Dec 21, 2012 | Housing Analysis
Single-family housing starts took a small step back in November.
According to the monthly Housing Starts report from the U.S. Department of Commerce, single-family housing starts tallied 565,000 in November 2012 on a seasonally-adjusted, annualized basis. This marks a 4 percent decline from October, but is more than 100,000 higher than the count from 12 months ago.
Clearly, the nation’s new home construction market is expanding.
On a regional basis, single-family housing starts have been strongest in the Midwest; and Hurricane Sandy appears to have affected the number of starts across the Northeast.
As compared to one year ago:
- Northeast Region : Housing starts down 19% on an annual basis
- Midwest Region : Housing starts up 40% on an annual basis
- South Region : Housing starts up 24% on an annual basis
- West Region : Housing starts up 33% on an annual basis
It’s expected that new construction growth will continue into 2013, too. This is because the Department of Commerce report also showed Building Permits mostly unchanged for November at 565,000 units on a seasonally-adjusted annualized basis.
As compared to November 2011, this marks a 25% increase. Permits for multi-family homes are up 17%, too.
There are more building permits being issued today that at any time in the last 4 years.
For home buyers, this may be good news. Rising permits and housing starts suggests a more healthy U.S. economy, but it also means that home supplies may not be as tight throughout the next few months.
Overly-tight home supplies in some U.S. markets have contributed to rapidly rising home values. With more construction and larger home inventories, home prices may rise in 2013 less slowly.
The good news, though, is the mortgage rates in Massachusetts remain near all-time lows and low- and no-downpayment mortgage programs are abundant. For today’s home buyer, there are plenty of affordable ways to purchase a home.
Talk with your real estate agent and your loan officer to see which plan works best for you.
Dec 19, 2012 | Housing Analysis
The National Association of Home Builders (NAHB) released its Housing Market Index (HMI), showing another monthly gain — its ninth in a row.
The HMI — a gauge of homebuilder confidence — rose 1 point to 47 in December 2012, lifting the index to its highest levels since April 2006.
Readings under 50 indicate unfavorable housing conditions for builders. Readings over 50 signal “good” conditions. Coincidentally, the last time that the HMI read above 50 was April 2006, too.
The Housing Market Index is based on a survey which the NAHB sends to its members. The survey asks the nation’s builders to rate the current housing market conditions.
In December, home builders reported gains in two of the three areas surveyed:
- Current Single-Family Sales: 51 (+2 from November 2012)
- Projected Single-Family Sales: 51 (-1 from November 2012)
- Buyer Foot Traffic: 36 (+1 from November 2012)
It’s noteworthy that buyer foot traffic has climbed over nine straight months and is now at it’s highest reported level in nearly 7 years. Low mortgage rates and rising home prices throughout Worcester County area have compelled today’s renters and existing homeowners to consider their home buying options.
This was none more apparent that in the Northeast Region in which builder confidence grew twelve points to 42. The Midwest Region also showed a strong improvement, climbing 2 points to 53. The West and South regions fell slightly between November and December.
For today’s buyers, rising builder confidence may be a signal that home prices are headed higher. Confident home sellers — including the nation’s builders — are less likely to make price concessions into an improving market, or may be less likely to offer free upgrades to buyers.
Therefore, if you are in the market for a newly-built home, consider that you may get the best “deal” by acting sooner rather than later. Mortgage rates are rising and home prices are, too. Six months from now, your costs of homeownership may be higher.
Dec 18, 2012 | Housing Analysis
Foreclosure-tracker RealtyTrac reports falling foreclosure sales nationwide as banks get better at selling homes via short sale.
In its Q3 2012 report, RealtyTrac says that 193,059 homes in some stage of foreclosure were sold, accounting for 19% of all residential home sales. In addition, pre-foreclosure sales — also known as “short sales” — climbed 22% on a year-over-year basis.
For the first time since 2007, the number of short sales outnumbered the number of homes sold in foreclosure over three consecutive quarters.
The average price of a short sale home fell by 5 percent as compared to a year ago which may reflect an eagerness on the part of mortgage lenders to dispose of distressed properties before they fall into foreclosure. Foreclosures can increase a lender’s losses, and foreclosed properties be expensive to manage.
Compare the average Q3 2012 sale price of a home in short sale versus one in foreclosure :
- Average sale price of a residential property in short sale : $191,025
- Average sale price of a residential property in foreclosure : $161,954
It’s not just the higher home sale prices that have pushing banks to settle on short sales, either. Short sales are less costly, too. Foreclosing on a home requires banks to pay court costs, among other fees, and which positions the short sale outcome as a clear winner for many banks.
For homebuyers in Worcester County area , the banking industry’s shift toward short sales is welcome news.
Buying a short sale has been a notoriously slow process with a lack of defined timeline. As banks improve their distressed sales division, they’re getting faster and more efficient. This makes it “easier” for a buyer to buy a home in short sale.
However, don’t buy a short sale without the help of an experienced, licensed real estate professional.
The negotiation process is different for a short sale than with a “traditional” home purchase. Time lines are different, responsibilities are different, and purchase contract language may be different, too. The same is true for buying a foreclosure.
Dec 14, 2012 | Housing Analysis
Last week’s National Association of Home Builders/First American Improving Markets Index (IMI) brought positive news about U.S. housing markets and the broader U.S. economy, in general.
According to the IMI, there are now 201 U.S. markets which can be considered “improving”.
To meet this standard, a local area economy must exhibit at least six consecutive months of improvement in terms of local employment, single-family housing permits and area home prices; and, at least six months must have passed since each of these readings were at their respective low points, called troughs.
The Improving Market Index added 76 metropolitan areas in December as compared to the month prior. 45 states are now represented on the list, in addition to the District of Columbia.
The cities deemed “improving” aren’t limited to recent, high-profile hot spots such as Detroit, Michigan; and Phoenix, Arizona, either. Several of the newly-included areas for December were :
- Atlanta, Georgia
- Bloomfield, Illinois
- Ithaca, New York
- Riverside, California
- Seattle, Washington
The geographic diversity of this month’s Improving Market Index suggests a nationwide economic recovery in progress. More jobs, a steady supply of available homes, plus rising home prices helps communities thrive.
Unfortunately, it may also mean less opportunity to buy homes as rock-bottom prices.
As sellers and home builders gain confidence in the economy, it may be more challenging for today’s Worcester County area buyers to get a “great deal”. In addition, an improving, post-recession economy will likely lead mortgage rates higher, robbing home buyers of their purchasing power.
Freddie Mac says that the average 30-year fixed rate mortgage rate is 3.32% nationwide. In a fully-recovered economy, that rate could be 5 percent or higher. The impact on monthly housing payments would be palpable.
The National Association of Homebuilders expects more markets to join the Improving Market Index list through 2013. Today’s home buyers may want to lock in today’s low rates before economic improvement leads mortgage rates higher.
Nov 30, 2012 | Housing Analysis
Homes were sold at a furious pace last month.
According the National Association of REALTORS® (NAR), the Pending Home Sales Index rose 5.2 percent in October, crossing the benchmark 100 reading, and moving to 104.8.
It’s a 5-point improvement from September’s revised figure and the highest reading April 2010 — the last month of that year’s federal home buyer tax credit.
October also marks the 18th consecutive month during which the index showed year-to-year gains.
As a housing market metric, the Pending Home Sales Index (PHSI) differs from most commonly-cited housing statistics because, instead of reporting on what’s already occurred, it details what’s likely to happen next.
The PHSI is a forward-looking indicator; a predictor of future sales. It’s based on signed real estate contracts for existing single-family homes, condominiums, and co-ops. Later, when the contract leads to a closing, the “pending” home sale is counted in NAR’s monthly Existing Home Sales report.
Historically, 80 percent of homes under contract, and thus counted in the Pending Home Sales Index, will go to settlement within a 2-month period, and a significant share of the rest will close within months 3 and 4. The PHSI is a predictor of Existing Home Sales.
Regionally, the Pending Home Sales Index varied in October 2012 :
- Northeast Region : 79.2; +13 percent from October 2011
- Midwest Region : 104.4; +20 percent from October 2011
- South Region : 117.3; +17 percent from October 2011
- West Region : 105.7; +1 percent from October 2011
A Pending Home Sales Index reading of 100 or higher denotes a “strong” housing market.
Of course, with rising home sales comes rising home values. 2012 has been characterized by strong buyer demand amid falling housing supplies. It’s one reason why the Case-Shiller Index and the FHFA’s Home Price Index are both showing an annual increase in home prices. Plus, with mortgage rates low as we head into December, the traditional “slow season” for housing has been anything but.
The housing market in Massachusetts is poised to end 2012 with strength. 2013 is expected to begin the same way.
Nov 29, 2012 | Housing Analysis
Sales of newly-built homes took a small step lower in October, but remain strong.
According to the Commerce Department, New Home Sales slipped 1,000 units last month, falling to 368,000 units on a seasonally-adjusted, annualized basis.
The final reading fell short of Wall Street expectations, and the government revised downward its initial findings from August and September by 2,000 units and 20,000 units, respectively.
A “new” home is a home that is considered new construction.
Furthermore, the number of new homes for sale nationwide ticked higher to 147,000 — the highest reading in 9 months.
However, in taking a broader look at October’s New Home Sales report, we see obvious strengths. For example, although home sales slipped last month, it remains the third-highest tally since the April 2010 expiration of the federal home buyer tax credit.
The highest reading? Last month’s 369,000.
In addition, the national new home inventory has dropped, off 8% from last year. Fewer homes for sales has been a driving force behind rising home prices. As compared to one year ago, the median new home price is up nearly six percent. More demand for buyers is a factor, too.
At the current sales pace, the complete U.S. inventory of new homes for sale would “sell out” in 4.8 months. This is a noteworthy data point because, as analysts point out, a 6.0-month supply of homes marks a market in balance.
Today’s new homes market, therefore, is a seller’s market; one in which home builders may be gaining pricing power and negotiation leverage over buyers. It’s one reason why home builder confidence has climbed to a 5-year high.
For buyers of new construction, then, in Worcester County area and nationwide, 2013 is a critical year. Home prices may rise and mortgage rates may, too. And, along the way, it may get tougher to get a “great deal” on new construction.
If you’re planning to buy, therefore, consider moving up your time frame. After October’s small step backward, the time to buy a newly-built home may be now.
