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Real Estate Big Data

Home builders not meeting demand, existing home sales plateau

(HOUSING NEWS) Home sales are stagnating for two reasons – new home construction and a shifting homeowner perspective. But it’s not for a lack of consumer motivation.

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After four consecutive months of declines, existing home sales did not change from the previous month and are down 1.5 percent from a year ago, according to the National Association of Realtors (NAR).

In August, the median existing home price was $264,800, up 4.6 percent from August 2017, marking the 78th month in a row of year-over-year gains.

Dr. Lawrence Yun, NAR chief economist calls the data a plateau. “Strong gains in the Northeast and a moderate uptick in the Midwest helped to balance out any losses in the South and West, halting months of downward momentum,” he said. “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market.”

NAR has repeatedly beaten the drum to the tune of pointing out home builders failing to meet demand, and this month is no different as Dr. Yun repeats the assertion, adding, “Homes continue to fly off the shelves with a majority of properties selling within a month, indicating that more inventory – especially moderately priced, entry-level homes – would propel sales.”

Meanwhile, the average days on market rose from 27 in July to 29 in August, but for context, the market is still on task as it is still down from 30 days a year ago. Over half (52 percent) of homes sold in August sold in less than a month.

What’s of particular interest in the current market is how differently the regions are performing:

  • Home sales rose 7.6 percent in the Northeast, but are 2.7 percent below a year ago. The median price rose 2.6 percent to $292,800.
  • Home sales rose 2.4 percent in the Midwest, but are 0.8 percent below a year ago. The median price rose 3.4 percent to $208,500.
  • Home sales fell 0.4 percent in the South, but are up 1.8 percent from a year ago. The median price rose 3.2 percent to $227.900.
  • Home sales fell 5.9 percent in the West, and are 7.4 percent below a year ago. The median price rose 4.8 percent to $392,900.
  • “Rising interests rates along with high home prices and lack of inventory continues to push entry-level and first time home buyers out of the market,” said Dr. Yun. “Realtors® continue to report that the demand is there – that current renters want to become homeowners – but there simply are not enough properties available in their price range.”

    “Realtors® across the country report that their clients waver about the decision to list their home; they are excited by the prospect of receiving many offers, they are concerned that they will not be able to find a new home to purchase,” said NAR President Elizabeth Mendenhall. “Unfortunately this fluctuating view is contributing to the short supply of homes.”

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Real Estate Big Data

Much needed good news for housing, despite slowed sales

(REAL ESTATE) The data is in, and some truly positive signs for the housing market are slowly surfacing.

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If you put your finger on the pulse of the housing market right now, you’d see some much needed health improvements – inventory levels are finally loosening up for the first time in years, and the rate of price increases abated in the fourth quarter.

The median price of an existing home in Q4 rose 4.0 percent to $257,600 compared to the fourth quarter of last year, according to the National Association of Realtors (NAR).

Dr. Lawrence Yun, NAR Chief Economist, said in a statement that despite hurdles last year, “the close of the fourth quarter was promising.”

“Home prices continued to rise in the vast majority of markets,” said Dr. Yun, “but with inventory steadily increasing, home prices are, on average, rising at a slower and healthier pace.”

Existing home sales fell 1.8 percent in the fourth quarter compared to the previous quarter, and 7.4 percent over the year.

Why?

Dr. Yun said the West Coast needs more homes built. “The West region, where home prices have nearly doubled in six years, is undergoing the biggest shift with the slowest price gain and large buyer pullback.”

Comparing Q4 of 2017 and 2018 shows some relief when it comes to tight inventory levels which has edged hopeful homebuyers out of the market, increasing 6.2 percent over the year.

Housing affordability is the key ingredient to a healthy real estate sector going forward, which Dr. Yun says will require more homebuilding of moderately priced homes (a drumbeat the economist has been steadily beating for years).

“Housing starts fell far short of historically normal levels, with only 9.6 million new housing units added in the past decade; compared to 15 to 16 million that would have been needed to meet our growing population and 20 million new job additions,” said Dr. Yun.

“Local zoning law changes, expanding construction worker training programs at trade schools and promoting the use of tax breaks for developers in the designated Opportunity Zones will all play an important role in assuring an adequate future supply of housing,” Dr. Yun opined. 

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Real Estate Big Data

Pending home sales fall, hardest hit in the South

(REAL ESTATE) Despite a setback in home sales, there are several factors that indicate 2019 is back on track for being a growth year in the real estate sector.

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For the twelfth consecutive month, pending home sales (contracts signed on homes for sale) fell annually, dipping 9.8 percent in December compared to the previous December, according to the National Association of Realtors (NAR).

Down 2.2 percent from the previous month, NAR reports that pending home sales fell most dramatically in the South by 5.0 percent (down 13.5 percent annually), and 0.6 percent in the Midwest (down 7.2 percent from last December).

Meanwhile, pending home sales actually rose for the month in the Northeast (up 2.0 percent) and the West (up 1.7 percent), despite coming in lower than December 2017 (down 2.5 percent, and 10.8 percent, respectively).

Dr. Lawrence Yun, NAR Chief Economist, points to Wall Street and Main Street as factors in the decline.

“The stock market correction hurt consumer confidence,” said Dr. Yun, adding, “record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December.”

Dr. Yun indicates that the partial government shutdown has not caused obvious damage to home sales, and that as the government reopens fully, more mortgage options will become available for consumers.

“Some home transactions were delayed,” he notes, “but we now expect those sales to go forward.”

Despite a setback in December, Dr. Yun stands by his previous forecast, asserting that the housing sector will see improvement in 2019.

“The longer-term growth potential is high,” he observes, adding that he expects the Federal Reserve to reduce their projected rate increases to one or even zero (from four as previously expected), decreasing mortgage rates and improving the 2019 forecast.

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Real Estate Big Data

Debate brewing over what home prices will do in 2019 (place your bets)

(REAL ESTATE NEWS) There are consistent factors we look at when forecasting housing prices, and a unanimous picture is emerging – but place your bets because there is a small spread to consider.

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In the past few years, it’s been pretty sweet to be a homeowner, watching your gains accumulate, while home buyers have been up against diminished inventory levels, rising prices, and perpetually tight lending conditions.

So what does 2019 have in store?

Several optimistic brokers we spoke with believe prices will continue their current pace, some predicting as much as a 7.0 percent increase this year, while others believe it to be as little as 1.0 percent. But none indicated prices will stagnate or even drop.

Which seems to be the consensus.

So the debate brewing is perhaps more nitpicking than anything, but a debate it remains.

According to Case-Shiller, CoreLogic, home prices are predicted to increase another 5.0% in 2019 (and another 5.0% in 2020), and many experts add a caveat that the 2020 elections will be a strong driver in both years as uncertainty inevitably plays a roll in buyer sentiment.

A Reuters report indicates prices will rise twice the speed of inflation and pay in 2019, again noting the impact of potential trade wars on the American economy. Meanwhile, mortgage costs are accelerating which could hold back home sales this year.

The good news is that inventory levels are loosening slightly as builders’ engines are starting to rev and housing starts inch upward, alleviating pressure on supply levels (although everyone agrees they’ll remain low).

Continued economic success, combined with low inventory levels are the primary indicators in favor of home price increases this year.

Calculated Risk suggests that inventory increases makes it “likely that price appreciation will slow to the low single digits – maybe around 3.0 percent.”

The National Association of Realtors is similarly conservative in projections, forecasting a slight increase in home prices in 2019.

NAR Chief Economist, Dr. Lawrence Yun tells The American Genius, “Home sales have been softened in the latter part of 2018. Not likely to be meaningful gains in home sales in 2019. Combine this with a modest growth in supply of new home construction and existing home inventory implies a much slower home price appreciation in 2019.”

Dr. Yun concluded, “My forecast is only 2 percent to 3 percent in 2019. This would be the first time in seven years where wage growth will likely exceed home price growth.”

So the spread is between 2.0 percent at 7.0 percent growth in home prices – what do you think this year has in store?

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