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Real Estate Market

Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand

Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand

One of the major questions real estate experts are asking today is whether prospective homebuyers still believe purchasing a home makes sense. Some claim rapidly rising home prices are impacting demand and, by extension, leading to the recent slowdown in sales activity.

However, demand isn’t the real issue. Instead, it’s the lack of supply (homes available for sale). An article from the Wall Street Journal shows this is true for new home construction:

Home builders have sold more homes than they can build. Now they are limiting their sales in an effort to catch up.”

The article quotes David Auld, CEO of D.R. Horton Inc. (the largest homebuilder by volume in the United States since 2002), explaining how they don’t have enough homes for the number of buyers coming into their models:

“Through our history, to have somebody walk into our models and to tell them, ‘We don’t have a house for you to buy today’, is something that is foreign to us.”

Danielle Hale, Chief Economist for realtor.com, also explains that, in the existing home sale market, the slowdown in sales was a supply challenge, not a lack of demand. Responding to a recent uptick in listings coming to market, she notes:

“. . . if these changing inventory dynamics continue, we could see a wave of real estate activity heading into the latter part of the year.”

Again, the buyers are there. We just need houses to sell to them.

If the slowdown in sales was the result of demand waning, we would start to see home prices beginning to moderate – but this isn’t the case. As Mark Fleming, Chief Economist for First Americanexplains:

“There’s a lot of conversation around rising prices and falling quantity in the housing market, and there’s this concept, or this idea, that it’s a demand-side problem . . . . But, if demand were falling dramatically, we would actually see less price pressure, less home price growth.”

Instead, we’re seeing price appreciation accelerate throughout this year, as evidenced by the year-over-year percentage increases reported by CoreLogic:

  • January: 10%
  • February: 10.4%
  • March: 11.3%
  • April: 13%
  • May: 15.4%
  • June: 17.2%

(July numbers are not yet available)

There’s a shortage of listings, not buyers, and there are three very good reasons for purchasers to still be interested in buying a home this year.

1. Affordability isn’t the challenge some are claiming it to be.

Though home prices have risen dramatically over the last 18 months, mortgage rates remain near historic lows. Because of these near-record rates, monthly mortgage payments are affordable for most buyers.

While homes are less affordable than they were last year, when we adjust for inflation, we can see they’re also more affordable than they were in the 1970s, 1980s, 1990s, and much of the 2000s.

2. Owning is a better long-term decision than renting.

recent study shows renting a home takes up a higher percentage of a household’s income than owning one. According to the analysis, here’s the percentage of income homebuyers and renters should expect to pay now versus at the end of the year.

Percentage of Income a Homebuyer and Renter Should Expect to Pay for Monthly Housing Expenses

While the principal and interest of a monthly mortgage payment remain the same over the lifetime of the loan, rents increase almost every year.

3. Owners build their wealth. Renters build their landlord’s wealth.

Whether you’re a homeowner or an investor, real estate builds wealth through growing equity year-over-year. If you own, your household is gaining the benefit of that wealth accumulation. Fleming says:

The major financial advantage of homeownership is the accumulation of equity in the form of house price appreciation . . . . We have to take into account the fact that the shelter that you’re owning is an equity-generating or wealth-generating asset.”

Odeta Kushi, Deputy Chief Economist at First American, elaborates in a recent article:

“. . . once the home is purchased, appreciation helps build equity in the home, and becomes a benefit rather than a cost. When accounting for the appreciation benefit in our rent versus own analysis, it was cheaper to own in every one of the top 50 markets, including the two most expensive rental markets, San Francisco and San Jose, Calif.”

Today, that equity buildup is substantial. The National Association of Realtors (NAR) reports:

“The median sales price of single-family existing homes rose in 99% of measured metro areas in the second quarter of 2021 compared to one year ago, with double-digit price gains in 94% of markets.”

In 94% of markets, there was a greater than 10% increase in median price. That means if you bought a $400,000 home in one of those markets, your net worth increased by at least $40,000. If you rented, the landlord was the recipient of the wealth increase.

Bottom Line

For many reasons, housing demand is still extremely strong. What we need is more supply (house listings) to meet that demand.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Categories
Real Estate Market

Home Builders Ramp Up Construction Based on Demand

Home Builders Ramp Up Construction Based on Demand

If you’re thinking of buying a home, there really is no time like the present. With today’s low mortgage rates, you have a great opportunity to get more home for your money. The challenge is inventory. Like you, many buyers want to capitalize on these market conditions, and it’s leading to more buyer competition and bidding wars.

If you’re having a hard time finding a home to buy, it may be time to talk to your trusted real estate advisor about a newly built home. Early indicators show new-home construction is beginning to ramp up. While new homes alone won’t be able to fix all of the inventory challenges, this does mean you’ll soon have more options as you search for a home. As a buyer, a newly built home may be exactly what you’re looking for – it’s brand new, and with builder customization options, it’s uniquely yours from the ground up.

Here’s what industry experts are saying about new homes coming to market:

Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says recent research could indicate upward momentum when it comes to new home construction. Evangelou refers to the volume of new homes where construction began during a set period, known in the industry as housing starts.

According to that research, housing starts reached their highest level since 2006 in March of this year – an encouraging sign for the industry. While they dipped slightly in April, Evangelou reiterates that the level of housing construction is heading in a positive direction compared to recent years:

“…we are currently building 24% more homes than we typically have built in April in the last couple of decades. Thus, housing construction is trending upward with housing starts likely to reach 1.6 million for all of 2021 and rise further to 1.7 million in 2022.”

As new data pours in, it further confirms this trend. According to the latest Monthly New Residential Construction report from the U.S. Census Bureau, housing starts increased even more in May, which continues the ongoing upward trend (see graph below) and indicates that ground is being broken on even more new homes.

New Home Construction Housing Starts

Robert Dietz, Chief Economist and Senior Vice President of Economics and Housing Policy for the National Association of Home Builders (NAHB), singles out another encouraging sign:

“It is also worth noting that the number of single-family homes permitted but not started construction continued to increase in May, rising to 142,000 units.”

This insight that there’s also an uptick in single-family homes permitted serves as an additional sign that more new homes lie ahead. It’s important to realize that the construction doesn’t have to start on these homes before you may be able to purchase one. According to the Monthly New Residential Sales report from the U.S. Census Bureau, many new homes are selling before construction even begins (see graph below):

Homes Sold Before Construction Begins

These signs are all good news for housing inventory. And as the recent challenges of rising lumber prices and dwindling lumber supply begin to improve, builders will be able to increase their production even more in the months ahead.

Bottom Line

While the inventory challenges we’re facing today won’t be solved overnight, the increase in new-home construction means your house may have more competition in the market. Let’s connect to talk about finding your dream home and the newly built homes available in our area.

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Categories
Real Estate Market

Builders & Realtors Agree: Real Estate Is Back

Builders & Realtors Agree: Real Estate Is Back

When shelter-in-place orders brought the economy to a screeching halt earlier this year, many believed the residential housing market would follow suit. Countless analysts predicted buyer demand would disappear and home values would depreciate for the first time in almost a decade. That, however, didn’t happen. It appears the opposite is taking place.

After the bottom fell out of the real estate market immediately following the shutdown, it has come roaring back – and seems to still be gaining steam. Here’s a look at two recent reports – one from the National Association of Home Builders (NAHB) and one from the National Association of Realtors (NAR) – showing this growing strength.

Builder Confidence Hits All-Time High

Last week, it was reported that applications for new home purchases with home builders were 39% higher than in July of 2019. That has builder confidence soaring.

Each month, NAHB releases its Housing Market Index, a survey of NAHB members who rate market conditions for the sale of new homes at the present time and over the next six months, as well as prospective buyer traffic for new homes.

This month, they reported that builder confidence in the market for newly-built single-family homes increased to the highest reading in the 35-year history of the series. NAHB Chairman, Chuck Fowke, explained:

“The demand for new single-family homes continues to be strong, as low interest rates and a focus on the importance of housing has stoked buyer traffic to all-time highs…Housing has clearly been a bright spot during the pandemic and the sharp rebound in builder confidence over the summer has led NAHB to upgrade its forecast for single-family starts, which are now projected to show only a slight decline for 2020.”

The number of newly constructed homes being built will be almost at the same level as last year, even though the economic shutdown crushed home building earlier in the year.

Existing Homes Are Also Selling Like Hotcakes

Last Friday, NAR released its Existing Home Sales Report. The report revealed that month-over-month sales increased by 24.7%, setting another record for the category. The Wall Street Journal reported that the increase crushed expert forecasts:

“Economists surveyed by The Wall Street Journal expected a 14.2% monthly increase in sales of previously-owned homes, which make up most of the housing market.”

Home sales increased by 8.7% year-over-year.

Lawrence Yun, Chief Economist for NAR, explained how the resale market is just as hot as the new construction market:

“The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days. With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”

In addition, the Housing Market Recovery Index, which is released monthly by realtor.com, also showed the market is recovering nicely. The latest index reading was 104.8, which means the housing market is doing better than it was in January and February of this year. As a reference, the highest point in the index was a 106.5 in early March, just prior to the health crisis setting in.

Bottom Line

Both the newly constructed and existing home sale markets are posting numbers greater than a year ago. Real estate is back. If you’re thinking of buying or selling, let’s connect so you have the expert counsel you need along the way.

 

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

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THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.
Categories
Real Estate Market

Are New Homes Going to Be Available to Buy This Year?

Are New Homes Going to Be Available to Buy This Year?

In today’s economy, everyone seems to be searching for signs that a recovery is coming soon. Many experts agree that it may actually already be in motion or will be starting by the 3rd quarter of this year. With the housing market positioned to lead the way out of this recession, builder confidence might be a bright spark that gets the recovery fire started. The construction of new homes coming right around the corner is a huge part of that effort, and it may drive your opportunity to make a move this year.

According to the National Association of Home Builders (NAHB): 

“New home sales jumped in May, as housing demand was supported by low interest rates, a renewed household focus on housing, and rising demand in lower-density markets. Census and HUD estimated new home sales in May at a 676,000 seasonally adjusted annual pace, a 17% gain over April.” 

In addition, builder confidence is also rising, opening up opportunity for newly constructed homes in the market. The NAHB also notes:

“In a sign that housing stands poised to lead a post-pandemic economic recovery, builder confidence in the market for newly-built single-family homes jumped 21 points to 58 in June, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Any reading above 50 indicates a positive market.”

As noted above, this upward trend is supported by builders reporting an increase in demand for single-family homes in suburban neighborhoods with lower-density populations, a result of the COVID-19 health crisis.

Moreover, the most recent Monthly New Residential Construction Report from the U.S. Census indicates that authorized building permits for new residential construction increased by 14.4% month-over-month from April to May, and housing starts were also up 4.3% over the same time period. (See graph below):

Building Permits and Housing Starts

Although housing permits and starts are both considerably lower than they were at this time last year, indicating the new construction market is still working on building its way back up, the trends are moving in the right direction when it comes to having an impact on the U.S. economy. They’re also poised to create the much-needed new homes for Americans to purchase in a time when inventory is so scarce.

Dean Mon, Chairman of the NAHB notes:

“As the nation reopens, housing is well-positioned to lead the economy forward…Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.”

The gap between homes to buy and the high demand from purchasers may be narrowed by new construction, and the data shows that these homes are on their way into the housing market.

So, if you’ve debated whether or not to sell your house this year because you’re not sure where to move, a newly-built home – designed to your specific liking – may be your answer.

Bottom Line

With new residential construction right around the corner, you can feel confident about selling your house and having a place to move into. Maybe it’s time to finally design the home you’ve always wanted. Let’s connect today to discuss selling your house while demand from eager buyers is high.

 

Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com

Let’s Connect:
Facebook
Linkedin
Twitter
Instagram

THE INFORMATION PRESENTED IN THIS ARTICLE IS FOR EDUCATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED LEGAL, FINANCIAL, OR AS ANY OTHER TYPE OF ADVICE.