Low Inventory, Rising Rates and a Bustling Spring Market

Low Inventory, Rising Rates and a Bustling Spring Market

RECBL - Real Estate News

Spring is here, and, with it, a busy home-buying and -selling season. While real estate markets can vary widely by region, housing is currently seeing similar developments across the country.

The Kiplinger Letter, an online source for personal finance advice and business forecasts, recently shared spring market trends. According to Kiplingers David Payne, staff economist, and Rodrigo Sermeño, reporter, REALTORS(R) can expect tight inventory, increased buyer competition and a rise in interest rates across the board this spring.

The biggest obstacle? Not enough homes, particularly in heavily-populated areas and others that are growing quickly.

"Buyers should expect tight inventory of existing homes across the nation, particularly in fast-growing metro areas such as Denver, Dallas, Seattle and Portland-but also most major metros in the West and in the South," say Payne and Sermeño.

Buyers are out in full-force, and with less inventory to choose from, they are flocking to any available homes in their price point and submitting aggressive bids.

"Buyers should expect more competition for entry-level homes, both existing and new," Payne and Sermeño say. "Tight inventories of existing homes will likely lead to bidding wars in many markets."

What the industry sorely needs right now is new construction, and that’s where the South is prospering.

"The South is seeing strong growth in residential construction, including starter homes," say Payne and Sermeño. "Builders are gradually adding entry-level homes in certain markets in the South, such as Dallas, Phoenix and Atlanta. Some builders are focusing on peripheral areas around these cities, where it is cheaper for them to build entry-level homes."

According to The Kiplinger Letter, buyers in the South and West can expect new homes on the market later this year, especially duplexes and townhomes; however, new-construction growth is generally slow across the U.S. due to high costs and insufficient land to build.

"Builders will continue to gradually bring starter homes to the market, but the rising cost of labor and building materials will make it difficult," Payne and Sermeño say.

While skyrocketing prices have been a concern with tight inventory, REALTORS(R) can breathe a small sigh of relief, as growing home prices seem to be slowing down, if only slightly, for the foreseeable future.

"Home price growth will slow a bit, to 5 percent from 6.5 percent last year," say Payne and Sermeño. "Price appreciation has been strong for a while, and some areas are seeing demand hurt by affordability problems, especially for high-end homes; however, the slowdown this year will only be modest because of continuing lack of inventory, especially at the low-to-middle price ranges."

REALTORS(R) are watching the market closely, as one factor could change the status of todays market. Rising interest rates are homebuyers biggest concern, and contributing to this springs flurry of home-buying activity.

"The prospective rise in interest rates this year and next is actually boosting buyer demand to purchase before rates rise further, according to REALTOR(R) surveys," Payne and Sermeño say. "Next year, once it appears that mortgage rates will be stabilizing, then the higher rates will have a somewhat depressive effect on prices and demand."​


Jason Grace is AZ Social Realty's content editor. Email him your real estate news ideas at jason@cashbuyerslists.com.





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New Homeowner Statistics Unveiled

New Homeowner Statistics Unveiled

RECBL - Real Estate News

Owning a home is a key component of the "American Dream," as well as a primary driver of wealth creation for many Americans. However, the fruits of homeownership are not shared equally across demographic groups. A new report from Apartment List offers interesting insights.

After analyzing Census data from 1980 to 2015, looking at trends in owner and renter populations nationwide, broken down by race, education and income, Apartment List researchers found that white households have a significant advantage in achieving homeownership, and that this advantage persists regardless of education or income.


Some of the highlights of the latest Apartment List report include:

• Nationally, the homeownership rate for white households is 64.4 percent, compared to 32.7 percent for black households, 41.1 percent for Hispanic households, 54.0 percent for Asian households, and 45.8 percent for households classified as "other."

• Since 2000, the gap in homeownership rates has closed by 8 percent for Asian households, by 2.5 percent for Hispanic households and by 2.4 percent for households classified as "other." However, the gap for black households has widened by 3.9 percent.

• Prime working age households in the U.S. are 61.8 percent white, 13.1 percent black, 16.7 percent Hispanic, 5.7 percent Asian, and 2.7 percent "other."

• The nation is growing steadily more diverse, with the share of white households falling by 18.7 percent points since 1980.

• The Census Bureau projects that more than half of the American population will belong to a minority group by 2044.

• Nationally, Apartment List researchers found that homeownership rates for minorities with college degrees are lower than those for whites with only a high school diploma.

• Gaps in homeownership rates by race tend to be worst in metros in the Northeast and Midwest, with smaller gaps found in metros across the South and on both coasts, particularly in California, Texas, and Florida.

Overall, the data shows gaps have been narrowing over time, but gaps for black households have grown worse. And while more diverse metro regions tend to have smaller gaps in homeownership rates, many of these metros also have corresponding low overall rates of ownership.

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The Yin and Yang of the Millennial Market

The Yin and Yang of the Millennial Market

In a recent release from apartmentlist.com, it’s very interesting to learn while millennials are starting to buy homes, there are not enough homes in their price range on the market - and even if there were, many could not come up with a down payment.

In his latest Apartmentlist Rentonomics report, Andrew Woo writes that during the Great Recession, investors bought countless foreclosed properties, most of which were starter homes.

And rather than selling when prices recovered, investors turned them into profitable single-family rentals. And as a result, Woo says there are very few existing starter homes on the market.

Woo points to Megan McGrath of MKM Partners, who says the housing recovery was primarily at the middle end of the market which drove up home prices and land prices followed. With higher land prices, it is harder for home builders to make a good profit at lower home prices.

During the housing recovery, the price spread between new and existing homes increased because builders were focused on the move-up buyer. But Woo says now middle-end sales are starting to slow down, and builders need to target new buyers to sustain growth.

He says big builders are starting to introduce new product lines at lower price points, and these starter homes are selling well. But the only way for builders to lower prices and take a hit to their margins is if they see big growth in new orders, and he is not seeing that happening anytime soon.

Woo says the demand is clearly growing but is not as strong as demographics would suggest. Single-family construction still stands at 18% below its 25-year average, and he warns about a developing affordability gap.

Aparetmentlist.com recently surveyed 24,000 millennial renters and found that 80 percent want to purchase a home, but face a huge obstacle in affording one. Woo says its because millennials vastly underestimate the savings needed for a down payment.

Woo fears based on current saving rates most millennials will need at least a decade to save enough - and that a lack of savings, combined with the shortage of affordable starter homes, will leave a large share of millennials renting for years to come.





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Housing Starts Again Disappoint in May

Housing Starts Again Disappoint in May

Home-building activity again disappointed in May, below expectations with housing starts down 5.5 percent to a rate of 1,092,000, according to the latest data from the U.S. Census Bureau and the Department of Housing and Urban Development (HUD). Single-family housing starts decreased 3.9 percent to 826,000. Starts for units in buildings with five units or more came in at 284,000.

Permits also fell short, down 4.9 percent from April to 1,228,000, according to the data. Single-family permits decreased 1.9 percent from April to 779,000. Permits for units in buildings with five units or more came in at 358,000.

Completions, however, totaled 1,164,000 in May, rising 5.6 percent. Single-family completions increased 4.9 percent from April to 817,000. Completions for units in buildings with five units or more came in at 335,000.

"Even though housing starts fell in May, the good news for buyers is that the number of completed new homes is up," says Joseph Kirchner, senior economist at realtor.com(R). "With completions up 5.6 percent from last month and 14.6 percent from a year ago, these new homes prevent the number of properties the market from falling too rapidly. 

Unfortunately, it is probably not enough to stem the steady decline of homes for sale that is contributing to accelerating prices and bidding wars across the country. The shortage of homes is so acute at the low end of the price range that it is affecting overall sales of new and existing homes.

Compared to a year ago, the sales of properties under $250,000, which is approximately the current median price, fell 9 percent, but rose 8 percent for properties above $250,000. As prices continue to go up, millennials, who make up the largest segment of buyers, will find it more difficult to take the homeownership plunge."

"[This] report is consistent with builder sentiment in the housing market, indicating some weakness after a strong start the year," said Granger MacDonald, chairman of the National Association of Home Builders (NAHB), in a statement. "Ongoing job growth, rising demand and low mortgage rates should keep the single-family sector moving forward this year, even as builders deal with ongoing shortages of lots and labor."

Source: U.S. Census Bureau


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NAHB: Home Builder Confidence in Single-Family Solid

NAHB: Home Builder Confidence in Single-Family Solid

Cash Buyers List News

Home builder confidence in the new, single-family construction market is solid, despite recent tempering, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

The Index reading for June was 67-down from 69 in May. An above 50-reading indicates more builders have a positive outlook than a negative one.

"Builder confidence levels have remained consistently sound this year, reflecting the ongoing gradual recovery of the housing market," said Granger MacDonald, chairman of the NAHB, in a statement.

"As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labor and buildable lots that is impeding stronger growth in the single-family sector," said Robert Dietz, chief economist of the NAHB.

Home builders expectations regarding present and expected single-family home sales both fell in June, down to 73 and 76, in order, while expected homebuyer traffic fell two points to 49.

Source: National Association of Home Builders (NAHB)

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