Rising Home Purchases Means Bigger Spending on Remodeling, Appliances and Furnishings

 According to the data found in the Consumer Expenditure Survey (CES) data from the Bureau of Labor Statistics (BLS), the National Association of Home Builders says that new home buyers and existing home buyers spend thousands of dollars or more on in the first year of owning a home on appliances, furnishings and remodeling. This estimate is derived from the pre-pandemic (2017 - 2019) data collected.

NAHB's report found that during the first year after the purchase of a new construction home, a homeowner will spend on average over $9,250 on their home over a non-moving home owner, and those that purchased an existing home spent around $5,240 over non-moving homeowners. This shows that a home purchase causes an increase in spending. These expenditures are mostly on things like appliances, furnishings, and remodeling.

New home buyers also spend a lot more on property alterations and repairs.  A typical new home buyer is estimated to spend almost twice as much on these projects ($9,288) compared to a similar household that stays put in a house they already own. When looking closer, the study showed that these expenses were from building outdoor features such as a pool, patio, fences, and landscaping.

When someone moves into a new home, they also want to have some new furnishings. This also triggers bigger spending. It is estimated that a new home buyer spends around $3,000 or more on furnishings during the first year of owning a home and $1,870 on appliances.

If a new home buyer purchases an older home, this price can go up even more. It is estimated that they tend to spend around $5,238 more on remodeling, furnishings and appliances. The majority of the spending is on property repairs, alterations and remodeling projects. Homeowners that do not move will spend around $4,282 in a year on home projects while those that buy existing homes will spend around $7,400 during the first year after closing. The data shows that home buying does spark additional spending.

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High Demand in Housing Is Having a Direct Effect on the Market

 The pandemic has changed the way people view their homes. From the stay-at-home orders to the scare of spreading the virus, the home is everyone’s safe haven. Luckily today’s technology has enabled many Americans to work from home. More and more people are reassessing what they want in a home such as a home office, flex space and outdoor living space.

The housing market is booming in fact, home sales are higher than they were before the pandemic. The

existing and new home sales are the highest level we have seen in over a decade. With the increase in home sales, comes an increase in the demand for building materials and labor.

Lumber has been in very high demand during recent months. Not only are builders building new homes but many homeowners are remodeling their current homes. Home offices and remote work locations have also spiked the demand for this hot commodity. The November 2020 Random Length Lumber contract shows a low set during the height of COVID in April at 277 but then in August lumber was set at 820.

The copper market has also been greatly affected by the booming housing market. Looking at the September 2020 copper futures contract, we witness a low set on March 19 at 1.99, followed by a big move up to 3.08 by September 15. Copper is also valuable to the technology industry where it is used for building servers, semiconductors and switches.

Currently, sales of single-family homes are up 24% from the spring, existing condominiums and co-ops are up 32%. Lumber and copper numbers are a great way to measure and predict the direction the housing industry will go, knowing which markets are directly affected by the growing demand for single-family units can be important for every trader and investor.

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September was a Positive Month For New Home Sales

This September was reported to be 15.5% higher year-over-year due to the lower mortgage rates. The National Association of Home Builders’ data shows that sales were 7.2% higher in the first nine months of 2019 than those reported in the first nine months of 2018. This first nine months this year

brought in 527,000 sales beating the 491,000 sales reported for the same time frame in 2018.

Signs show sales volume increasing with the more new homes that are reported being built. New home sales for the first nine months of 2019 were up 12.8% in the South, and 7.3% in the West compared to the first nine months of last year.

This fall is a great time to purchase a new home with the median new home sales price at $299,400. Right now, nearly 15% of newly built homes are priced under $200,000! This buyers' market will not last, so if you are in the market to purchase a home, buy your new home before the new year.

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2019 New Home Sales Up 3.8% Year-Over-Year

Even with the sales numbers for new homes for sale during May, 2019, not all in, an annualized report of new home sales shows a 3.8% increase, year-over-year of new home sales. Because many different firms only look at sales numbers through the lens of how they compare to the previous month’s sales, the reports of new home sales growth slowing have been inaccurate when taken into account of adjusting for seasonal fluctuations and year-over-year numbers.

In 2018, two things affected new home sales – the increases in interest rates throughout the year and a slight stock market “bear market” which slowed down the economy overall. The beginning of 2019 shows a boost after the slowdown, and it also doesn’t show any signs of wavering throughout the rest of the year according to Forbes.com economic contributor John S. Tobey (click here to read the article).

The seasonal adjustments account for the slowdown of new home sales throughout the winter – this is a consistent annual occurrance. It is Tobey’s opinion that home buyers “postponed” the purchase of their new home to wait for better housing market conditions. He also anticipates double-digit growth rates towards the end of 2019’s home buying season.

Locally, in St. Tammany Parish, Louisiana, local home builders enjoyed enormous turnout for the 2019 Parade of Homes. Also, local builders have also seen tremendous and growing interest in home buyer contacts to build new homes and fully custom homes in Mandeville, Covington, and Madisonville. Ron Lee Homes has been inundated with interested home buyers, partially as a result of the Parade of Homes. We welcome you to Contact Us for your home building needs to sit down for a consultation to discuss your options. Call 985-626-7619 or Email Info@RonLeeHomes.com.
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Builders See an Almost 13% Increase in New Home Sales

Throughout all regions of the United States in February, the real estate industry had something to celebrate. All regions increased new home sales compared to the same time in February, 2016.  In the South, new home sales increased 3.6%, which was 7.9% higher than the past year.  Approximately 592,000 new homes sold in February, 2017, which was 12.8% higher than last year and 6.1% higher than January new home sales.
Bloomberg analysts had estimated 565,000 in new home sale for this time period but reporting from the Census Bureau and Department of Housing showed differently.  The number of new homes available for sale going into the month of March, 2017 was approximately 266,000, which is a 5.4 month’s supply of new homes for sale.  In January, this amount was a 6.4 month’s supply, but February’s new home sales numbers trimmed this amount substantially.

The average price of a new home sold for the month of February stood at $296,200, which was lower than January’s average price of sold new homes which was $308,200.  The total average sales price increased substantially month-over-month from $355,300 to $390,400.  It increased even more when compared to February one year ago – up from $349,400.

All of this is great news for new home builders and custom home builders building new homes for sale throughout Southeast Louisiana and the rest of the Gulf Coast.  Ron Lee Homes is a St. Tammany Parish custom home builder who is building and selling new homes throughout West St. Tammany Parish.  For more information about building your new home, Contact Us at 985-626-7619 or E-mail Info@RonLeeHomes.com.

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Pace of New Home Sales and New Home Inventory on the Rise

Both the pace of new home sales and new home inventory are up according to the numbers reported for February, 2016.  New home sales went up by 2% bringing the seasonally adjusted amount to 502,000.  Standing new home inventory also moved upward slightly to a 5.6-month’s supply of homes meaning it would take this amount of time to sell off all of the standing supply of new homes for sale nationwide.  New home inventory has struggled to rebound because of three factors: lots,

construction workers and sub-contractors, and lending standards.

Lots available for building have actually been a problem for builders in pockets around the country as builders are ready to “get back to work” and build new homes for sale.  The lack of supply of ready lots have them searching more rural locations or building completely different floorplans to accommodate certain lot plats.

Construction employment demand has skyrocketed as opportunities begin to be more and more prevalent because of the surge in new construction.  Employees and sub-contractors seem to be now flooded with work, which leaves builders waiting on certain subs’ industries to come out to work on their new homes under construction.

Lenders have found ways to ease the home buyer’s woes by offering better standards of down payments with new FHA loan packages and rural development loans.  However, the kink in the industry came in late October and the beginning of November, 2015, when the new Closing Disclosure was implemented for real estate closings.  Banks, lenders, mortgage companies, and even title companies are on a fast learning curve to master the new system and get home buyers into their new homes fast.

In reality, it is better that the real estate industry is undergoing these types of struggles rather than a complete lack of demand and over 1.5 year’s inventory on the ground like it felt during the Recession.  The lack of all of the items mentioned above are actually a good problem for new home builders to have.  If you are interested in building a new, custom home in St. Tammany Parish, Contact Ron Lee Homes today to set up a meeting regarding new home plans and construction.  Call 985-626-7619 or E-mail Info@RonLeeHomes.com to set up your appointment.


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Home Sale Numbers Nationwide Dip Slightly

New protections by the Department of Housing and Urban Development (HUD) kicked in the first of October, but their effects were not felt until November when delayed closings affected home sales numbers nationwide.  The plunge in new home sales was expected because of the delays that the new system incurred coming out the gate.
The new system for closing new home loans and home loans included a drastic overhaul of the traditional HUD (Settlement Statement), and this new document, called the CD (Closing Disclosure) had multiple checks and balances throughout the Good Faith Estimate all the way to closing to ensure that home buyers know what every aspect of their home buying process is about.
Despite the expected slowdown in home sales in November, the National Association of Realtors said that solid gains in real estate have been seen throughout the entire year of 2015.

Another factor contributing to an adjustment in home sales numbers is the fact that home values are increasing a rate that is double that of typical wages.  Year-over-year, home values have increased 6.3% in November to $220,300.  The good news is that wages exist with an improving job market and still historically low interest rates are encouraging buyers and refinancers to get their loans done before there is a significant increase in the interest rate.

Still, builders will have to get busy in 2016 because the real estate market is still showing a gap between availability and inventory for new home buyers.  New home builders can fill this gap with newly constructed homes which will help balance out home prices.
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Invest in the Real Estate Market

For potential new home buyers, 2016 is the year to invest in the real estate market.  The housing market is still on the rise and there are still great deals to be found on new homes and resale homes. What is making real estate a hot ticket item for 2016?  There are many influences that are contributing factors to this year’s housing market.
Since the economic downturn’s departure, housing prices have been on the rise.  Zillow predicts home prices are going to rise a little slower in 2016.  According to Zillow’s Chief Economist Svenja Gudell prices are anticipated to rise 3.5%. This will give buyers who might not have had a chance in the competitive 2015 market an opportunity to purchase a home.

Jonathan Smoke, with Realtor.com believes this could lead to a succession of home buyers.  He states, “We have the potential for about six million home sales just through the months of April through September; that is basically impossible to do.”

Inventory will increase giving home buyers more options. “Because of the price appreciation they have experienced, you will have more sellers put homes on the market next year,” Smoke said.  Also the new home market will see growth in 2016 because builders are concentrating on the construction of starter and middle-range homes.  This boost in both existing home and new home inventory will make it easier for potential home buyers.  More homes on the market will also contribute to a slower price increase and less bidding wars.

This year we might be kissing cheap mortgages goodbye.  The Federal Reserve is slated to increase interest rates making this one of the last opportunities to benefit from record low mortgage rates.  Home buyers will have to cut back on their new home budget because the borrowing cost and monthly mortgage payments will be higher.

“You are likely to get the best rate you will possibly see, perhaps in your lifetimes through the majority of next year, but certainly, the earlier the better,” said Smoke.

The last influence to affect the 2016 housing market is rent vs. buy.  Renters beware; rent prices will still increase this year making it cheaper to buy a home.  The increase in mortgage rates will still outweigh rental pricing.  According to Ralph McLaughlin with Trulia, “Interest rates would need to rise to around 6.5% for the cost of buying to equal that of renting on a national level.” For those who want to purchase a new starter home, upgrade to a new home or larger home, and for those who want to downsize to a smaller new home, now is the time.

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