May 2021 Home Sales Highest Level Since 2005

The past year has been a whirlwind for the housing market in a good way. There has been a boom in sales

as seen in pending home sales up the highest level of sales for May since 2005. According to the National Association of Realtors, May 2021 was up 8% compared to April 2021 and 13% from the sales in May 2020.

“May’s strong increase in transactions – following April’s decline, as well as a sudden erosion in home affordability – was indeed a surprise,” said Lawrence Yun, NAR’s chief economist. “The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings.”

All four regions saw an increase in pending home sales in May. The Northeast had a 15.5% increase, the Midwest climbed 6.7%, the South rose 4.9% and the West increased to 10.9% month over month.

Although the market is still hot, weekly mortgage demand did take a 7% downturn in May 2021.

“While these hurdles have contributed to pricing out some would-be buyers, the record-high aggregate wealth in the country from the elevated stock market and rising home prices are evidently providing funds for home purchases,” Yun said.

The could have stemmed from the home price increases. The S&P Case-Shiller National Home Price Index rose 14% year over year in April 2021. This increase was the largest gain in its 30-year history. The median home price has also increased which has made it harder for first-time homebuyers.

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This Year Homeowners Are Looking For Greener Areas

What most homebuyers today are looking for in a home will be completely different than what a homebuyer pre-pandemic sought in a new house.

“The pandemic has brought about a seismic shift in people’s perspective on housing,” said Jordan Ayan, an agent who leads the North Scottsdale Luxury Real Estate Team at the Lifestyle Collection, under Keller Williams Realty in Arizona. “They are thinking more about where they want to be and what kind of environment they want to be in.”

People want to live in a less congested area now. Many homeowners work from home more because

of the times so traffic is not a problem anymore. Homebuyers are looking for a more laid-back lifestyle, where they can both work and decompress.

Homebuyers will be looking for very efficient spaces such as tucked away home offices. Home offices have become very popular since the pandemic.
“The office was somewhat of a flex space, previously,” said Laura Powers of the Laura Powers Property Group, part of Compass in Houston. “Maybe it was also a guest bedroom or more of a library. Function has become much more critical.”

Homebuyers want a separate living space from their home office. When working from home, you need a quiet space with privacy. Ideally, the home office would have built-in shelving, space to move around, and good natural lighting.

Homes have become the live, work and play of 2020. Homeowners are taking formal living rooms and updating them to a comfortable place to relax. Many are “tech-free zones” where homeowners can get away from screen time.

Many Realtors have found that homebuyers are seeking larger garages, extended foyers and

mudrooms. They are also interested in LEED-certified homes that are environmentally friendly and built to the standards of the U.S. Green Building Council.

Outdoor covered areas such as patios, porches, decks, and outdoor kitchens are another must. Since the COVID-19 pandemic, everyone has been stuck at home. A nice area to enjoy the outdoors is a must during these times. In Florida, Realtors have reported that access to the water has become more popular along with docks, pools, expansive decks, covered patios, fire pits and outdoor kitchens.

In urban areas, homeowners use public parks and greenspace for their outdoor living, however, with the pandemic many of these spaces are restricted. Homebuyers are now seeking an outdoor space included in their urban home.

“Any other time, we would talk about parks and the neighborhood. But now, they might not even be able to use it,” said Patrick Ryan, owner and managing broker at Genuine Real Estate in Chicago. “So outdoor space at home has become huge.”

Homebuyers in the suburbs are seeking homes on a golf course with views of the greens and larger lots. Many even want extra acreage where they can have distance between their neighbors. Others have emphasized a guest house or in-law suite for multi-generational living.

“They want space. They don’t want to be cooped up,” Ryan said. “But they also want community and to be able to connect with their neighbors.”

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NAHB Works with Congress to Help Low-Income Housing Laws

Without the help of the country’s federal government, many Americans could not see homeownership in their future.  The National Association of Home Builders worked with the House of Representatives and the Senate to pass a bill in Congress that would facilitate the chance for low-income Americans to become homeowners.  On July 29, 2016, the President signed The Housing Opportunity Through Modernization Act which consists of several reforms which will increase access to affordable rental housing, provide assistance to low-income renters and facilitate homeownership.

There are many facets to the bill which is now a new law.  In the past voucher holders had no chance in competing with market-rate renters.  Because of red tape in the inspection process, voucher holders were not able to move into a multi-family unit such as an apartment or condominium immediately.  Now with the new law inspection requirements in the Housing Choice Voucher Program are more efficient and allow a quicker approval.

The contract terms of HUD’s Section 8 Project Based Housing Choice Voucher program is now 20 years instead of 15 which enables project-based vouchers to be used with the Low Income Housing Tax Credit residences.  Voucher holders will now be protected from economic influences that are out of their control, which means that when the market rental rate goes up, voucher holders will not have to be displaced because their payments are not high enough.  This also allows property owners to preserve respectable renters.

The Rural Housing Service Single-Family Guaranteed Loan Program will also be updated to compete with other government loan programs.  This will allow more low-income renters to actually be able to get a home loan.

FHA regulations that are enforced on existing condominium projects have been reduced.  This means that the purchase of a condo will be less stringent in terms of required owner occupancy for the buyer.  Buyers will now find it easier to purchase multi-family units for rental purposes, creating more rentals in the market.  Also, condo owners who are able to sell will then be able to move up to a single family detached home, if they would like.

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NAHB States Homeownership Is One of the Highest Investments

According to over 80% of Americans surveyed by the National Association of Home Builders (NAHB), homeownership is one of the highest and best investments in not only a financial future but also an emotional and mental future as well.  Home provides security in investment, security in living (the physical walls of the home), security in family (many couples dream of owning a home to rear their children), and security in equity in the future.  Homes are one of the largest financial investments that can be made that will absolutely return money to a homeowner in the form of equity loans that can be taken out of the house.

Most everyone has heard of the “American Dream” and Leonard Boswell, former U.S. Representative, described it best when he said, “The American Dream is one of success, home ownership, college education for one’s children, and have a secure job to provide these and other goals.” The (NAHB) believes this still holds true in today’s current housing market.   According to a polling done in July on over 2,800 registered voters “…..most Americans believe that owning a home remains an integral part of the American Dream and that policymakers need to take active steps to encourage and protect homeownership,” said NAHB Chairman Ed Brady.

The polling was done to explore the American peoples’ perspective on homeownership, housing production, and government programs that assist in homeownership.  Four out of five Americans still factor homeownership into the “American Dream’” believing it is still a worthy investment.  The key outcomes of the study were as follows: 82% of Americans feel that owning a home is the highest of investments, 81% of 18-29 year old Americans are planning to purchase a new home, 72% agree that the government providing tax incentives help fuel homeownership, 46% feel that now is a good time to purchase a new house and 36% of the Americans surveyed planned to purchase a new home within the next three years.

So with that said, homeownership is still a big part of the “American Dream” and to end with another quote, Maya Angelou describes homeownership as this, “The ache for home lives in all of us, the safe place where we can go as we are and not be questioned.”

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New Home Buyers Have More Selection in New Homes

Even though the housing market has been making incredible strides in its recovery since its low in 2008, one of the major obstacles that has been holding the sale of real estate back is the lack of supply for the growing demand of home buyers.  New home buyers especially have been stymied by a lack of inventory from local builders.  Builders themselves have been frustrated by the tightened funding requirements for construction loans from banks and lenders, so there is been a “stalemate” of sorts going on in the new home industry.

However, good news is on the horizon for real estate because single-family home starts have been on the rise and holding steady over most of the months of 2015.  Single-family home starts remained steady from August to September with 740,000 starts nationwide for both months.  Overall, housing starts (including multi-family housing) increased by 6.5% and reached the 1.2 million mark – the highest its been since October, 2007.

From a yearly perspective, quarter-over-quarter, single-family home starts are up 5.7% 3rd quarter from second quarter with a total of 746,000 home starts.  The numbers year-over-year show that single-family home starts are up 11% compared to 2014.

Another strong sign of new home real estate recovering is the number of housing permits for single-family home starts.  The number of permits for single-family homes went up 9.4% year-over-year and also remained unchanged compared to the previous month of August from September, 2015. Trends also show that money of the new home purchases are coming from “contingency sales” where a home buyer has a house to sell and wants to build or buy new which is excellent news for new home builders.

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Conventional Mortgages for New Homes Increase for the 5th Month in a Row

When the bottom dropped out of the real estate market, the biggest indicator that the economy was in trouble was that home owners and new home buyers found themselves paying more for their home than what it was worth.  One of the biggest indicators that the housing economy has been in recovery has been the increase in house pricing regionally nationwide.  These home prices went up steadily during the end of 2013 and 2014, so much so, that investors were concerned that they would cause a housing bubble and throw the entire economy back into a Recession.  Once again, though, supply and demand allowed for free market commerce to dictate the real estate market, and prices started to stabilize in the 1st quarter of 2015.

For the 5th month in a row, conventional mortgages for new homes have increased to an all-time high of $352,500 in June, and this is also a record for the average loan amount which has not yet so far been above $350,000 after the Recession.  In addition to the average amount of a loan going up, home prices also increased in June to $462,100 from $447,600 which is a 3% increase.  Also a record-breaking statistic, this is the first time that new home prices have been above $460,000 since the Recession as well.

Even though the average initial fees and charges on loans decreased by 3 basis points to 1.08%, the effetive interest rate on conventional mortgages went up to 3.98%.  Home buyers and people interested in refinancing their homes have been “spoiled” with the phenomenally low interest rates over the past 5 years, but an average overall interest rate in the 4% range is still a historically low rate and will probably not be seen again for quite some time.  The Fed was set to increase interest rates in September, but this is not a guaranteed move and has been in limbo for over a year.  Interest rates are still low, credit is easing allowing higher borrowing amounts for conventional mortgages, and Ron Lee Homes is building new, custom homes in St. Tammany Parish for interested home buyers.  Contact Us today to help you start building the home of your dreams.  Call 985-626-7619 or e-mail Info@RonLeeHomes.com.

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