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Home Builder Sentiment Highest in Five Months

October 18, 2017 Comments off

Component readings used for calculating Housing Market Index readings also rose in October. Builder sentiment for current market conditions gained five points for a reading of 75. The index reading for builder perception of market conditions in the next six months also rose five points to an October reading of 78.

Builder sentiment for home buyer traffic in new home developments rose one point to 48. Buyer traffic readings seldom exceed a Home Builder Index reading of 50.

NAHB Chairman Granger Mc Donald said builders were recovering from the initial shock of damage caused by hurricanes, but this was prior to numerous wildfires adding to demand for contractors and home builders.

National Disasters Add to Ongoing Materials and Labor Shortages

Factors contributing to stronger builder sentiment included an industry concentration of building homes for purchase instead of multifamily rental projects. Single-family homes have been in short supply in recent years and building more homes is the only remedy for a market skewed in favor of sellers and rapidly rising home prices fueled by high buyer demand and few choices available to buyers.

Recent hurricane damage is likely to raise materials prices and worsen labor shortages; Widespread damage caused by wildfires in California is expected to increase demand for contractors and skilled laborers as they work to repair and rebuild homes and buildings ruined in storms and fires.

Regional Readings Mixed

Three-month rolling averages of builder sentiment for regions tracked by NAHB were mixed. In the Northeast, builder sentiment rose one point to 50. The South gained two points for a reading of 68. The reading for builder sentiment in the South was unchanged at 63; the reading for the West was also unchanged at 77.

Winter weather and challenges caused by higher demand for services against rising materials costs and ongoing labor shortages can be expected to challenge builders, but the need for new housing caused by multiple national disasters will likely create many new jobs for builders.

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What’s Ahead For Mortgage Rates This Week – October 2, 2017

October 2, 2017 Comments off

Last week’s economic reports included Case-Shiller’s Home Price Indices, readings on new and pending home sales and Freddie Mac ‘s weekly mortgage rates report. Weekly jobless claims and reports on inflation and core inflation were also released.

CaseShiller Home Prices Rise in July; New and Pending Home Sales Lower in August

According to Case-Shiller July Index reports, national home prices rose at a rate of 5.8

90 percent on a seasonally-adjusted annual basis as compared to June’s reading of 5.80 percent. The top three cities in the 20-City Home Price Index were Seattle, Washington, Portland, Oregon and Las Vegas, Nevada.

Home prices are responding to high demand for homes and limited inventories of homes for sale. Although this trend has persisted in the last few years, lower readings for sales of new homes and pending home sales were lower in August. Analysts said this could indicate that home prices are topping out due to affordability and few homes for sale.

New home sales fell to 560,000 on a seasonally-adjusted annual basis in August as compared to July’s reading of 580,000 sales. While real estate pros and economists look to pending home sales as an indicator for future closings and mortgage originations, August’s reading slipped lower into negative territory with a reading of – 2.60 percent. July’s reading for pending home sales was – 0.80 percent.

Mortgage Rates Stay Flat, New Jobless Claims Rise

Freddie Mac reported no change in average fixed mortgage rates. 30-year fixed rate mortgages had an average rate of 3.83 percent and 15-year fixed rate mortgage rates held steady at an average of 3.13 percent. The average rate for a 5/1 adjustable rate mortgage rose by three basis points to 3.20 percent. Discount points averaged 0.60 percent for 30-year fixed rate mortgages and 0.50 percent for 15-year fixed rate and 5/1 adjustable rate mortgages.

First-time jobless claims rose by 12,000 to 272,000 claims. Analysts expected 270,000 new jobless claims; 260,000 new claims were filed the prior week.

Inflation rose by 0.10 percent in August, which matched expectations and was lower than July’s growth rate of 0.30 percent. Core inflation, which excludes volatile food and energy sectors, was unchanged at 0.10 percent and fell short of expectations of 0.20 percent growth in August.

Consumer sentiment fell to an index reading of 95.10 percent and met analysts’ expectations based on August’s reading of 95.30

Whats Ahead

Next week’s scheduled economic reports include readings on construction spending and labor-sector reports from ADP Payrolls, Non-Farm payrolls and the national unemployment rate for September. Weekly readings on mortgage rates and new jobless claims will also be released. 

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Case-Shiller: Home Prices Higher in July, Home Prices May Have Peaked

September 27, 2017 Comments off

Case-Shiller reported higher sales of new homes for July; the national reading for new home sales increased by 0.10 percent to a seasonally-adjusted annual rate of 5.90 percent. The 20-City Home Price Index rose by 0.20 percent to 5.80 percent on a seasonally adjusted annual basis.

Seattle Washington held the top spot in the 20-City Index with a growth of 13.50 percent year-over-year. Seattle home prices are growing faster than home prices in Portland Oregon, which reported a year-over-home price growth rate of 7,60 percent. Dallas, Texas lost its third-place standing in the 20-City Index to Las Vegas, Nevada, which reported 7.40 year-over-year growth in home prices. Dallas, Texas and Detroit, Michigan tied for fourth position with 7.30 percent home price growth.

David M. Blitzer, managing director and chair of the S&P Case Shiller Home Price Index Committee, said that the Pacific Northwest largely drove July home prices,12 of 20 cities surveyed reported higher home prices in July. Home prices rose to their highest level since May 2009 but were selling for less than half of what new homes sold for in 2009.

Home Prices Rise, Falling Sales Suggest Prices May Have Peaked

High demand for a limited number of available homes continued to cause home prices to rise, but home sales fell in July. Three of four regions reported lower sales with the Midwestern region sales volume unchanged. Low inventories of homes for sale have increased competition among homebuyers; this creates bidding wars that cause artificially high home prices in high-demand markets.

In related news, The Commerce Department reported that new home sales fell by 3.40 percent in August. The inventory of homes on the market rose from a 5.70month supply to a 6.10month supply of homes for sale. Real estate pros consider a six-month supply of homes for sale a good balance between homes on the market and active home buyers. Increasing inventories of homes for sale suggests that home prices could be peaking as home buyers face strict mortgage rules and affordability concerns.  

Hurricanes Harvey and Irma impacted 14 percent of building permits issued in 2016. While building permits issued may increase, ongoing concerns over labor shortages and building materials costs could become more pronounced as rebuilding in the hurricane zones progresses.

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NAHB Housing Market Index Slips Two Points in June

June 16, 2017 Comments off

The National Association of Home Builders Housing Market Index for June fell by two points to 67 after a revision of May’s reading. Components of the Housing Market Index were lower for June with builder confidence in current market conditions two points lower at 73; June’s reading for builder confidence in market conditions for the next six months also fell two points to 76. Builder confidence in buyer traffic fell two points to 49. According to the Index, any reading over 50 indicates that more builders are confident than those who are not.

Labor and Lot Shortages Continue to Stifle SingleFamily Home Building

NAHB Chief Economist Robert Dietz said that builder confidence remains high despite ongoing shortages of buildable lots and skilled labor. Meanwhile, NAHB reported lower readings for its regional 3-month rolling average of home builder confidence. The Northeast region was two points lower at 46; Builder confidence in the Midwest was one point lower at 67 and the Southern region was also one point lower with a 3-month reading of 70. The West had the highest builder confidence with a three-month average reading of 70.

Mortgage and consumer credit interest rates are likely to move higher after the Federal Reserve’s decision to raise its target federal funds rate by 0.25 percent on Wednesday. This was the third uptick for the Fed rate this year. As interest rates and other consumer costs increase, would-be buyers of new homes may be sidelined. Future builder confidence readings could be influenced by a variety of economic factors including employment, interest rates and consumer confidence.

Housing Starts Expected to Lag Behind PreBubble Level

While housing starts are expected to increase to approximately 1.23 million on a seasonally-adjusted annual basis, they are significantly lower than the near 2-million housing starts reported prior to when the housing bubble burst. Analysts noted that the overall economic recovery remains steady with some glitches expected along the way. Closing the gap between builder confidence and housing starts is seen as the solution for easing high demand for homes and unusually low inventories of homes on the market.

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Case-Shiller: December Home Prices Highest in More Than Two Years

March 2, 2017 Comments off

December home prices continued to rise per December readings for Case-Shiller’s National and 20-City Home Price Indices. On average, national home prices increased by 5,80 percent year-over-year and exceeded November’s year-over-year reading of 5.60 percent. The 20 City Index, which analysts follow more closely than the National Home Price Index, posted a year-over-year gain of 5.60 percent in December, which exceeded an expected reading of 5.40 percent and November’s year-over-year reading of 5.20 percent growth.

West Posts Highest Home Price Growth

The West continued to dominate home price growth rates with Seattle, Washington posting 10.80 percent year-over-year growth while Portland, Oregon and Denver, Colorado posted year-over-year gains of 10.00 percent and 8.90 percent respectively. New York, New York posted the lowest year-over-year gain in home prices with year-over-year growth of 3.10 percent. Washington, D.C. followed with 4.20 percent growth in home prices; Cleveland, Ohio posted a year-over-year gain of 4.40 percent.

Home Price Growth Rate Doesn’t Indicate a New Housing Bubble

David M. Blitzer, Chairman and Managing Director of the S&P Indices Committee that oversees Case-Shiller Home Price Indices, said that home prices adjusted for inflation averaged a year-over-year growth rate of 3.80 percent. While higher than average, Mr. Blitzer said the current rate of home price growth “is not alarming.”

While rising home prices may sideline moderate-income and first-time homebuyers, high demand for homes and ongoing shortages of homes for sale continued to drive prices up. Real estate pros typically consider a six-month supply of available homes an average inventory reading, but the current supply of homes for sale averages three to four months. Recently rising mortgage rates were also cited as contributing to higher home prices; rates for a 30-year fixed rate mortgage average 4.20 percent as compared to 6.40 percent on average since 1990.

Questions of affordability and rising rates could impact first-time buyers who enable current homeowners to sell their homes and “move up.” If large numbers of first-time buyers are sidelined by rising home values and mortgage rates, home prices could be impacted if investors and cash buyers fail to fill in gaps between high home prices and affordability.

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Case-Shiller: Home Price Growth Continues

December 28, 2016 Comments off

Home increased in October according to Case-Shiller’s 20City Home Price Index. Home prices rose from September’s annualized reading of 5.40 percent to 5.60 percent. Factors contributing to rising home prices include stronger economic conditions and outlook along with short inventories of available homes coupled with high demand. On average, October home prices rose 5.10 percent on seasonally adjusted annual basis, which was unchanged from September’s reading.

West Continues to Lead Home Price Growth

Top home price growth rates were in Seattle, Washington at 10.70 percent, Portland, Oregon at 10.30 percent and Denver, Colorado with a seasonally-adjusted annual price increase of 8.30 percent. New York, New York had the lowest home price growth in October with a reading of 1.70 percent.

In a separate report, December consumer confidence exceeded expectations with an index reading of 113.70 as compared to an expected reading of 110.00 and November’s reading of 109.40. This was the highest reading for consumer confidence since 2001. Analysts said that the strong reading for consumer confidence was a sign that consumers will increase their spending in 2017, but what will happen with mortgage rates is a big question.

Rising Mortgage Rates May Slow Home Prices, High Demand for Homes

With the Federal Reserve’s decision to raise its target federal funds range in December comes a question of how rising mortgage rates will affect housing markets. Rising fed rates typically lead to increases in consumer lending rates including rates for home loans and refinancing. Combined effects of rising home prices and mortgage rates create challenges for first-time and moderate income home buyers. While higher mortgage rates have not impacted buyer demand so far, rising mortgage rates could sideline some buyers.

A recent compilation of the most expensive places to live in America illustrates the imbalance of home prices as compared to consumer incomes. Brooklyn, NY topped this list with a reading of 127.70 percent of average household income earned in Brooklyn to buy an average priced home in Brooklyn. Analysts reporting this data noted that many Brooklyn homeowners work in Manhattan and earn more than those who work in Brooklyn. Disparities in average home prices and home buyer incomes could “trickle down” to less expensive areas if mortgage rates and home prices continue to rise.

Meanwhile, builder confidence is strong and is expected to lead to higher levels of home construction in 2017.

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Case-Shiller: Home Price Growth Mixed for September

December 1, 2016 Comments off

September’s 20-City Housing Market Index from Case-Shiller showed signs that rapidly rising home prices in some metro areas may be losing momentum. San Francisco, California, posted a month-to-month reading of -0.40 percent and a year-over-year reading of 5.70 percent. Home prices stayed flat in Seattle Washington from August to September, but posted the highest home price gain of 11.00 percent year-over-year. Slowing home price growth in high-demand areas suggest that affordability concerns are impacting rapid gains in home prices seen in recent years.

Case-Shiller’s National Home Price Index achieved its highest gain with a reading of 5.50 percent as compared to August’s reading of 5.10 percent.

YearoverYear: Western U.S. Holds Highest Gains in Home Prices

In addition to Seattle’s year-over-year home price growth rate of 11 percent, Portland, Oregon closely followed with a year-over-year reading of 10.90 percent. Denver, Colorado rounded out the top three cities in the 20-City Home Price Index with a year-over-year growth rate of 8.70 percent. September was the eighth consecutive month that the top three cities held their places in the 20-City Index. Case-Shiller’s 20-City Home Price Index posted a year-over- year gain of 5.10 percent.

September Home Prices Cap Recovery, Usher in New Progress for Housing Market

According to David M. Blitzer, Chairman of S&P Dow Jones Index Committee, September’s record national reading for home prices marks a transition from housing recovery to “the hoped for start of a new advance.” Mr. Blitzer cited recent data on sales of new and pre-owned homes and said that housing starts reached a post-recession peak.

September’s peak in national home prices was 0.10 percent above the pre-recession peak set in 2006. Adjusted for inflation, the September peak remains approximately 16 percent below the pre-recession peak. During the recession, national home prices reached a trough that was 27 percent lower than Case-Shiller’s September reading. Analysts expressed some caution and noted headwinds to housing markets including slower-than-normal rates of homes construction, higher mortgage rates and strict mortgage approval requirements.

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