Sales of newly built single-family homes fell 1.6 percent in November from October’s sales rate. New home sales were also down 1.6 percent from one year earlier. The drop – which included decreases in three of four U.S. regions – brought sales to their slowest pace in four months and fell well below economists’ expectations for the month. Sales were down 12 percent in the Northeast, 6.4 percent in the South, and 6.3 in the Midwest. The West, on the other hand, saw a nearly15 percent increase in new home sales. Despite the overall downturn, however, analysts warn not to place too much importance in monthly readings, as month-to-month estimates can be volatile and are often revised after their initial release. Also in the report, the median sales price of new homes sold in November was $280,900; the average sales price was $321,800. At the end of the month, there was a 5.8-month supply of new homes available for sale at the current sales rate. More here.
Sales of previously owned homes slipped in November, according to the National Association of Realtors. The decline follows a calendar-year high in October and brings sales to their lowest level since May. Still, existing-home sales were above year-before levels for the second straight month. Lawrence Yun, NAR’s chief economist, said sales activity was choppy in November despite mortgage rates falling to their lowest levels of the year. According to Yun, the number of real estate investors active in the market is declining as home prices rise. And, in fact, a closer look at the numbers reveals fewer all-cash sales and individual investors active in the market. Instead, the number of first-time buyers has rebounded, climbing to 31 percent of all November sales, the highest percentage in more than two years. Also affecting November sales totals, the number of homes available for sale is falling. Total housing inventory was down 6.7 percent in November. Tighter inventory, however, is due largely to seasonal factors, as fewer people put their homes up for sale during winter months. Also in the report, the median existing-home price for all housing types was $205,300 in November, 5 percent above last year. More here.
At the beginning of every year, experts and analysts make predictions about what the year will hold for the real estate market. From home sales to mortgage rates, there are many forecasts predicting what will be in store for buyers and sellers over the course of the year but not as many reviews of whether those forecasts were right or wrong once the year is through. Freddie Mac’s chief economist, Frank Nothaft, is one of the few willing to test his predictions against the year-end totals. In a recent analysis, Nothaft found that many of Freddie Mac’s key projections turned out to be more right than wrong this year. For example, they projected that home prices would continue to increase, but at a slower pace than in 2013. And, as expected, there was a significant slowing from the rapid price gains seen the year before. They also projected that that mortgage market would tilt toward home purchases after a drop in refinance activity, which was also accurate. Mortgage rates, on the other hand, were forecast to rise in 2014 when, in fact, they moved lower – even hitting calendar-year lows early in December. Home sales were also forecast to improve from the year before but, due to unexpected economic volatility and unseasonably rough winter weather during the first quarter, home sales started the year slow and will come in 500,000 short of Freddie Mac’s projection. More here.
Though the economy and housing market have been largely up-and-down this year, Fannie Mae’s Economic & Strategic Research Group is forecasting improvement for 2015. In fact, according to Doug Duncan, Fannie Mae’s chief economist, the group anticipates a significant increase in the number of new homes built next year due to stronger employment and improvement in Americans’ household income. Improved employment prospects and rising income is predicted to release pent-up demand to buy homes and, as a result, should help boost home sales in addition to increasing the number of new homes built. And, since new residential construction has historically been a driver of economic activity, increased housing starts should help boost the broader economy as well. In recent years, household income has been relatively flat, which has dampened demand to buy homes and kept the housing market from enjoying a more robust recovery. Duncan says Fannie Mae expects total housing starts to increase by 22 percent in 2015, with total home sales rising 5 percent, and total mortgage originations rising to $1.13 trillion for the year. More here.
According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates fell to their lowest level since May 2013 last week. Rates dropped across all loan categories, including 30-year fixed-rate loans with conforming and jumbo balances, mortgages backed by the Federal Housing Administration, and 15-year fixed-rate loans. Mike Fratantoni, MBA’s chief economist, said interest rates dropped sharply due to plummeting oil prices and heightened concerns regarding global economic growth. Despite the large drop in mortgage rates, however, demand for mortgage applications fell 3.3 percent from the previous week. The Refinance Index showed no change from one week earlier, though as a share of total mortgage demand refinance activity increased to 66 percent. The seasonally adjusted Purchase Index, on the other hand, slipped 7 percent. The unadjusted Purchase Index is now just 5 percent lower than the same week one year ago. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.
New home construction fell in November, according to new estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development. Despite the drop, however, an upward revision of October’s estimate means the overall trend in residential construction remains positive. In fact, the decline follows two months of significant gains, including a 6.3 percent increase in September and a 4.2 percent jump in October. Analysts forecast even further improvement in the next year, as job growth and wage increases are expected to boost the number of young buyers entering the housing market. In November, however, housing starts – which refer to the number of new homes that broke ground during the month – were down 1.6 percent. Building permits also fell from October, dropping 5.2 percent. The decrease in the number of building permits – which are a forward-looking indicator of future housing construction – was mostly due to an 11 percent decline in multi-family permits. Single-family authorizations to build new homes, on the other hand, slipped just 1.2 percent from the month before. More here.
Because builders have an unique perspective on the market for newly built, single-family homes, the National Association of Home Builders surveys them each month to gauge their perception of current buyer traffic and sales, as well as their expectation for sales over the next six months. Their responses are scored on a scale where any number above 50 indicates that more builders view conditions as good than poor. In December, the NAHB’s Housing Market Index fell one point to 57. The drop follows a four-point gain in November. David Crowe, NAHB’s chief economist, said the index has stabilized in the mid-to-high 50s after a sluggish start to the year. According to Crowe, the results are consistent with with the NAHB’s assessment that the new-home market is gradually climbing back to normal. This gradual upward trend is expected to continue into 2015. December’s dip in builder confidence was due to slight declines in the index components measuring current sales and future sales expectations, both of which dropped a point from the month before. Despite the drop, however, both components are still in the 60s, with future sales expectations registering a 65. The gauge of current buyer traffic was unchanged from the previous month. More here.
According to research from Harvard’s Joint Center for Housing Studies, homeownership – though not without risk – is an effective way to build individual wealth. And, because of this, homeowners typically have a higher net worth than renters. In fact, the median net worth of homeowners was $195,400 in 2013, which is $190,000 more than the median for people who rented. The study comes after many questions about the viability of homeownership as a financial investment were raised following the housing crash. After home values plummeted, the traditional view that owning a home would lead to greater wealth was damaged and, subsequently, the number of renters has increased as the homeownership rate has fallen. But homeowners are forced to save money in a way that renters aren’t – if only for the fact that paying off a mortgage requires owners to pay down a portion of their mortgage principal every month. This is essentially forced savings, which ultimately buys a greater percentage of ownership over time. In addition, homeowners can gain wealth through home price appreciation and have the added benefit of the tax benefits and deductions that come with ownership. Though the ups-and-downs of the housing market do pose a risk to homeowners, research continues to find a link between owning a home and accumulating wealth. More here.
The U.S. Department of Housing and Urban Development’s monthly Housing Scorecard collects key housing data and details of the administration’s foreclosure prevention efforts. November’s report shows the residential real-estate market improving, with progress in vital areas such as new and existing home sales, home prices, and foreclosure starts and completions. For example, the report found sales of new homes up again in October and 15.4 percent higher than one year earlier. Sales of previously owned homes also rose, hitting their fastest pace in just over a year. The scorecard shows home prices, though still rising, are increasingly stable, according to the most recent data. In fact, year-over-year price increases continue to slow, reversing the previous year’s volatile price spikes. The Federal Housing Finance Administration says home prices are now just 5.8 percent below their previous peak and approximately at the same level they were in September 2005. Foreclosure starts and completions, on the other hand, continue trending downward on a year-over-year basis. Despite the overall trend, however, October saw an increase over September’s estimates, though that can largely be attributed to banks imposing foreclosure moratoriums over the holidays. More here.
Over the past few weeks, mortgage rates have been falling, even setting new lows for the year. But despite low interest rates, mortgage activity hadn’t shown much significant improvement. Now, according to the Mortgage Bankers Association’s Weekly Applications Survey, mortgage demand has rebounded, spiking 7.3 percent last week due to a 13 percent jump in refinance activity. The improvement also included a 1 percent increase in demand for loans to purchase homes. Despite last week’s gains, however, purchase demand is still 4 percent below year-before levels. Mortgage rates, on the other hand, were a mixed bag last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances was up from one week earlier, but rates on jumbo loans and loans backed by the Federal Housing Administration fell. Average mortgage rates on 15-year fixed-rate mortgages also increased. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.