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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?”

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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.

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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.”

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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

Pending home sales bounce back up, erasing recent hiccup

(REAL ESTATE BIG DATA) Like many of aspects of the housing market, things are starting too look up after a slight dip in January. Now the PHSI rates are up!

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PHSI rates are up

After a sharp dip in December, the Pending Home Sales Index (PHSI), which tracks contracts signed on homes for sale, improved 5.2% in January, according to the National Association of Realtors (NAR).

It is notable that all regions improved in January, except for the West. Again. That said, year-over-year contract signings surged in all regions, rising 5.7% nationally.

NAR’s Chief Economist, Dr. Lawrence Yun attributed the improvement to “the good economic backdrop and exceptionally low mortgage rates,” noting that this month marks the second highest monthly improvement in over two years.

But it’s not all sunshine and rainbows.

Dr. Yun continues to beat the warning drum, asserting that tight inventory levels continue to hold back the housing market, with December and January supply combining to mark the lowest level since 1999. “Inventory availability will be the key to consistent future gains.”

In recent months (and even years), Dr. Yun has pointed to homebuilders as the beacon of hope – if housing starts continue to surge, inventory levels could be less restrictive and allow in buyers that have been kept out of the market.

“With housing starts hovering at 1.6 million in December and January, along with the favorable mortgage rates, among other factors, 2020 has so far presented a very positive sales climate,” said Dr. Yun.

Looking to the future, he reports that “the latest stock market correction could provide exceptional, even lower mortgage rates for a few weeks, and that would help bring about a noticeable upturn in the coming months.”

PHSI regional breakdown:

  • The Northeast PHSI rose 1.3% to 92.9 in January, 1.2% higher than a year ago.
  • In the Midwest, the index increased 7.3% to 105.3 last month, 6.5% higher than in January 2019.
  • Pending home sales in the South grew 8.7% to an index of 129.4 in January, a 7.1% increase from January 2019.
  • The index in the West declined 1.1% in January 2020 to 92.6, still a jump of 5.5% from a year ago.

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Real Estate Big Data

Qualified Opportunity Zones are seeing growth! What does that mean?

(REAL ESTATE BIG DATA) It’s hard to keep track of all the important factors involving the housing market but yet another is qualified opportunity zones.

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Qualified opportunity zones

Almost three years after the 2017 Tax Cuts and Jobs Act, things are looking up. In fact, in almost half of the Qualified Opportunity Zones (QOZ), home prices have increased. This reflects the growth these areas have been experiencing – pretty exciting given these zones were originally “distressed communities” in need of a boost.

To get an idea of what this really means, here’s a quick refresher of QOZs. First of all, there are 8,760 Qualified Opportunity Zones. According to the U.S. Economic Development Administration, these zones are located “ in all 50 States, the District of Columbia, and five United States territories.” Investments in these struggling areas are incentivized due to tax cuts, which helps the zones recover.

If median house prices are any indication, the plan seems to be working.

Recently, ATTOM Data Solutions released a third report on these Opportunity Zones, marking an increase in over half the median home prices between 2018 and 2019. (To compare, the national increase was 9.4%, which was beaten by QOZs in 20 states.) This is a great sign that these areas are making strides towards recovery, though it should be noted that over three quarters of homes are still below the national median price, which is roughly $250k. Awesome for buyers, but for sellers, not so much.

This growth also varied by region. For instance, QOZs in the Midwest were very likely to have median home prices under $150k, which is well under the national average. Not to mention, many areas saw their home prices decrease, rather than grow.

It’s also worth noting that although there has been growth, it might not be permanent. According to Todd Teta, who is ATTOM Data Solutions’ chief product officer: “These areas are among the most vulnerable to economic downturns. As a result, the recent upswing could change on a dime if the broader housing market flattens out or sags.”

Although things are up in the air, for now the 2017 Tax Cuts and Jobs Act is still helping to revive struggling areas. So if you’re considering moving to one of the over 8,000 Qualified Opportunity Zones, you might just be coming in at a great time.

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Real Estate Big Data

‘Boom, boom, boom,’ Kudlow declares this a ‘housing boom’ as sales fluctuate

(REAL ESTATE) Existing home sales slide for the month but surge for the year – challenges remain, but Kudlow declares this a “housing boom.”

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existing home sales

Existing home sales (contracts signed) dipped 1.3% in January, following the current trend of “a fluctuating pattern of monthly increases and declines,” according to the National Association of Realtors (NAR).

NAR points to sluggish sales in the Western region as dragging down the national average, while other regions saw little to no change last month.

The good news, however, is that year over year, existing home sales actually surged 9.6%. Also hopeful is the news this week that housing permits hit a 13-year high, and housing starts recently hit a 13-year high as well.

Although affordability and tight inventory levels continue to hold back the housing market, Larry Kudlow, Director of the United States National Economic Council calls this a “housing boom.”

In jest, when Fox News began to ask about existing home sales, Kudlow interrupted with the words “boom, boom, boom.”

“Whatever the question is, the answer is boom. We’re in a housing boom,” Kudlow asserted.

NAR Chief Economist, Dr. Lawrence Yun calls the outlook for 2020 home sales “promising despite the drop [in existing home sales] in January.”

In a statement, Dr. Yun said, “The trend line for housing starts is increasing and showing steady improvement, which should ultimately lead to more home sales.”

The median existing home price rose 6.8% from January 2019 to hit $266,300. Supply conditions are driving price grown, notes Dr. Yun, adding that low mortgage rates have aided with affordability.

The average days on market fell to 43 days in January (down from 49 in January 2019). Fully 42% of all homes sold in January 2020 were on the market for less than a month.

On Wednesday, Dr. Yun called the housing start and building permit data “jumpy,” which is proving to be applicable to current home sales as well.

It’s this muddy mix of monthly setbacks with wildly successful annual increases. Spring sales are set to similarly trend positively, so long as starts and permits continue to fuel what Kudlow calls a “housing boom.”

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