I guess how you feel about the tax reform might depend on how much you make…
From Business Insider:
Under tax reform, national home prices are expected to take a hit, but the impact will likely be greater on markets with higher-priced homes.
According to new data from Moody’s Analytics, several counties in New Jersey and New York — predominately blue states with rich homeowners — are the biggest losers.
The tax bill presents a few changes for homeowners: The mortgage interest deduction cap will fall to $750,000, the property tax deduction will drop to $10,000, and the standard deduction for all taxpayers will increase to $12,000 for single filers and $24,000 for joint filers.
That means it may no longer be better for some households to itemize the mortgage interest deduction, since it would be lower than their standard deduction.
You will have to wait and see if the predictions about home prices are true in your local real estate market. Business Insider goes on to talk about how the deficit will increase dramatically from this tax reform.
Not as much as it did while Obama was in office but considering how high the deficit is already, I cannot understand the logic in doing anything to make it worse.
From the National Low Income Housing Coalition:
The final tax bill passed by the Senate yesterday and the House today fails to expand housing resources for people with the lowest incomes, but instead provides massive tax cuts to wealthy individuals and corporations, increases the national debt by at least $1 trillion over a decade, and threatens vital safety net programs like Medicaid, Medicare, and those for affordable housing and homelessness prevention.
Although the bill retains the tax exemption for private activity bonds and preserves the 9% and 4% Low Income Housing Tax Credit (Housing Credit) – a notable achievement by affordable housing advocates – it fails to include any of the bipartisan reforms that would improve the Housing Credit to help it better serve extremely low income households or people experiencing homelessness. It also fails to make adjustments to offset the impact of the lowered corporate tax rate from 35% to 21%, which will reduce the value of Housing Credits to corporate investors. It redirects housing dollars generated from reforms to the mortgage interest deduction to provide even deeper tax cuts for billionaires and corporations. The significant deficits produced by the tax bill may trigger automatic funding cuts to the national Housing Trust Fund—a program that helps build and preserve rental homes affordable to people with the lowest incomes, including those experiencing homelessness—and will likely put future investments in affordable housing at HUD and USDA at risk of deep spending cuts.
Well that does not sound good!
U.S. home sales will likely take a hit next year as middle-class Americans receive fewer perks under an overhaul of U.S. taxes and face rising home prices and interest rates, industry experts said.
Sales of new single-family homes are projected to rise 5 percent in 2018 — only about half the growth estimated for 2017 and the slowest pace since 2014, according to the National Association of Home Builders (NAHB).
Ouch! After all the positive housing reports this week and now it appears this tax reform could screw things up…
That is it for today but check back ASAP! I still need to talk about this week’s reports on mortgage rates and much much more!
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