Single-Family Home Construction Sees Turnaround in Urban Markets, Multifamily Declines in Coastal Areas

The housing construction landscape is shifting, with recent data from the National Association of Home Builders (NAHB) indicating a gradual turnaround in single-family home construction, particularly in larger urban metro markets. The fourth quarter of 2023 saw a modest rebound in these areas, driven by moderating mortgage rates and a persistent shortage of existing homes on the market. This shift comes despite a backdrop of broad declines across various market segments earlier in the year.

According to the NAHB Home Building Geography Index (HBGI) for Q4 2023, the improvement in single-family construction was notable in smaller metro outlying counties, which experienced a growth rate of 0.4%. "While all urban, rural, metro, and county area single-family markets saw double-digit production declines in the third quarter, construction began to turn the corner in the final quarter of the year," explained NAHB Chairman Carl Harris. He attributes this positive trend to the easing of interest rates and a mortgage "lock-in" effect, where homeowners with low mortgage rates are hesitant to sell, thus reducing existing home inventory.

NAHB Chief Economist Robert Dietz also highlighted the recovery in single-family construction, contrasting it with the multifamily sector. "New multifamily building in large, metro suburban counties posted a negative growth rate of 20% in the fourth quarter, reflecting the tail end of an apartment building boom that reached its highest level in more than 50 years," Dietz said. This downturn in multifamily construction was most acute in large metro areas, whereas more rural and outlying areas showed stronger performance.

The HBGI, a quarterly measurement using county-level data on housing permits, shows that single-family home building market shares varied significantly across different types of metro and county areas in the fourth quarter:
- Large metro core counties: 16.0%
- Large metro suburban counties: 25.0%
- Large metro outlying counties: 9.6%
- Small metro core counties: 28.7%
- Small metro outlying areas: 10.0%
- Micro counties: 6.5%
- Non-metro/micro counties: 4.2%

In terms of geography, approximately 25% of single-family construction consistently occurs in U.S. coastal counties, with these areas accounting for about one-third of new multifamily building. The market share for coastal counties in single-family construction has remained remarkably steady since 2014, with a slight decrease in multifamily construction market share in coastal regions from 36.6% in 2014 to 30.3% in 2023.

This ongoing shift in multifamily building toward non-coastal areas, particularly since the Covid pandemic, reflects broader trends in housing demand and development, with many people moving away from dense urban centers to more spacious suburban and rural settings.

As we move into 2024, the housing construction industry appears poised for continued adaptation, responding to shifts in demographic preferences, economic conditions, and the availability of construction resources. The recovery in single-family home building, especially in metro areas, is a promising sign for potential homebuyers looking for new opportunities in a challenging market.

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Navigating the 2024 Housing Market: How Buyers Can Prepare for Imminent Rate Cuts

As 2024 dawned, there was a palpable sense of optimism among homebuyers and borrowers, fueled by falling inflation and the anticipation of subsequent interest rate cuts. While initial hopes were somewhat dashed by less-than-stellar inflation reports for December and January, the consensus remains that rate cuts could be on the horizon, possibly as early as May or June.

This prospect is particularly significant for homebuyers who faced soaring interest rates in 2023—the highest since 2000. As they eagerly await potential decreases in the benchmark interest rates, and subsequently mortgage rates, prospective buyers are advised to prepare strategically to navigate the expected influx of competition in a new rate environment.

One crucial step buyers can take right now is securing mortgage pre-approval. While not a guarantee of securing a property, pre-approval does signal to sellers that a buyer is serious and financially vetted, providing a distinct advantage especially before rates drop and the spring real estate market heats up. In the current unique mortgage climate, being pre-approved can offer a significant competitive edge.

Mortgage pre-approvals typically last for two to three months, which perfectly positions buyers to concentrate on finding the ideal property without the pressure of concurrently shopping for lenders. Keeping your credit score high during this period is essential; a dip can complicate the re-approval process and potentially worsen the terms on offer.

Maintaining a strong credit profile isn't just about ensuring easier pre-approval. A high credit score can also secure better terms and rates, reducing the overall cost of a mortgage. In contrast, a lower score might lead to more required documentation and slower approval processes, which could cost you a desired property.

Financial prudence extends to the size of the down payment. A 20% down payment not only eliminates the need for private mortgage insurance (PMI) but also strengthens a buyer's offer by showing substantial financial backing. In today's market where cash is king and contingencies can be deal-breakers, demonstrating financial readiness is crucial.

For those who need to sell their current home to finance a new purchase, consider listing your property sooner rather than later. This move reduces buying contingencies and enhances your appeal to sellers by showing readiness to proceed quickly.

While mortgage pre-approval doesn't ensure home buying success, it significantly enhances a buyer's profile in a competitive market. With rate cuts likely on the way this year, enhancing your buyer profile by obtaining pre-approval, maintaining a robust credit score, making a significant down payment, and minimizing contingencies is more critical than ever. These steps will not only position you favorably in the current market but also set you up for success when you find your ideal home in the future.

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Surprising Surge in Existing Home Sales Highlights Market Resilience

In a surprising turn of events, sales of existing homes in the U.S. jumped 9.5% in February from January, reaching 4.38 million units on a seasonally adjusted annualized basis. This significant increase, as reported by the National Association of Realtors (NAR), defied housing analysts' expectations of a slight drop, showcasing an unexpected resilience in the housing market.

Despite a year-over-year decrease of 3.3%, this February marked the largest monthly gain since the previous year, highlighting a robust recovery in certain regions. The West experienced the most dramatic increase with a 19.4% surge, followed closely by the South with a 16.4% rise. The Northeast, however, saw no change, indicating regional disparities in housing market dynamics.

Lawrence Yun, the chief economist at NAR, attributed this growth to an increase in housing supply which is beginning to meet the rising market demand fueled by steady population and job growth. "The actual timing of purchases will be determined by prevailing mortgage rates and wider inventory choices," Yun noted, pointing out the critical factors influencing future market trends.

Inventory levels also saw an uplift, with a 10.3% increase from last year, bringing the total to 1.07 million homes available for sale at the end of February. Despite this growth, the supply remains tight with just a 2.9-month supply at the current sales pace, underscoring the ongoing imbalance between supply and demand in the housing market.

The median home price continued its upward trajectory, increasing by 5.7% from last year to $384,500. This marks the eighth consecutive month of annual gains, fueled by high demand and competitive market conditions where 20% of homes sold above the listing price.

Interestingly, the rise in home sales did not translate to increased participation by first-time buyers, who represented only 26% of purchases, a decline from 28% in January and well below the historical norm of around 40%. The prevalence of all-cash purchases, which increased to 33% from 28% the previous year, suggests a significant influence of wealthier consumers and possibly those relocating from more expensive states like California to more affordable markets such as Florida or Georgia.

Yun also speculated that factors like the stock market's performance and the acceptance of higher mortgage rates as a 'new normal' might be influencing these trends. With the 30-year fixed mortgage rate now over 7%, the dynamics in the housing market continue to evolve, influenced by broader economic factors.

This surge in existing home sales provides a complex picture of a housing market that is simultaneously grappling with tight supply, rising prices, and shifting consumer behaviors. As the market continues to adjust to economic pressures and demographic shifts, the landscape of U.S. housing remains a critical area to watch.

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Covington Anticipates Economic Boost with New Costco Development

The much-anticipated $45.8 million Costco warehouse is on track to open its doors by the end of this year, marking the Fortune 500 company's first entry into St. Tammany Parish. This development, positioned off Pinnacle Parkway, is expected to significantly bolster the local economy and provide numerous job opportunities.

Chris Masingill, head of St. Tammany Corporation, the parish's economic development agency, revealed that construction for the sprawling 159,000-square-foot facility is slated to commence in the second quarter of this year. While Costco has remained tight-lipped about the project specifics, Masingill hints at a potential opening towards the late third quarter.

Strategically located in the bustling Nord du Lac shopping district adjacent to Interstate 12, the new store is anticipated not only to enhance the shopping landscape but also to generate substantial employment. The opening of the store is expected to bring about 75 full-time jobs offering an average annual salary near $60,000, alongside 75 part-time positions.

The introduction of Costco into the region is projected to inject $60 million in new sales and property taxes into the local economy over the next decade, according to St. Tammany Corporation. This new establishment joins Costco's existing location in Mid-City, New Orleans, expanding the retailer's footprint in the region.

The Covington area, particularly the Nord du Lac and adjacent River Chase shopping districts, is already a retail hub featuring stores and restaurants like Kohl's, Academy Sports and Outdoors, and Texas Roadhouse. The addition of Costco is set to amplify this retail synergy, attracting more shoppers and potentially spurring further developments.

Commercial real estate circles are abuzz with the news, as evidenced by Hayden Ingram, a commercial agent with Property One, noting increased interest in nearby properties due to the impending Costco launch. "Investors are excited that Costco's going to be a neighbor," said Ingram, highlighting the positive ripple effect expected from the store's opening.

Moreover, the region is undergoing significant infrastructure improvements with a $189 million state project to expand Interstate 12. This enhancement aims to alleviate traffic congestion, particularly from shoppers frequenting the Nord du Lac and River Chase areas, further facilitating access to the new Costco.

As western St. Tammany's commercial corridors continue to grow, the arrival of Costco represents a significant milestone for the community, promising a blend of employment opportunities, enhanced retail offerings, and increased tax revenues. Local residents and businesses alike are eagerly anticipating the doors opening to what promises to be another anchor in the parish's flourishing commercial landscape.

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Empowering Homebuyers: A Builder's Guide to Navigating Home Financing

As a builder, your relationship with buyers doesn't end when plans are drawn or foundations poured; it extends into ensuring they can secure financing for their dream home. Financing troubles can unravel deals and strain buyer relationships, but with the right guidance, you can steer clients towards successful homeownership. Here are strategies to support your clients in navigating the maze of home financing.

1. Unveiling Homebuyer Assistance Programs

Misconceptions about down payments can deter potential buyers. Many believe they need 16% or more down, yet options with much lower requirements exist. Highlighting programs like FHA loans, which require as low as 3.5% down, can open doors for buyers unsure about their financial standing. Educate them about federal, state, and local assistance programs to broaden their possibilities and alleviate down payment concerns.

2. Demystifying Mortgage Finance

The world of mortgage financing can be overwhelming for many buyers. Break down the basics: explain the different types of home loans – from conventional loans suitable for a wide range of buyers to specific ones like VA and USDA loans, designed for military personnel and rural homebuyers, respectively. Clarify how interest rates work and the impact they have on monthly payments. Emphasize that despite recent hikes, rates remain below historical averages, which might make the present a favorable time to buy.

Educate them on the significance of pre-approval. It not only solidifies their budget but also enhances their standing with sellers. This understanding can set realistic expectations and streamline the home shopping process.

3. Fostering Lender Relationships

Having a network of trusted lenders can be invaluable. Directing clients to knowledgeable lenders ensures they receive accurate, timely information tailored to their specific situations. This partnership can expedite the loan approval process, keeping your construction schedule and their move-in plans on track.

Keller Home Loans, for example, provides an online platform, My Agent Station, that offers real-time updates on loan status. Tools like this can keep everyone informed and prevent last-minute financing issues from derailing home purchases.

Building More Than Homes: Building Trust

As a builder, you're not just constructing houses; you're helping build futures. By guiding buyers through the financing process, you're not only ensuring smoother transactions but also cultivating long-term relationships. Educated, satisfied clients are more likely to refer others and return for future needs. Your role in their financing journey is a testament to your commitment to their satisfaction and success in homeownership.

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Understanding Mortgage Rate Movements: What Homebuyers and Sellers Need to Know

The landscape of mortgage rates has been a roller coaster, especially following the near 8% peak witnessed last fall. Presently, there's a silver lining as rates have exhibited a downward trend, a critical shift for those in the market to buy or sell homes.

Despite the day-to-day fluctuations driven by various economic factors like inflation and the consumer price index (CPI), it's important not to get sidetracked by short-term volatility. According to industry experts, the overall trajectory for mortgage rates is expected to continue downward throughout the year.

Dean Baker, a Senior Economist at the Center for Economic Research, highlights, "While we may not revisit the pandemic-era lows, we could see rates dip below 6% soon, which would be considerably low by standards set before the Great Recession."

Supporting Baker's assertion, recent projections from Fannie Mae also suggest the possibility of mortgage rates falling below the 6% mark by year's end. These forecasts, regularly updated in response to ongoing market and economic developments, reinforce the optimism that rates could ease, particularly if inflation continues to cool down.

Implications for Prospective Homebuyers and Sellers

For potential homebuyers and sellers, the key takeaway is the broader market trend rather than momentary rate changes. If you're contemplating purchasing a home and have found one that aligns with your budget and requirements, attempting to "time the market" for a further rate decrease might not be advisable. Given the current lower rates compared to last fall, acting now could prove advantageous, as even minor reductions in rates can significantly enhance your buying power.

Acting Now Could Be Beneficial

For those who postponed their home buying plans last year with hopes of lower rates, this could be your moment to reevaluate and act. Engaging with a real estate professional can provide you with updated information and guidance tailored to your specific situation.

In conclusion, while navigating the housing market can seem daunting amid fluctuating mortgage rates, focusing on the long-term trends and consulting with experts can help you make informed decisions. With the possibility of rates dipping further, staying informed and ready to act could position you favorably in the current market landscape.

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Navigating Rising Homeowner's Insurance Costs in Louisiana

Louisiana homeowners have faced a harsh reality recently: skyrocketing insurance rates, primarily due to the increased frequency of hurricanes. This uptick in natural disasters has led some insurance companies to withdraw from the state altogether, while others have hiked their premiums significantly. However, Baton Rouge's own Dex Gonzales, a seasoned producer at Bayou Insurance Services, advises not to panic. There are strategies homeowners can employ to mitigate these rising costs.

1. Raising Your Deductible

A higher deductible can lead to lower annual premiums. While this means higher out-of-pocket costs in the event of a claim, it could make financial sense in the long run. Consulting with insurance professionals like those at Bayou Insurance can help you make an informed decision.

2. Tailoring Coverage

Insurance is not one-size-fits-all. By adjusting your coverage levels with the help of an expert, you can ensure you're not overpaying while still protecting your most valuable assets.

3. Thinking Twice Before Filing Small Claims

Not all claims are equal. While natural disaster-related claims are typically unavoidable, smaller, less significant claims can lead to rate increases. It's wise to evaluate the cost of repairs versus the potential premium hike before filing a claim.

4. Improving Your Credit Score

Insurance companies often consider your credit history when setting rates. A better credit score can lead to lower premiums, making good credit habits more important than ever.

5. Bundling Policies

Combining your home and auto insurance with the same provider can unlock savings on both policies. Independent agencies like Bayou Insurance can shop around for the best bundle deals.

6. Upgrading Your Roof

The condition of your roof can significantly impact your insurance rates. Upgrading to a new roof, particularly before disaster strikes, not only provides better protection but can also reduce your premiums.

7. Fortifying Your Roof

In Louisiana, upgrading to a fortified roof can not only better protect your home from severe weather but also lead to discounts from insurers. The state even offers grants to help cover these upgrades.

8. Installing Alarms

Security and fire alarms are not just about safety; they can also lead to insurance discounts. Ensure your provider knows about any protective devices installed in your home.

9. Regularly Reviewing and Comparing Rates

Insurance markets are dynamic, and rates vary between providers. Regularly comparing rates and discussing your current policy with your agent at renewal time can uncover potential savings.

10. Choosing the Right Agent

A local, knowledgeable agent can make all the difference. Bayou Insurance, led by Gonzales and the Jones family, offers personalized service that national chains can't match. Their local insight and dedication to Louisiana residents can guide you through the state's complex insurance landscape.

Gonzales, a Thibodaux native with deep roots in customer service and a clear understanding of the local insurance market, emphasizes the importance of community and personalized service. Since partnering with Bayou Insurance and opening the Baton Rouge office, he's committed to providing local, personalized insurance solutions.

In an era where faceless national agencies dominate, Bayou Insurance stands out by prioritizing customer needs and employing Louisiana locals, ensuring jobs stay within the community. With a range of A-rated insurance products, they are equipped to tackle the unique challenges faced by Louisiana homeowners.

In summary, while rising insurance costs can be daunting, Louisiana residents have options. By taking proactive steps and working with local experts like those at Bayou Insurance Services, homeowners can find ways to manage and even reduce their premiums, all while keeping their homes and families protected.

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