Discussing existing home sales, increasing rents, home ownership is still important to many, first mortgage default rate increases, the effect of rising mortgage rates on home sales and much more!
US Existing Home Sales Decreased for the Second Consecutive Month
Existing-home sales slumped for the second consecutive month in January and experienced their largest decline on an annual basis in over three years. All major regions saw monthly and annual sales declines last month.
Total existing-home sales sank 3.2 percent in January to a seasonally adjusted annual rate of 5.38 million from a downwardly revised 5.56 million in December 2017. After last month’s decline, sales are 4.8 percent below a year ago (largest annual decline since August 2014 at 5.5 percent) and at their slowest pace since last September (5.37 million).
The median existing-home price for all housing types in January was $240,500, up 5.8 percent from January 2017 ($227,300). January’s price increase marks the 71st straight month of year-over-year gains.
Total housing inventory at the end of January rose 4.1 percent to 1.52 million existing homes available for sale, but is still 9.5 percent lower than a year ago (1.68 million) and has fallen year-over-year for 32 consecutive months. Unsold inventory is at a 3.4-month supply at the current sales pace (3.6 months a year ago).
Lawrence Yun, NAR chief economist, said:
The utter lack of sufficient housing supply and its influence on higher home prices muted overall sales activity in much of the U.S. last month. While the good news is that Realtors® in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace. It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.
Remember this is talking about the entire country and does not reflect what is happening in every local market. For example, in Anderson County SC, there were 145 sales in January 2018 compared to 123 in January 2017.
We keep hearing about how the low inventory is hurting home sales. I would say it is a shortage of affordable homes that is causing the problem.
While there is a shortage of inventory in some price ranges in our area, home buyers can still be successful. I am not saying it is easy or there won’t be hiccups or frustrations.
The key to successful home buying is working with a local experienced Realtor and following their advice. This is true in our area and in each and every other housing market in the US.
U.S. Single-Family Rents Up 2.7 Percent Year Over Year in November
National single-family rent prices climbed steadily between 2010 and 2017, as measured by the CoreLogic Single-Family Rent Index (SFRI). However, the Index shows overall year-over-year rent growth has decelerated slowly since it peaked early last year. In November 2017, single-family rents increased 2.7 percent year over year, a 1.6-percentage point decline since the growth rate hit a high of 4.3 percent in February 2016. The Index measures changes to the cost to rent single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. The analysis is conducted both nationally and for 75 individual Core Based Statistical Areas (CBSAs).
It is good that the way that rents have been increasing is slowing down. This will make it easier for renters to save money to buy a home.
Of course, some will say that not all renters want to buy a home.
Or should buy a home.
Which is true BUT the truth is many Americans still dream off owning a home…
Home Ownership Rate Increased for First Time in 13 Years
The Census Bureau recently reported that the home ownership rate increased for the first time in thirteen years:
This is great news and an article in the Wall Street Journal drives home why:
The annual increase marks a crucial turning point because it comes after the federal government reined in bubble-era policies that encouraged banks to ease lending standards to boost homeownership. This time, what’s driving the market is a shift in favor of owning rather than renting.
We kept hearing about a shift towards in how attractive renting is after the housing market crashed. But it appears this was mainly due to the economy and NOT how most Americans feel according to RentCafe:
Undoubtedly, the recession had a great impact on homeownership…However, it looks like it takes more to discourage Americans from buying a house than that.
As the years go by, it seems more and more certain that the fact that renting has seen a sudden gain in popularity is more a reaction to the economic crisis than a paradigm shift in the Americans’ attitude toward housing.
Pew Research recently did a survey and asked “How important is homeownership to achieving the American Dream?”. Check out the results:
- 43% said home ownership was essential to the American Dream
- 48% said home ownership was important to the American Dream
- Only 9% said it was not important
I am glad to see so many people still realize that home ownership is an important and essential part of the American Dream. If you have any questions about buying a home in the Anderson SC area, you can Contact Me for a private consultation.
First Mortgage Default Rate Increased In January 2018
S&P Dow Jones Indices and Experian released today data through January 2018 for the S&P/Experian Consumer Credit Default Indices. The indices represent a comprehensive measure of changes in consumer credit defaults and show that the composite rate increased four basis points from last month to 0.95%. The bank card default rate rose 13 basis points to 3.57%. The auto loan default rate fell three basis point from December to 1.07%. The first mortgage default rate increased four basis points to 0.72%.
While an increase in first mortgage defaults is bad, I wouldn’t freak out. Check out the chart to see where we are now compared to the past to see why:
The Chemical Activity Barometer Signals Further Gains in U.S. Economy
The Chemical Activity Barometer expanded 0.5 percent in February on a three-month moving average (3MMA) basis, its fifth such solid gain following the 2017 hurricanes. On an unadjusted basis, growth was just 0.1 percent. The CAB is up 4.2 percent on a 3MMA compared to a year earlier.
Very good news and since the Chemical Activity Barometer is a good indicator for the next 12 months, we should see a strong economy in 2018.
Well, unless inflation gets out of hand or the Fed raising rates screws things up. Or something unexpected happens that causes the economy to go haywire.
How Will Rising Rates Impact Home Sales?
From First American:
The consensus among economists is that 30-year, fixed-rate mortgages will approach 5 percent by the end of the year. Rising mortgage rates typically reduce the affordability of housing, as it means the cost of borrowing increases. So, the question is: how much will rising interest rates impact the amount of home sales?
Historically, a 30-year, fixed-rate mortgage of 5 percent is still a very low rate. In fact, the mortgage rate has been greater than 5 percent in 38 of the last 46 years, so it is unlikely that large numbers of home buyers will be dissuaded by a modest increase in mortgage rates. There are a variety of reasons why people buy homes that are completely independent of mortgage rates. A gradual rise in mortgage rates won’t change that.
I must keep driving home that while rates are increasing, they are STILL low if you look back in time. If it is the right time for someone to buy a home, they are going to buy a home.
Speaking of mortgage rates, be sure to check back tomorrow because I will be covering this week’s reports on mortgage rates!
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