STRONG BUYER DEMAND BUILDS UP BUILDER CONFIDENCE

 

The latest National Home Builders Association/Wells Fargo Housing Market Index (HMI) reported that builder confidence increased in April 2021. For newly-built single-family homes, builder confidence was at an 83 in April.

The NAHB/Wells Fargo HMI surveys builders’ views on how the current single-family home sales and sales expectations for the next six months. The builder's rate as good, fair or poor. When asked about the traffic seen of prospective buyers, they rate it as high to very high, average or low to very low. Once the data is collected,  scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Today’s market is seeing an 88 for current sales conditions even with the high lumber prices and supply chain problems. For the traffic of prospective buyers, there was a three-point gain to 75. As for the different regions the Northeast was at 86 points, the South at 83 points, the West at 90 points and the Midwest came in at 78 points.

“Despite strong buyer traffic, builders continue to face challenges to add much-needed housing supply to the market,” said NAHB Chairman Chuck Fowke. “The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials. Though builders are seeking to keep home prices affordable in a market in need of more inventory, policymakers must find ways to increase the supply of building materials as the economy runs hot in 2021.”

“While mortgage interest rates have trended higher since February and home prices continue to outstrip inflation, housing demand appears to be unwavering for now as buyer traffic reached its highest level since November,” said NAHB Chief Economist Robert Dietz. “NAHB’s forecast is for ongoing growth in single-family construction in 2021, albeit at a lower growth rate than realized in 2020.”

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NINETY PERCENT OF NEW HOME SALES IN Q1 2021 WERE BACKED BY CONVENTIONAL AND FHA MORTGAGES

The recent Quarterly Sales by Price and Financing, published by the U.S. Census Bureau, was analyzed by the National Association of Home Builders and found that conventional loans financed the largest share of new home sales since 2018.

Conventional loans in Q1 2021 were reported at 71.6%, FHA came in at 19.3%, VA loans at 5.3% and cash new home sales were 4.1%. As far as the percentage points increase from Q1 2020, conventional loans rose 2.1 percentage points and FHA-backed sales were up 1.6 percentage points. Unfortunately, VA loans decreased 2.1 percentage points and cash sales dipped 0.9 percentage points.

The four-quarter moving average (MA) of the share of new home sales backed by FHA has increased over the past two and a half years from 12.2% to 18.9%. Conventional loans however have seen a 4.4 percentage points decrease during the same period.
Even with a small increase, interest rates are still at historically low levels. The stock market returns topping 20% from Q1 2020 to Q1 2021 have played important roles in the large increase in the number conventional loan and cash purchases relative to sales financed through the FHA and VA.

Now is a great time to purchase a home with low interest rates and in turn a great time to also sell. The national median sales price for a new home reported was $347,500 and those homes sold back by financing were $386,600.
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High-Performance Home Appraisal Guide

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High-performance homes are becoming more and more popular, but is the market up to date with appraisals for these specialty homes? Builders, sales agents and homeowners can take several steps to ensure local appraisers, lenders and the general public about what makes your durable, energy-efficient, healthier home stand out from the competition.

Step 1:

Make sure to highlight the home's high-performance features when marketing the home. This can be done by advertising, educating, teaching, highlighting and displaying these high-performance features.

When advertising, make sure to include the features that make the home more comfortable, energy-efficient and water-efficient. Point out how these will help lower utility bills. For tips on verbiage to use or ideas on what to highlight, check out Home Performance Counts.

Educate and teach others about the results of an Energy Rating Index (ERI) which includes the Home Energy Rating System (HERS) score or Home Energy Score (HES). All sales agents and sales staff should know what an ERI, HERS and/or HES rating means and how to articulate the ratings to consumers and others in the industry.

Features such as independently verified green home certifications should be highlighted in the marketing materials. The National Green Building Standard is a great example that should be put on flyers and web pages. During open houses, display the ERI, HERS or HES ratings and an explanation of the potential energy savings. Also, display certification plaques that show the home is approved by the National Green Building Standard.

Step 2:

Buyers should choose a lender who is familiar with high-performance homes. Local mortgage lenders who have a separate appraisal panel of trained professionals with experience valuing high-performance homes are critical to get the value your above-code home deserves. It is important for a lender to choose an appraiser that is on the Appraisal Institute’s green registry. This way both the lender and appraiser will not be hesitant to appraise the home higher for its energy-efficient upgrades.

Step 3:

The sales contract for a high-performance home should include Residential Green and Energy Efficient Addendum. What this means is the high-performance features that are behind the walls and cannot be seen will be included. This documentation will help the appraiser fully understand the higher price when it comes to an above-code home.

Step 4:

Just like interviewing a sales agent, interview the appraiser before you choose them to appraise the home. Not only ask about their appraisal experience but also ask if they are familiar with ERI scores and HERS ratings. Find out what classes or courses they have taken on high-performance valuation.  The Federal Housing Administration, the U.S. Department of Veterans Affairs, Fannie Mae and Freddie Mac all require that the appraiser has requisite knowledge prior to accepting the assignment, and the only way to enforce that is to ask about their knowledge and experience upfront.

Including these steps in the appraisal process will ensure a high-performance home will be given the right amount the home is worth. Choosing a sales agent who is versed in energy-efficient homes will help buyers with the home buying process.

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Suburbs Are The Place To Be

 The National Association of Home Builders NAHB recently did a survey that revealed 25% of home buyers have changed their home buying preferences due to COVID-19. The survey found that home buyers are looking to the suburbs because of the health crisis. Thiry percent of buyers are seeking a home in the outlying suburbs. Before the pandemic, only 26% of home buyers wanted to purchase a home in the suburbs.

This does not bode for other locations. All of the other location points saw no change or small declines in buyer's preferences after the onset of COVID-19. Rural areas went from 24% down to 23%, downtown in a central city, dwindle from 12% to 11% and those who desired a home in the central city outside of downtown remained at 9%.

Buyers should enlist the help of a Realtor. A local sales agent will know the suburbs and can help you find the perfect home of your dreams. They will be able to help find a home in the perfect community for the perfect price.

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Spring A Great Time To Sell A Home

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Spring brings new flowers, animals, and warm sun. Many say that spring is the time for changes. The housing market also sees a rise in home sales during this time. Here are five reasons why springtime is the best time to sell.

1. There's high demand from homebuyers.

Showingtime, an app that tracks showings on homes, reported that buyer showings are up 51.5% from this time last year. The housing market is hot and buyer demand is strong.

“As anticipated, demand for real estate remains elevated and continues to be affected by low levels of inventory…On average, each home is getting 50 percent or more requests this year compared to January of last year. As we head into the busy season, it’s likely we’ll push into even more extreme territory until the supply starts catching up with demand,” says Daniil Cherkasskiy, Chief Analytics Officer at ShowingTime.

2. There aren't enough houses for sale.

Inventory is on a record low, and buyers are high on demand. “Nationally, the inventory of homes for sale in February decreased by 48.6% over the past year, a higher rate of decline compared to the 42.6% drop in January. This amounted to 496,000 fewer homes for sale compared to February of last year,” reported Realtor.com.

According to the National Association of Realtors (NAR) "sales are skyrocketing" and the existing inventory is "continuing to drop dramatically". The average house is only staying on the market for only 21 days.

3. You have a lot of leverage in today's market.

Low inventory and tons of buyers make this a seller's market. The seller currently has the upper hand in the market and can negotiate the best deals. NAR reports that bidding wars have increased on average by 3.7 offers per house.

4. It's a great way to use your home equity.

CoreLogic reported that the average homeowner gained $17,000 in equity over the past year, and that number continues to grow as home values appreciate, in the third quarter of 2020. During this market, homeowners will find that they have a lot of equity in their homes. Equity is a type of forced savings that grow during your time as a homeowner and can be put toward bigger goals like buying your next dream home.

“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity. In today’s housing market, fast-rising demand against the limited supply of homes for sale has resulted in continued house price appreciation,” says Mark Fleming, Chief Economist at First American.

5. It's a chance to find a home that meets your needs.

The COVID-19 pandemic has changed the way homeowners see and live in their homes. The stay-at-home orders meant spending a lot of time at home. This extra time at home caused homeowners to re-evaluate the top desires they want in a home.

The home office, outdoor spaces and flex rooms became a must in the 2021 home search. With so many people working from home, or virtual schooling flex rooms and home offices are in high demand.

If you are in the market to sell your home, contact your local Realtor. A Realtor will not only help you navigate the market, getting you the best price and deal for your home, but will also take most of the pressure off of you from this fast pace market.

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Improve a Home's Resale Value With These Projects

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A home's resale value is always important to a homeowner. Home renovations if done right and smart can make a huge impact on a home's worth. Some homeowners are ready for a big project such as a kitchen or bathroom overhaul, but others do not have the time, resources, or energy to tackle these. If you are in the market to sell your home, some small projects can boost the value and time it takes to sell your home.

“People buying may not have the greatest imagination, and they want to walk into something that’s turnkey,” says Sandy Scheinman, a real estate salesperson at Douglas Elliman Real Estate in New York City. “In a competitive market, offering a home that looks renovated and new is really what you need to do to compete.”

According to Scheinman, renovations can increase a home's price by 10% to 12%. In order for these changes to not only add monetary value but also gain a buyer's interest, you must make smart choices in your projects. Here are some great tips to follow to make your projects a success.

Design with buyers in mind

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“If you are doing the renovations for resale, choose the types of fixtures and styles that will appeal to your target audience,” says Michele Morrison, a real estate agent with the Sereno Group in Los Altos, CA. “Don’t build your dream home if it’s not for you.”

What you may love, another person may hate. The key to renovations is to opt for designs that are universally flattering.

Paint a room

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Painting a room can cost around $200 - $400 and only take about a day but the impact is huge. Updating the walls in a warm gray or white will give the room a fresh look in a neutral color.

It is always important to use a color that is neutral and not polarizing. Some buyers will walk into a home hate the eggplant walls and leave.

Add crown molding

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Crown molding gives a room a finished and improved look. This wood can be added to the top edge of walls, door frames, or cabinets. This project typically costs between $300 to $500 per room and only takes a few days to paint, prep and install. Crown molding is not only a lovely touch but can also cover problem areas on walls or around windows and doors.

“This renovation increases value by setting the home apart from other comparable homes in the area,” says Richard McMurray, owner of DFW Crown Moulding in Fort Worth, TX.

Bathroom makeover

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“We’re seeing a trend where people are expanding the size of the bathrooms and having his-and-her showers. It’s more of a room than what it was in the past,” Nematnejad says.In the past, a bathroom in a home served only basic needs and was more simple in design. Today, the bathroom is a major part of a home's grand showcase. Today's buyers want a nice large bathroom with a soaking tub and natural light.

A bathroom renovation can be costly, $35,000 to $65,000-plus, but there are simple updates you can do to please a buyer's eye. Some buyer-pleasing ideas include replacing a linoleum floor with tiles, painting the vanity, installing a new sink and faucet, and putting in new lights.

Kitchen renovation

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Another project that can cost anywhere from $65,000 to over $100,000 but can recoup the cost of about 65% of the project when you sell your home is renovating the kitchen. Kitchens are not just a place to cook anymore, today's homeowners use the kitchen as a living space.

“The more you put into [a kitchen renovation], the higher the resale cost recouped percentage is going to be,” says Robert LaFleur, owner of Building Professionals, Inc. in Westford, MA.

Follow these tips and you are sure to be please with the outcome of the sale of your home. If you are in the market to sell, contact a local Realtor who can help you through the process.

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New Construction Buyers Spend Less Time Searching For a Home in 2020

 The Zillow Consumer Housing Trends Report for 2020 had big changes from the data reported in 2019. New construction (NC) buyers that were surveyed for the 2020 report revealed that they spent less time looking for a home because they focused only on a new construction home. The report showed that 23% more NC buyers found their home in less than four weeks. In fact, the average new construction buyer spends only two months searching for a newly built home.

More and more home buyers are desiring a new construction home now more than ever. Builders are marketing off this change by adding incentives such as free builder upgrades. In 2019 9% of NC buyers said free builder upgrades was one of the top three of their reasons for buying new construction while in 2020 14% cited this as one of their motivators.

The top reasons for purchasing a certain home are still location and home features but following close behind now is the desire to purchase a new home that has never been lived in or used. Buyers want to be able to customize their home features and choose their own floor plan. Thirty-percent of NC buyers cited one of their top reasons for purchasing a newly built house was because it was the best value for their money.

New construction buyers are now focusing on less square footage. More NC buyers (9%) in 2020 purchased small homes which were 6 percentage points higher than in 2019. Small homes are homes that are less than 1,000 square feet. The data also informed that 19% of NC buyers paid less than $100,000 for their home in 2020 while only 9% were reported in 2019. Zillow feels that the shift might be because more new construction is being built in urban areas or that home builders are offering more options in smaller homes.

There was also a shift in home feature preferences in NC buyers in 2020. These include rental income, smart technology and space for cars. It became important to 32% of new construction buyers that they could generate rental income by renting out the whole home compared to 23% who said this was important in 2019. Smart home technologies are also becoming the norm. More and more people are becoming comfortable with devices that control things such as security or temperature control. Forty-three percent of NC buyers say that smart home capabilities are very important. Cars are also important to Americans, in fact so important, that 74% of NC buyers have to have off-street parking or a garage and 67% have to have an assigned parking space. Zillow says this probably stems from the higher rate of new construction in urban areas.

The new construction housing market is starved for inventory so if you are in the market, choosing a Realtor is a must. A Realtor can help you find the best home for you and your needs.

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