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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. 

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

Global market panic over Chinese real estate bubble subsides slightly

(REAL ESTATE) Chinese real estate bubble fears shook markets last week, but Evergrande made a big move today to temper the panic.

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Last week, stock markets internationally plunged due to fears of a real estate bubble in China as their largest real estate developer, Evergrande struggled to make their interest payments on their outstanding bank loans as well as their bonds.

Analysts pointed to the interconnected nature of markets, reminding people that when the housing market crashed in the U.S. back in 2008, all global markets were impacted.

We asserted that the panic was overblown given that Evergrande has a tremendous amount of physical assets ($340 billion to be more precise), and that a restructure was possible which could put them back on track (rather than crumble – which was what markets seemed to imagine last week).

There has been a lot of speculation that the CCP (Chinese Communist Party) would begin pressuring state-owned businesses to prop up the developer.

Today, Evergrande’s stock is actually up as they have raised $1.5 billion in cash to meet their financial obligations.

How did they accomplish this? By selling their 20% stake in Shengjing Bank to the state-owned Shenyang Shengjing Finance Investment Group.

The money will only be applicable to their outstanding interest payments that are past due, and the Chinese government has not made any statement to the effect that they applied pressure or intervened.

The government has been pouring cash into the financial system to assuage fears, adding $15.5 billion to keep liquidity moving.

In a statement this week, the People’s Bank of China said they would “maintain the healthy development of the real estate market and safeguard the legitimate rights and interests of housing consumers.” The statement did not specifically reference Evergrande.

It is important that real estate practitioners keep their eye on this story as it has stoked consumers’ fears, especially when people don’t read beyond a headline.

There won’t be a pop quiz on how much cash Evergrande has on hand, but consumers may mention the Chinese real estate bubble elbowing markets here as a factor in their decision making. Understanding the bird’s eye view of what is going on will help Realtors better address the topic while in the field.

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Real Estate Big Data

Pending home sales jump 8.1% after two months of declines

(REAL ESTATE) Pending home sales are up in August versus July, but are down annually and regional performance varies.

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The volume of contracts signed on home purchases in America (pending home sales) rose 8.1% in August from July after two months of sliding sales, according to the National Association of Realtors (NAR).

Although all regions experienced monthly growth, the Northeast actually fell 15.8% compared to this same time last year. In that same vein, pending home sales are down 8.3% over August of 2020.

This metric is used to indicate how many closings are coming down the pipeline nationally, so regardless of the volume compared to last year, closings are looking up compared to this summer.

NAR’s Chief Economist, Dr. Lawrence Yun said, “Rising inventory and moderating price conditions are bringing buyers back to the market. Affordability, however, remains challenging as home price gains are roughly three times wage growth.”

Dr. Yun also notes that this market imbalance “is unsustainable over the long-term.”

He adds that the Midwest and South are more moderately priced and are experiencing “stronger signing of contracts to buy,” which he notes is not surprising. “This can be attributed to some employees who have the flexibility to work from anywhere, as they choose to reside in more affordable places.”

NAR pending home sales index

Remote work is certainly shifting the landscape, but it remains unseen how permanent this shift is as our nation struggles to emerge from a persistent global pandemic.

It is worth noting that in the Midwest, pending home sales surged 10.4% monthly, bud dropped 5.9% annually. The Southern region rose 8.6% monthly, and is down 6.3% annually. In the West, contract signings rose 7.2% monthly and dipped 9.2% annually. In the Northeast, sales rose 4.6% monthly, and fell a whopping 15.8% annually.

Another forward-looking indicator remains worrisome as housings starts for single family homes fell 2.8% in August. But with home prices rising for the fourth consecutive month, there remains uncertainty in the market.

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Real Estate Big Data

Housing starts surge, but only in the multi-family sector #MixedNews

(REAL ESTATE) Housing starts just skyrocketed, led by multi-family, while single-family actually fell, doing *nothing* to help the housing supply crisis.

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Housing starts are on the rise, everyone celebrate! We’ve been saying for years that the market will continue to choke out would-be homebuyers if permits and starts don’t improve, and we’re finally seeing a glimmer of hope, but unfortunately it’s pretty exclusively in the multi-family sector.

According to the U.S. Commerce Department, housing starts jumped 3.9% in August, beating economists’ expectations, with construction material pricing easing and allowing for more new builds. But again, the surge was led by multi-family (up a whopping 20.6% for the month), while single family housing starts actually fell 2.8%, and permits for that sector stagnated.

“There is certainly a housing shortage, as reflected in the low inventory of homes for sale and in low rental vacancy rates,” observed National Association of Realtors’ Chief Economist, Dr. Lawrence Yun. “However, a shift toward rental buildings means less access to homeownership over the long run and the accompanying opportunity for wealth gains.”

This summer, NAR called for lawmakers from local to federal to take “once-in-a-generation action” to address the housing supply crisis.

Now, Dr. Yun noted that “given the housing shortage and the lack of big increases in the construction of single-family homes, home prices will continue to move higher than most people’s income gains,” despite price gains skyrocketing 20% gains in the first half of this year.

“That’s good news for property owners,” said Dr. Yun, “but bad news for those wanting to become homeowners.”

In coming months, single-family housing starts are expected to slow, not just for seasonality reasons, but as a result of thousands of people trading in their city life for a suburban life as a reaction to a global pandemic.

Home builders’ permits are up 50% nationally compared to this time last year when supply chains were obliterated by COVID, and China’s real estate problems are not expected to have a strong ripple effect in housing stateside, although a temporary stock market retraction has been felt.

Homebuilder sentiment just rose for the first time in three months, according to the National Association of Home Builders (NAHB) which pointed to a rise in buyer traffic and (finally) falling lumber prices, which they said has added an average of $30K in cost to a new home in America.

“The September data show stability as some building material cost challenges ease, particularly for softwood lumber. However, delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers,” said NAHB Chairman, Dr. Chuck Fowke.

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