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Housing still hoping to gain momentum

Michael J. Berens

Wednesday, August 24, 2016

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Housing still hoping to gain momentum

Slow but steady is the current prognosis for the housing industry. Housing starts are up for the first seven months of the year, but month-to-month gains have remained flat for the past four months. Meanwhile, requests for single-family permits have declined, which could mean fewer new starts in the months ahead.

Nonetheless, builders and housing experts expect the industry will continue to experience modest growth in the second half of the year.

Overall, housing showed signs of improvement in July. The U.S. Department of Commerce announced that housing starts (in number of units) rose 2.1 percent, compared to June, reaching their highest reading since February. Most of the gain was in the multifamily sector, which was up 5 percent. New single-family starts stayed positive but flat, nudging up only 0.5 percent. Applications for new permits slipped slightly (0.1 percent) but were 0.9 percent above a year ago.

Similarly, Dodge reports residential construction (in dollars) increased 3 percent in July over June. Again, the strongest gains were in multifamily, which jumped 9 percent, while single-family construction ticked up just 1 percent. Multifamily also was the strongest performer on the Architecture Billings Index for July, says the American Institute of Architects.

According to the National Association of Home Builders’ Leading Market Index for the second quarter of 2016, average economic and housing activity nationwide is now at 97 percent of “normal,” with 91 percent of markets showing year-over-year improvements. For housing, that means single-family permits and housing prices are nearly at 2000-2003 levels.

However, the boost has come mainly from rising housing prices. Permits as yet have rebounded only to 50 percent of “normal” activity. Realtor magazine relates sales of existing homes “heated up” in July, fueled by an increase in inventory (due to rising housing prices) and historically low mortgage rates.

More millennials in the 25- to 34-year-old age range were actively looking to purchase a home, as well. Qualifying for a mortgage and a shortage of affordable properties continue to be hurdles for many would-be first-time homebuyers, though. That, in turn, is driving the need for rental housing, which is pushing the demand for multifamily units.

Despite the rather mixed bag of favorable and concerning indicators, the industry outlook remains positive. Builder confidence, as measured by the NAHB’s Housing Market Index, was up two points in August, buoyed by improving employment and economic news. Builders were slightly more optimistic (up one point) about sales expectations for the next six months.

A joint forecast by economists from the Associated Builders and Contractors, AIA and NAHB predicts the industry will end the year maintaining its current level of a 10-plus percent increase over last year, and will continue to see gradual, modest growth in 2017.

In its National Residential Economic Report for the second quarter of 2016, MetroStudy forecasts the total number of residential permits will exceed that of 2015 by year’s end. For the longer term, it foresees an overall healthy housing market during the next five years, with valuations increasing and demand outpacing supply.

Unless some change occurs either in household income or home prices, affordability will remain on a drag on the industry’s efforts to accelerate growth.

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About the Author

Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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Homebuyer sentiment reverses course amid mixed signals

Michael J. Berens

Wednesday, October 12, 2016

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Homebuyer sentiment reverses course amid mixed signals

Homeowners looking to sell are enthusiastic about the continued rise in housing prices. Prospective homebuyers not so much.

Even with mortgage rates remaining near rock bottom, those who would like to purchase a home are feeling the pressure of having to strain too much financially to meet market demands. The past two months have seen a gradual decline in buyer interest that could linger throughout the remainder of the year.

Homebuyers were mostly optimistic just a few months ago. Nearly three-fourths of prospective buyers (71 percent) in the third quarter felt “now is a good time to buy a home,” according to the National Association of Realtors (NAR) September 2016 Housing Opportunities and Market Experience (HOME) study, up from fewer than half (42 percent) in the second quarter.

Fannie Mae’s Home Purchase Sentiment Index (HPSI) hit a survey-high 86.5 (out of 100) in July. Sales of new homes were up strongly in July as well, as were pending home sales. The industry appeared to be well positioned to take advantage of the fall homebuying season. Then the winds shifted.

Fannie Mae’s HPSI dipped 1.5 points in August. Sales of newly built single-family homes — while still trending well above 2015 year-over-year — fell 7.6 percent, and new housing starts dropped 5.8 percent, according to the National Association of Home Builders (NAHB).

The NAR reports, “After bouncing back in July, pending home sales cooled in August for the third time in four months and to their lowest level since January,” declining 2.4 percent. Existing home sales toppled in July by more than 3.2 percent and softened again in August by nearly another point (0.9 percent), surprising economists who had expected a 1.1 percent increase over July, announced Reuters.

During this time, the economic news was mostly positive, and employment continued to trend upward. Clearly, other factors have brought about this sudden shift in consumer attitude.

A closer look at NAR’s third-quarter HOME study reveals a positive outlook was highest among prospective buyers who already own a home, were age 45 or older, had a household income of $50,000 a year or more, and lived in regions that have rebounded more quickly from the recession.

Prospective first-time buyers — especially millennials and those living in urban areas — were less optimistic. Moreover, participants in the HOME survey were more confident that home prices in their area would not rise substantially over the next six months and that mortgage rates would hold steady at current low levels.

As the summer progressed, those variables appeared less certain. Speculation that the Federal Reserve Board might raise interest rates in the light of strengthening employment numbers created concern that mortgage rates would soon follow. In the August HPSI, the net share of Americans who say it is a good time to buy a house fell by 5 percentage points. More than half of respondents (56 percent) indicated they believe mortgage rates would stay the same or go up during the next 12 months.

Releasing the results, Fannie Mae senior vice president and chief economist Doug Duncan said the decline in the HPSI over the past two months “adds a note of caution to our moderately positive housing outlook.” Commenting on the drop in pending home sales, NAR Chief Economic Lawrence Yun remarked that in most areas of the country “an increased number of prospective buyers appear to be either wavering at the steeper home prices pushed up by inventory shortages or disheartened by the competition for the minuscule number of affordable listings.”

In areas throughout the country, the mismatch between housing costs and income, as well as the hurdle of qualifying for a mortgage, is making prospective buyers think twice about taking on the burden of a home purchase. Whether the current reversal will evolve into a trend will become clearer when September figures are released later this month.

Meanwhile, industry experts remain confident, if cautious, that the market will continue to experience modest growth in the months ahead.

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About the Author

Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

Continue reading Homebuyer sentiment reverses course amid mixed signals

5 All-Female Coworking Clubs Where Design Counts

In honor of International Women’s Day, AD rounds up the most stylish all-women coworking spaces and social clubs across America.

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