Connect with us

Real Estate Big Data

New home construction data is out, and the numbers are both horrible and awesome

If new home construction data slipped this month, how can a leading economist call this “the best year since the recovery began?”

Published

on

According to the U.S. Census Bureau, housing starts in July fell 16.0 percent, but were up 10.1 percent for the year. Falling to 1.206 million, housing starts are at historically low levels, and after a jump last month, permits saw a 6.3 percent dip during this reporting period (although permits are up 7.5 percent for the year).

Although multi-family saw the biggest decline, pulling the overall number down, it is not time to panic, as it is typical for this sector to decline after frantically making up for lost winter productivity. All regions but the Midwest are doing well when looking at year to date numbers.

So why then does Trulia’s chief economist, Dr. Selma Hepp proclaim that “Despite the volatility, construction activity is in the best year since the recovery began.” Because of data.

How can this be good news?

Hepp explains by offering in her own words below the combination of single-family starts, annual growth in multi-family construction, and builder confidence:

  1. Single-family construction starts are moving up ever so slowly, and reached 782,000 annualized units in July 2015. Finally a little bit stronger than multi-family starts, the single-family starts are still below long-run average in most major metros across the county. In fact, Trulia’s latest study reveals that the single-family component is still well below historical norms even in metros seeing improvement in annualized permit activity. Only 13 out of the 100 largest U.S. metros saw increases in single-family construction over their historical norms, most notably in Austin, Houston, Charleston and Nashville.
  2. The annual growth in multi-family home construction has slowed markedly but in line with expectations, particularly among 5+ units construction which recently reached highest levels since mid-1980s. Trulia’s analysis of permit activity for multi-family construction shows that 53 out of the 100 largest U.S. metros are now building more than their historical average. In some of the top 10 markets, multi-family construction was higher than the historical norm by several fold. For example, New York’s activity is more than four times higher, while both Boston and Newark are almost three times higher. In many of these markets, multi-family construction is reaching a cyclical peak and will soon see some slowdown.
  3. Many housing markets are still building well below their historical norm. Trulia’s analysis of permit activity shows that 7 in 10 homebuilding markets t are building below their long-run norm. Most simply, areas with slower home price appreciation and fewer new jobs are still the construction laggers, but also the markets with some residual distressed inventory since the housing bust.
  4. Builder confidence for newly built, single-family homes yesterday showed the index continuing to increase to the highest level since November 2005. High confidence among builders is an encouraging indicator of future construction activity.

trulia-data-1

trulia-data-2

Hepp concludes, “All in all, the housing recovery has reached a new milestone. Builders have become much more bullish on the housing market, with homebuilder confidence haven risen to a near-decade high. New construction is now being driven by steady home price appreciation, but more importantly by stronger economic fundamentals, job growth, and demographic trends which are key fundamentals necessary for a sustainable healthy recovery.”

NewHomeConstruction

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

Real Estate Big Data

Real estate myths created during the pandemic

(REAL ESTATE BIG DATA) Real estate is a finicky field, but the most popular myths surrounding the effects of COVID-19 on the market are purely unfounded.

Published

on

real estate myths

In the past six months, there has undoubtedly been a large amount of misinformation regarding the Coronavirus, its treatment, and the long-term ramifications of a pandemic–a phenomenon that has affected, among other industries, real estate. Courtesy of SFGate, here are a few myths you’re likely to experience in the current market.

The first myth–and, arguably, the most prevalent one–asserts that selling your home amidst COVID-19 restrictions is a poor choice. In fact, the opposite is true: Danielle Hale, a real estate expert, explains that people have been able to sell at relatively high rates despite the pandemic. “As long as buyer demand remains strong, I expect the market to remain tipped in favor of sellers,” she adds.

Of course, both taking the proper precautions during showings and maintaining social distancing–along with affording buyers an appropriate amount of grace when settling on a closing date–are important attributes of making a successful sale during this time.

Another myth you’ll probably hear about is tangentially connected to the first–that home prices are declining, thus making it, again, a bad time to sell. This is simply untrue; Lawrence Yun of the NAR points to low mortgage rates, as well as a general lack of people selling during this time, as the culprit. It makes sense that people would want to protect their investments for the time being, after all.

Thirdly, and lastly in the buying-and-selling myth pantheon, you’ll find that people are actually buying houses more now than they were before the pandemic–a direct answer to the myth that buyers are hesitant to close on properties for now. Just like the last item, you can look to low interest rates and high demand as the justification here.

Then, there is the myth that you can no longer tour homes in person seems real enough, and it may be standard practice for some sellers; however, the majority of homes being sold in the United States, as of now, are viewable in person–and, more importantly, with the viewer’s safety at the forefront of the seller’s endeavors. However, SFGate does point out that, due to rising cases in much of the United States, some of these restrictions may eventually return.

Finally, the myth that buyers are actively attempting to leave cities in favor of suburb living seems to be circulating as of late. SFGate acknowledges that this myth is “partly true”, but that doesn’t mean city listings aren’t available–nor does it mean city dwellings will begin to lose their value. After all, urban living has consisted of largely prime real estate for as long as any of us can remember, and the Coronavirus probably won’t outlast that allure.

The bottom line is this: Real estate, like everything else, has been affected by COVID-19–but it hasn’t been completely turned on its head and wiped out like some may think.

Continue Reading

Real Estate Big Data

Home sales dive 10% in May – when is a sales rebound expected?

(REAL ESTATE) Home sales plummet in May, which we all expected, but when will sales begin to recover in light of this pandemic?

Published

on

home sales

As you would expect, May marks the third consecutive month of home sales declines amidst a global pandemic. According to the National Association of Realtors (NAR), existing home sales fell 9.7% in May compared to April, down a whopping 26.6% compared to this time last year.

The silver lining is that values continue to improve, with a median existing home price of $284,600 nationally, up 2.3% from May 2019, marking the 99th month of year-over-year gains.

Inventory levels rose 6.2% from April, and are down 18.8% from May 2019. Average days on market didn’t move much, at 26 days being equal to May 2019, and down from 27 days in April.

“Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lockdown and hence the cyclical low point,” said Dr. Lawrence Yun, NAR’s chief economist.

He added, “Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”

Sales also reflected an uptick in suburban sales over urban home sales. Dr. Yun cited work from home demands, however, anecdotally we would add some people moving away from densely populated areas in response to recent unrest.

What will ease housing conditions?

As he has observed repeatedly in recent years, Dr. Yun points to home builders. “New home construction needs to robustly ramp up in order to meet rising housing demand. Otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates.”

Mortgage Banker’s Association’s (MBA’s) SVP and Chief Economist, Dr. Mike Fratantoni’s insight pointed to inventory challenges as well: “As buyers are returning to the market, as evidenced by the strong, nine-week rebound in MBA’s purchase application data, the lack of homes for sale will be a real constraint. Although demand certainly dropped in March and April due to the crisis, supply dropped even more, and has thus far kept home prices from declining. We expect that home-price growth will pick up over the summer due to insufficient supply levels.”

Dr. Fratantoni noted, “The market is supported by strong demand from first-time homebuyers, who represented 34% of home purchases in May. Millennial-driven demand will be a tailwind for the market for the next several years.”

“Although the real estate industry faced some very challenging circumstances over the last several months, we’re seeing signs of improvement and growth, and I’m hopeful the worst is behind us,” said NAR President Vince Malta, broker at Malta & Co., Inc.

Continue Reading

Real Estate Big Data

Mortgage rates are still falling, demand still rising

(REAL ESTATE BIG DATA) Mortgage rates are low, so people should buy or refinance before they go up. And although inventory is low, demand is up as well.

Published

on

mortgage

Mortgage rates have dropped to another record low with the fourth reduction this year and buyers are taking notice. According to Mortgage Bankers Association (MBA) economist Joel Kan, “The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence.” Mortgage applications rose 4% last week from the previous week and were 21% higher than last year, according to the MBA’s seasonally adjusted index. Nine straight weeks of gains and the highest volume in more than 11 years is significant.

A year ago the 30-year home loan averaged 3.84%, but for the week ending June 18th, the 30-year fixed-rate mortgage averaged 3.13%, down eight basis points from a week earlier. The previous record low was 3.15% at the end of last month. 15-year fixed-rate mortgages have also seen a drop. Four basis points down to an average 2.58% rate.

With numbers like this, Americans may not want to wait too much longer before locking rates in.

Lower rates have also encouraged an increase in applications for refinancing, with applications up 10% for the week and 106% higher than a year ago. “Refinancing continues to support households’ finances, as homeowners who refinance are able to gain savings on their monthly mortgage payments in a still-uncertain period of the economic recovery,” Kan said.

There is no certainty how long rates will remain this low, however. Matthew Speakman, an economist with Zillow said “Upticks in coronavirus cases across the country left market participants skeptical of the economic recovery’s sustainability. More bad news regarding the uptick in coronavirus cases would likely send rates back downward, possibly to new lows. However, rates could just as easily begin to trend upward again, particularly if key economic data or measures to contain or treat the virus show meaningful improvements.”

The housing market is seeing a rebound. COVID-19 stay at home orders mean more people are wanting to invest in their homes and buyers are ready to capitalize on low rates before they increase. Unsold inventory remains at a low, however, and until there are more houses up for sale there is a limit on how high sales activity will increase.

Continue Reading
Advertisement

Our Partners

Get The Daily Intel
in your inbox

Subscribe and get news and EXCLUSIVE content to your email inbox!

Still Trending

Get The American Genius
in your inbox

subscribe and get news and exclusive content to your email inbox