Monday, October 27, 2014

New-Home Sales Inch to 6-Year High

For the third consecutive month, sales of newly built single-family homes edged up, “demonstrating steady growth in the housing market,” says Kevin Kelly, chairman of the National Association of Home Builders. However, housing analysts caution that the sector remains fragile.
New-home sales inched up slightly by 0.2 percent in September to a seasonally adjusted annual rate of 467,000 units—the highest level since June 2008, according to new data from the U.S. Department of Housing and Urban Development and U.S. Census Bureau. The median price of new homes in September was $259,000, a 4 percent drop year-over-year.
"We expect the housing market recovery to remain relatively gradual over the coming months," Gennadiy Goldberg, an economist at TD Securities in New York, told Reuters.
In September, the inventory of new homes rose to 207,000—a 5.3-month supply at the current sales pace. Most economists consider 6 months a healthy balance between supply and demand. The slow-growing inventory of new homes points to builders gaining confidence in the market, says NAHB Chief Economist David Crowe.
Regionally, new-home sales rose the most in the Midwest, posting a 12.3 percent gain month-over-month, followed by a 2 percent rise in the South. Sales stayed flat in the Northeast and fell 8.9 percent in the West.
The government revised August’s reported new-home sales figures, reflecting the fact that sales actually posted a sharp decline last month, as opposed to what had been originally reported. August’s sales numbers were revised down to 466,000 units from the originally reported 504,000 units.
Source: National Association of Home Builders and “U.S. Home Sales at Six-Year High; Recovery Still Fragile,” Reuters (Oct. 24, 2014)

Housing Hit by a ‘Hangover’

Last year, many real estate markets saw double-digit price appreciation – some by as much as 20 percent – which prompted warnings of another “bubble” forming in the sector. Fast forward one year later, and price appreciation is slowing as foreclosures dry up and investors retreat.
"Buyers don't have the same sense of urgency as they did before,” Greg Bender, a Los Angeles real estate professional with Berkshire Hathaway HomeServices, told CNBC. Los Angeles saw home prices rise 18 percent in the third quarter of 2013 year-over-year, but that annual appreciation for the quarter has slipped to 8 percent this year. It’s no longer a seller’s market as more homes sit on the market longer than just six months ago, Bender says.
Housing analysts attribute the home price surge between 2011 and 2013 mostly due to the Federal Reserve buying up billions of dollars in mortgage-backed bonds that caused borrowing costs like the 30-year fixed-rate mortgage to drop to record lows. Buyer demand rose and investors snagged up foreclosures on-the-cheap.
"If stimulus 'hangovers' are proportional to the amount of stimulus that preceded them, then this one could be a doozy," notes Mark Hanson, a housing analyst in California.
The “sand states” – like Arizona and California -- are seeing some of the biggest changes to price appreciation lately. This is where markets tended to overheat the most during the housing boom and had the highest rates of foreclosures during the housing crisis.
In contrast, markets where the housing recovery has been much more gradual are seeing better price gains this year, such as in Chicago, Philadelphia, and Atlanta, CNBC notes.
"Home values should continue to grow, but that growth will increasingly be driven by traditional market fundamentals like household formation and job growth,” says Stan Humphries, chief economist at Zillow, “and less by artificial stimulants like decreased supply and widespread investor demand."
Source: “Housing Is Waking Up to a New Hangover,” CNBC (Oct. 23, 2014)

Wednesday, October 15, 2014

Where to Find the Biggest, Priciest New Homes

Depending on where you live, new single-family homes vary drastically on price, design features, building materials, and even financing, reveals a study from the National Association of Home Builders, using 2013 Census Bureau Survey of Construction data.
The priciest homes built for sale can be found in New England, where the median sales price of newly built single-family homes is $400,000. On the other hand, the least expensive new single-family homes can be found in the East South Central (which includes Alabama and Mississippi) and West South Central (Texas and Oklahoma) divisions, where median sales prices of new-homes are $221,000 and $223,000, respectively.
The price of the home doesn’t always correlate to its size. While New England had the priciest new homes, the median size of new homes in the region was fairly small, at 2,240 square feet.
The largest homes can be found in the South Atlantic division (Georgia and Florida), which has a median size of 2,596 square feet. Nationwide, the median square footage for a new home is 2,469 square feet.
"This recent analysis really illustrates the many different types of homes built throughout the country," says NAHB Chairman Kevin Kelly, a home builder. "It is fascinating to see how newly built homes can vary significantly not only in design features and building materials, but also in terms of lot size, home prices, and financing methods used, simply based on where a home is built."
Here are some additional findings from the report:
  • Outdoor features: Porches ranked as the most popular outdoor feature nationwide, dominating new-home construction in the West South Central and in the West. Decks are declining in popularity nationwide, but remain the most popular choice for single-family homes built in New England, where 63 percent of new-homes include one.
  • Prices per square foot: Per square foot, new homes are most affordable in the South, where the median sales price per square foot (excluding lot value) are $73 in the West South Central division and $84 per square foot in the South Atlantic division.
  • Siding preferences: Vinyl is the most commonly used primary siding material nationwide, with nearly 31 percent of new single-family homes started in 2013 using it, followed by brick (nearly 24 percent). Regionally, vinyl was the most popular in the Northeast and Midwest; brick most commonly used in the South; and stucco the most popular in the West.
  • Foundations and number of stories: Most homes in colder climates, like the Northeast and Midwest, have basements, unlike homes in the South that are usually built on a slab. Fifty-eight percent of new homes nationwide had two or more stories. The majority of homes in the Northeast are two stories; more than half of the homes started in 2013 in the West also have two or more stories. In the Midwest, however, more than half of new homes started have only one story.
  • Lot sizes: The New England region has some of the largest and priciest lots nationwide. The median lot size in New England is 22,863 square feet – more than three times larger than the national median of 8,712 square feet. The lots are also the priciest there, with the median lot value at $100,000 compared to the $40,000 nationwide median for spec-built homes. On the other hand, the East South Central division has the second-largest lots with a median size of 14,520 square feet, as well as the lowest median value at $30,000 per lot.
  • Financing: The majority of single-family homes nationwide are purchased using conventional loans, but regionally, there are differences among various financing options. Cash purchases are the most common in New England, while FHA-insured loans are the most prevalent in the West and South. VA-guaranteed loans are most common in the South Atlantic and Mountain divisions.
Source: National Association of Home Builders

Lower Rates Revive Refinancing Boom

As interest rates tumble, home owners are rushing to take advantage of the lowest rates of the year. Overall, mortgage applications rose 5.6 percent on a seasonally adjusted basis during the week ending Oct. 10, led by an 11 percent week-to-week surge in refinance applications, the Mortgage Bankers Association reports.
"Growing concerns about weak economic growth in Europe caused a flight to quality into U.S. assets last week, leading to sharp drops in interest rates,” says Mike Fratantoni, the MBA’s chief economist. “Mortgage rates for most loan products fell to their lowest level since June 2013. Refinance application volume reached the highest level since June 2014 as a result."
The 30-year fixed-rate mortgage dropped to a nationwide average of 4.20 percent last week, from 4.30 percent the week earlier, the MBA reports. However, average mortgage rates reportedly have dropped even more this week, with many lenders reporting a 4 percent average as of Tuesday and some even offering 3.875 percent to creditworthy borrowers, according to Mortgage News Daily.
Low rates, however, aren’t spurring greater homebuying activity. Mortgage applications for home purchases, viewed as a gauge of future home buying, dropped 1 percent last week. Purchase applications are 4 percent lower than they were for the same week one year ago, the MBA reports.
"Purchase application volume continues to run behind last year's level, but to a lesser degree,” Fratantoni says. “We continue to expect that the strengthening job market should lead to an increase in purchase activity next year.”
Source: “Mortgage Rate Drop Sparks Refinancing Boomlet,” CNBC (Oct. 15, 2014)

Despite Price Gains, Affordability Still In Play

Despite the jump in the latest median single-family home price — $220,600, up from around $160,000 just a few years ago, according to the National Association of REALTORS® — the large price gains are not denting affordability.
Even with home prices climbing, home ownership remains affordable because low mortgage rates have helped to offset the price gains, writes Lawrence Yun, NAR’s chief economist, at NAR’s Economists’ Outlook blog. Also, incomes have risen slightly as the unemployment rate has fallen, which also has helped to improve the affordability picture.
A home buyer buying a median-priced home at the current mortgage rate and having a 20 percent down payment would make a monthly payment of about $867. That is 15.9 percent of monthly gross family income, compared to an average of 21.3 percent over the past 30 years, Yun notes.
Source: “Affordability in Monthly Mortgage Payments,” National Association of REALTORS® Economists’ Outlook blog (Oct. 14, 2014)

Saturday, October 11, 2014

30-Year Mortgage Falls Back to Yearly Lows

Borrowing costs were down once again this week, giving home buyers another opportunity to lock in some of the lowest rates of the year.
Freddie Mac reported the following national mortgage rate averages for the week ending Oct. 9:
  • 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.5 point, dropping from last week’s 4.19 percent average. Last year at this time, 30-year rates averaged 4.23 percent.
  • 15-year fixed-rate mortgages: averaged 3.30 percent, with an average 0.5 pont, dropping from last week’s 3.36 percent average. Last year at this time, 15-year rates averaged 3.31 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.05 percent, with an average 0.5 point, dropping from last week’s 3.06 percent average. A year ago, 5-year ARMs averaged 3.05 percent.
  • 1-year ARMs: averaged 2.42 percent, with an average 0.4 point, holding the same average as last week. A year ago, 1-year ARMs averaged 2.64 percent.
Source: Freddie Mac

Builders: Tight Credit Caused 18,700 Lost Sales

Tight mortgage lending standards continue to drastically curtail new-home sales and are causing a growing number of deals to be lost, according to a survey by the National Association of Home Builders.
"While housing has seen some positive growth throughout the year, there is no denying that tight credit conditions are hindering a full, healthy housing recovery," says NAHB Chief Economist David Crowe. "These persistently tight mortgage credit standards continue to limit the number of creditworthy borrowers, particularly younger families and first-time home buyers, from entering the housing market."
Eighty-three percent of builders say they have lost sales over the last six months due to buyers not qualifying for a mortgage. The NAHB estimates that those sales losses translate to about 18,700 new-home sales lost because buyers were unable to qualify for mortgages.
"We’ve seen banks and regulators swing the pendulum too far and create an environment where lending standards are too restrictive," says Kevin Kelly, NAHB chair. "We want a return to reasonable lending standards where qualified borrowers are able to obtain a mortgage and create the American dream for themselves."
Last week, media outlets reported that former Federal Reserve Chair Ben S. Bernanke, who has a net worth of at least $1.1 million, said that he couldn’t refinance his home in Washington due to the restrictive mortgage standards. Because of his recent job switch from chairman of the Federal Reserve to a fellow at the Brookings Institution, lenders may have deemed him as a credit risk .
Mortgage standards are at their toughest levels since at least 1998, according to a new index by CoreLogic. Credit availability for all home loans as of May was about half of what it was in the late 1990s, when the housing market was in recovery-mode similar to it is today, according to CoreLogic’s Housing Credit Index.
“It is clear that credit is quite tight relative to normal,” says Mark Fleming, CoreLogic’s chief economist. Fleming says that banks shouldn’t revert to the overly loose credit standards from the housing bubble, but he believes more lenders could expand credit like they did in the late 1990s, while still being cautious with their lending.
Source: National Association of Home Builders and “Tightest Credit Market in 16 Years Rejects Bernanke’s Bid,” Bloomberg (Oct. 8, 2014)