New Construction Demand Is on the Rise

 Existing housing has become a Debbie downer for buyers in the market. The market for existing homes is still on the short end with higher home costs than in recent years. This coupled with the spiking interest rates has detoured buyers. In fact, the industry reports that homes haven’t been this unaffordable since 1984.

According to reports, the US mortgage rates have slowed a little, stopping the five-week straight of gains. There is no relief in the 30-year fixed-rate mortgage as it remains high around 7.18%. This time last year the 30-year fixed rate was only 5.66%.

Those buyers in the market are going for the new construction, making home builder stocks more desirable. The market is frustrated with the huge buyer competition and so few existing home listings which has caused massive bidding wars. This has been avoided with buyers focusing now on new construction. Home builder stocks are jumping, Pultegroup has jumped 80%, Toll Brothers 64% DR Horton up 34% and Lennar up 32%.

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IS THE HOUSING MARKET HEADING FOR A CRASH

The housing crash of 2008 was a devastation to the U.S. housing market.  Currently, the economy is slightly taking a negative turn.  The slowdown in the U.S. economy is having many homeowners concerned with the state of the market.  Fortunately, data reveals that today’s slowdown is nothing like the crash in 2008. One of the biggest factors for it not to crash down is the low inventory supply which comes from current homeowners putting their homes on the market, newly built homes being listed and short sales or foreclosures. 

Even with the uptick in housing supply, resales are still low.  Data shows that inventory is up 27.8%  which was the same time last year but compared to 2019 it is down by 42.6%.  This means that the current inventory is still super low because current homeowners are still hesitant to put their homes on the market.  This does not mean however that there are not enough houses on the market to cause a crash or prices to drop.  This would take a flood of current homeowners that would want to put their house on the market at the same time for this to happen.

Ironically even with such low inventory, homebuilders are slowing down their production currently.  “It has become a very competitive market for builders where they are trying to offload any standing inventory,” says Ali Wolf, Chief Economist at Zonda.

The slow down is a reaction to the higher mortgage rates and softening buyer demand. Builder’s do not want to overbuild like they did before the 2008 crash occurred.  Those in the industry say it is a sign that builders are being intentional about not overbuilding homes like what happened during the bubble before the 2008 crash.  The latest report from the U.S. Census states that at today’s current pace, we’re headed to build a seasonally adjusted annual rate of about 1.4 million homes this year. This is the perfect mix to make a stable market.  This will add more inventory at a pace that does not create an oversupply of inventory that the housing market can not absorb.  This is due to the builders being cautious about how much and how fast they are producing.

Distressed properties which are both foreclosures and short sales are another place inventory is pushed out in the market from.  In the 2008 housing crisis, there was an influx of short sales and foreclosures to flood the market in a short period of time.  This crisis was mainly due to the lenders allowing people to secure a loan they really could not afford the home.  Today’s market does not have to worry about this as much because lending standards are much stricter today than they were back then.  These tighter standards are pushing out more qualified buyers and fewer foreclosures.

Around the time of the 2008 crash, there were well over a million foreclosures per year.  When the lender’s tightened their reigns on lending standards the amount of distressed homes started to decline.  Also the introduction of the forbearance program in 2020 and 2021 has also aided in preventing a repeat crash.  This program gave homeowners the option for loan deferrals and modifications that were not there in the past.  And data on the success of that program shows four out of every five homeowners coming out of forbearance are either paid in full or have worked out a repayment plan to avoid foreclosure.

These three factors are the biggest reasons we will not see another big crash like we had in 2008.  Even though our housing supply is growing in 2022, it will not even touch the number of homes that would need to hit the market to saturate it and make home prices drop.  If you are in the market for a new home, contact a local real estate agent who can help you with the purchase of a new home.

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Five Designer Tips To Do First When Buying a New Home

 What are the first five things to update when buying a home?

1. Don't Seek Instant Perfection
2. Start With The Bones
3. Practice Patience
4. Know Yourself
5. Have A Plan Before You Start

Buying a new home is an exciting time for anyone. It is a big step in life's journey and can be a very stressful one. If you are purchasing a home, professionals agree that these tips should be followed from the start.

1. Don't Seek Instant Perfection

“One of my big beefs with home improvement shows is that they set new homebuyers up for failure,” Karlie Adams, a Denver interior designer said. “People watching these shows think everything comes together so easily, then feel they need to have perfection instantly, when, in fact, they need to take their time.”

2. Start With The Bones

Instead of starting with the little design elements in a room, start with the floors, walls and windows. Once these are tackled you can slowly move inward in the space. “That may not seem so gratifying at first,” Adams said, “but it’s more prudent. People would rather buy toss pillows at Pottery Barn when they really should replace their baseboards.”

3. Practice Patience

Like with everything in life, a little patience can go a long way. Take your time and go slowly purchasing quality pieces that will be more of a design investment in your home.

4. Know Yourself

Figure out who you are as a person and build your look around your unique characteristics. The look of your home should be based on who you are. If you are a nature lover, using worn leather, weathered wood and rustic finishes are best. A perfect coffee table would be a three cross-section of tree trunks.

5. Have A Plan Before You Start

Don't go into the kitchen and add a new sink and faucet to later realize you should have updated the whole kitchen. Have a plan in each space before you add anything. This will save you time and money in the long run. Remember your home is a big investment.

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Homebuying Still Going Strong With the Prospective Buyers

NAHB’s latest Housing Trends Report found in the second quarter of this year 11% of Americans

were considering buying a home within the next 12 months. In fact, almost half (49%) of those surveyed, reported that they are currently in the process of purchasing a home. This figure is a lot higher than reported this time last year.

The Housing Trends Report is put out by the National Home Builders Association’s Economics team. The team researches and measures prospective home buyers’ perceptions about the availability and affordability of homes for sale in their markets.”

As seen in the chart displayed, Millennials were the most likely to purchase a home in the next 12

months at 19% which was a little higher than a year ago at 17%. Gen Z reported 14%, Gen X came in at 12%, and Boomers were the least at 5%. Among regions across the country 13% planned to purchase a home in the next 12 months, 12% in the South, 10% in the Northeast and Midwest came in at only 9%.

Even with the COVID-19 crises home buying is still a must on many American’s to-do lists. Record low mortgage rates at 3.13% coupled with a recovery in the labor market with 4.8 million jobs and a low unemployment rate has boosted the housing market.

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A Positive Outlook From Home Buyers

The economy might be in questionable times right now, but home buyers across the country are having a positive outlook on their home search. According to the recent Housing Trends Report (HTR), ” the share of prospective home buyers expecting their house search to get easier in the months ahead rose to 25% in the first quarter of 2020, up from 16% and 22%, respectively, in the first quarters of 2018 and 2019.”  This has been the third consecutive year-over-year increase in the share of buyers that anticipate more housing inventory.

The Housing Trends Report (HTR) is created by the NAHB Economics team. Their goal is to measure prospective home buyers’ impressions regarding the availability and affordability of homes for sale in the current market. The report is done quarterly and asses the changes in a buyer’s perception over time.

The HTR breaks down its findings by generation. They found that Gen X buyers were among the highest that felt the housing availability will improve while the Boomers were the lowest. The breakdown by generation of buyers expecting their house search to get easier was Gen X at 27%, Millennials at 26%, Gen Z at 22% and Boomers on the bottom at 20%.

Across the country’s regions, the report finds that 20% to 27% feel that their home search will become easier during the following months. The West came in with the highest percentage at 27%, followed by the Northeast and South at 25% and the Midwest came in last at 20%.

Not only do share buyers believe that the numbers will improve but they are reporting that they actually see more houses out there that they like and can afford. The first quarter of 2020 reported 31% compared to the first quarter of 2019 at 30%.

The report shows the breakdown by generations and regions. The highest generation found was Millennials and the highest region was the West. The breakdown for generations came in at 34% Millennials, 32% Gen Z, 29% Gen X and 24% Boomers. For regions, the West was 33%, the South came in at 32%, the Northeast at 30% and the Midwest last at 25%.

This is good news for the moral of the current housing market. Now is a great time to purchase a new home.

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New Homes Are Popular With Millennials

Many potential home owners have many different preferences when it comes to buying a home. According to the NAHB Economics team, millennials show an increase in interest in new homes built for sale and offered by a builder.

Statistics show that between 2007 and 2018, millennials who desired to purchase a new home, went

from 28% to 41%. Existing homes stayed around 40% in the 11-year time span and custom-built homes fell from 37% to 18% during the same time span.

The data shows that millennials, at 41%, are the first in the running when it comes to wanting a brand new home offered by a builder.  The next generation for this preference was seniors coming in at 31%. The bottom two were baby boomers at 29% and gen x at 28%.

Several factors play into the desire for new homes for millennials. They want to live in the central city, which is opposite for the majority that still want to live in the suburbs. Millennials want a set of

amenities that are not necessarily custom such as trash compactors, wet bars, built-in kitchen seating and an exercise room. Millennials are okay with smaller homes on smaller lots if they are able to get what they want in amenities and finishes.

Other data that was reported in the study looked at existing homes and custom homes built on owned lots. When it came to existing homes, baby boomers were the highest at 48%, gen x at 47%, seniors at 43% and millennials came in last at 41%. Those that desired a home custom built on an owned lot all hovered between 18% to 27%.


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Lower Mortgage Rates Encourages Gains In Existing Home Sales

New home sales are on the rise but the existing home sales are keeping up. According to the National Association of Realtors (NAR) total existing home sales reported a seasonally adjusted annual rate of 5.42 million.

The NAR reported that on a year-over-year basis, existing home sales were 0.6% up than a year ago which included single-family homes, townhomes, condominiums and co-ops. This is the first year-over-year gain in almost a year and a half.

Homes stayed on the market 29 days in July 2019 with 51% of homes on the market selling in less than a month. All-cash sales composed 19% of transactions up from June 2019. Median sale price of

existing homes in July was up 4.3% from a year ago at $280,000 and existing condominium/co-op prices were up 2.5% with a median price of $254,300.

Sales by regions saw an increase, except for the Northeast and West, for existing homes sales in July 2019. Existing home sales in the Midwest grew 0.8% and in the South existing homes rose to 2.7%.
NAR has encouraged the market to add more inventory which is a good sign. The falling mortgage rates, July 2019 at 3.77%, and lower home prices are a big plus.

“We are optimistic that the latter part of this year and the early months of 2020, at least, will see a significant upturn in sales. That, in turn, will boost construction activity in due course,” wrote Ian Shepherdson, founder and chief economist of Pantheon Macroeconomics, in a research note.


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National Mortgage Rates Are at a Near 3-Year Low

According to Sam Khater, Freddie Mac’s chief economist, the lower mortgage rates are getting positive results from home buyers across the nation. Mortgage applications for home purchases are rising steadily and have seen the highest year-over-year change since the fall of 2017.

Here is a look at the national averages with mortgage rates Freddie Mac reported for the week ending July 25, 2019:

The 30-year fixed rate mortgages averaged 3.75% with an average 0.5 point. This was a dip from the week prior which was at an average of 3.81%. July of 2018 reported 30-year rates averaged 4.54%.

The 15-year fixed mortgages reported as the following. They averaged 3.18%, with an average 0.5 point. Again, this was a lower than last week’s which reported 3.23% average. This time last year the 15-year rates averaged 4.02%.

The average 5-year hybrid adjustable-rate mortgages was 3.47%, with an average 0.4 point. Another fall from last week’s 3.48% average. A year ago the 5-year hybrid adjustable-rate mortgages (ARMs) averaged 3.87%

“While the improvement has yet to impact home sales, there’s a clear firming of purchase demand that should translate into higher home sales in the second half of this year,” Khater says.


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St. Tammany New Property Tax Supports School Safety

St. Tammany Parish school system has 55 school campuses with 39,000 students. The school system takes no cuts when it comes to safety. Currently there are 1,793 security cameras in schools and buses, perimeter fencing around all campuses, and visitor photo id systems in place at each school.

The new property tax, which 64% of voters supported, gives the school system money annually allotted from the new 2-mill tax. The money will pay for police officers and mental health providers at each school campus. Luckily the 2 mills will not cost St. Tammany homeowners additional tax money due to the School Board decision to cut 2 mills from the district’s tax rate.

Other outcomes of the May 4, 2019 voting were also positive. Sixty-five percent of the voters agreed to allow $175 million in bonds to go to St. Tammany schools for construction and technology purposes. Covington elected Mark Verret as the final member of the City Council. There was also a 10-mill, 10-year property tax for Lacombe area recreation renewed as well as a 5-mill, 10-year tax for the Pearl River fire district.
This month St. Tammany Parish voters approved referendums “to pay for police officers and mental health providers on public school campuses.”



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Appraisals a Big Challenge But Getting Easier

One of the biggest challenges facing builders and people selling their homes in St. Tammany Parish and Southeast Louisiana are the appraisals that are given for the homes for sale and built new homes.  Recently, in the last few years, laws were established requiring banks and mortgage companies to choose appraisers from a universal list, giving each appraiser an equal amount of work. However, because appraisers are not required to go through intensive training and maintain continuing education, some appraisals that were turned in to the banks and mortgage companies fell far below what the perceived value of the house was.

This causes a problem for the closing process in that the loan amount is often more than the house is worth, according the appraiser.  The appraisal process for a home for sale or new home for sale in a

new neighborhood or in a rural part of St. Tammany Parish, where there aren’t a lot of “comps” (comparisons of homes previously sold in the area) can be a stressful one for a home buyer looking to buy a new home or existing home for sale, unless it is a cash sale.  The appraisal dictates to the mortgage company or the bank how much the loan amount can be based upon the value of the house and / or the down payment of the buyer.

“An appraisal can vastly impact the mortgage process. This number alone can impact how much a buyer needs to bring to closing, or the current equity a homeowner has when refinancing,” said Bill Banfield, Quicken Loans Executive Vice President of Capital Markets. “If homeowners are aware of local home values and how they are changing, it will assist with a smoother mortgage process.”
However, there is good news for the real estate industry, the distance (difference) between the amount of the appraisal and new home and existing home prices has narrowed for 4 months in a row according to the National Quicken Loans home Price Perception Index (HPPI). Appraised values are still falling short of home prices, but the most recently logged margin during the month of September was 1.14%. This is good news for builders looking to sell their homes (and have them appraise) at market value.

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Single-Family Home Sales Increase in 2nd Quarter

Single-family home sales increased by almost 24% compared to new home sales in 2015 in April.  Compared to March, 2016’s home sales, single-family home sales increased by almost 17%.  Finally, sales went up to 619,000, an eight-year high during the month of April as well.
Home buyers are taking advantage of the availability of new homes because the inventory of new homes for sale on the market has decreased to a 4.7 month’s supply – a total of 243,000 new homes for sale with only 56,000 completed, move-in ready homes available. Demand will require that builders increase their production of new homes for sale in order to keep up with the buyers.

Single-Family Home Builders

April’s sales numbers go hand-in-hand with the reported new, single-family home starts which increased by 3.3% at the beginning of April.  Builder confidence held steady for the 4th month in a row since February, 2016, which contributed to new construction starts and inventory on the ground.  Single-family home permits in the beginning of April were already up year-over-year by 8.4%, so construction of new homes should continue to escalate over the next few months.

While first-time home buyers are finding it difficult to find new homes for sale in their price range, the sales of homes priced from $150,000 – $200,000 increased to 10,000 sales in April.  For existing home sales, the first-time home buyer sales accounted for 32% of these sales, opening up the market, once again for homes priced affordably.

Good News for Resale Market

Existing home sale closings increased by 6% year-over-year and by 1.7% compared to March’s sales.  It is definitely a seller’s market right now as existing home inventory also stands at a 4.7 month supply like single-family new homes.

The 2nd quarter of 2016 shows good news for the housing market after a slow 1st quarter start.  New, single-family home starts and permits indicate an increase in new home inventory moving forward in the 3rd quarter.  Sellers should be able to “take their pick” of home buyers as supply currently is lagging behind demand.

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Real Estate Market Celebrates Statistics Which Indicate a Buyer’s Market

Real Estate Showing Buyer’s Market

In general, the real estate market seems to be turning more into a buyer’s market than a seller’s market – an indicator that the housing market continues its steady, slow rebound since the Recession.  New home buyers have cause for optimism with the increase in standing new home inventory which was upwardly revised for the month of March from 205,000 in March, 2015, to 246,000 new homes this year.  Currently, new home inventory stands at a 5.8 month’s supply.

Competitive Home Pricing

 

With the increase of available homes, new home pricing and existing home pricing are now competitively arranged in the housing market, making builders’ new homes for sale just as attractive price-wise as existing home pricing.  This trend of available new homes for sale is expected to continue as in the month of Market, there are approximately 149,000 new homes under constructions and 41,000 single-family homes that will be constructed according to the record of building permits throughout the country.  The building industry reported 56,000 move-in ready homes on the market ready to be closed.

New home pricing has also stabilized compared to new homes for sale in March, 2015.  The current new home median sales price is $288,000 where it was around $293,400 in 2015.  Overall, new home pricing gained in a year-over-year comparison, with homes in the $200,000 – $300,000 price range rising by 20% in comparison.

As new home inventory exponentially increases, and a high number of new homes “flood” the real estate market, new home sales are expected to increase in the months ahead as home buyers can expect to see a large variety of different floorplans, features, and upgrades available to them in making a choice of buying their new home for sale. Some buyers may choose to build their new home from scratch with a custom home builder such as Ron Lee Homes in St. Tammany Parish.  If you are interested in building your new, custom home, Contact Us at 985-626-7619 or E-mail Info@RonLeeHomes.com.

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