|Freddie Mac November Forecast: Expect Modest Housing Market Growth in 2019|
According to Freddie Mac’s November Forecast, the biggest unknown about the housing market next year is whether current negative trends, such as lack of housing supply, will persist or the market will adjust to the shock of higher mortgage rates and resume modest growth.
Sam Khater, Freddie Mac’s chief economist, says, “Almost all the trends in the U.S. housing market have been negative in recent months as housing market activity continues to adjust to higher mortgage rates.”Khater added, “If new home sales are to resume growth in 2019, builders may have to shift their focus to more modestly priced homes and smaller sized homes to help offset housing affordability concerns. But with cost pressures pinching profitability, this will be a significant challenge.”
Expect GDP growth to average 3 percent in 2018 before slowing to 2.4 percent in 2019 and 1.8 percent in 2020.
Expect total home sales to decrease 1.6 percent to 6.02 million in 2018 before slowly regaining momentum and increasing 1 percent to 6.08 million in 2019 and 2 percent to 6.20 million in 2020.
Expect home prices to increase 5.1 percent in 2018 with the rate of growth moderating to 4.3 percent in 2019 and 2.9 percent in 2020.
Expect single-family mortgage originations to decline 9.9 percent year-over-year to $1.63 trillion in 2018, falling slightly to $1.62 trillion in 2019 and dropping once more to $1.60 trillion in 2020. This is the result of shrinking refinance activity.Adjusted for inflation in 2017 dollars, an estimated $14.2 billion in net home equity was cashed out during the refinance of conventional prime-credit home mortgages in the third quarter of 2018, down from $18.3 billion a year earlier and substantially less than the peak cash-out refinance volume of $102 billion during the second quarter of 2006.
Softwood lumber prices fell 10.3% in October—the largest drop since May 2011—according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics. The producer price index for softwood lumber has fallen 21.2% since setting the cycle and all-time high in June (see below). Even after the decrease, however, the index currently sits just 4.7% lower than the prior-cycle high set in 2004.
The final demand price index for OSB has followed a path similar to that of softwood lumber over the last three months.
Since climbing 38.1% in the first seven months of 2018, OSB prices have fallen 16.6%. The price index for OSB is now 15.2% and 15.7% higher than it was to start 2018 and 2017, respectively.
Residential construction goods input prices increased 0.4% in October and have now risen 7.5% over the last twelve months. The index decreased only twice during that period, by 0.1% and 0.5% in December 2017 and August 2018, respectively. Year-to-date residential construction goods input price increases in 2018 (+5.6) continue to outpace the increase during the same period in 2017 (+2.9%).
Gypsum prices fell 1.6% in October, continuing what has been a relatively volatile year. The price index for gypsum products is 6.3% higher than it was to start 2018, but the year-to-date price increase masks large fluctuations within the year. Consecutive-month increases of 5.4% and 6.1% have been partially offset by two-month decreases of 3.3% and 1.8%.
The last several large increases in the gypsum price index has been foreseeable, as large wallboard producers sent out price increase announcements in the March-May and October-December periods. These announcements informed customers that wallboard prices would increase effective as of January or June/July, depending on the announcement date. Examples of such announcements may be found here and here.
Ready-mix concrete prices declined 0.5% in October. After a large price increase (relative to historical data) in early 2018, prices of ready-mix concrete dropped and have remained essentially unchanged since July.
Triangles, and the sloping ceilings they create, don’t make a natural fit for human habitation. But for his idyllic wooden house in rural Sweden,architect Leo Qvarsebo embraced the triangle, creating for himself a sloping isosceles of a summer home.
Positioned between a patch of woodland and a green pastures, the Qvarsebo Summerhouse was designed like a triangle to give stunning, unobstructed views of an idyllic vista in Dalarna. Large windows frame the landscape on three separate floors, while the front of the building opens up to a gorgeous terrace, including a swing set for Qvarsebo’s children.
Qvarsebo says that despite the fact it isn’t very close to any trees, he thinks of it as a treehouse for adults. As such, there’s a rope connected to the peak of the roof, so he and his kids can scale the facade. Even inside, though, climbing the home’s central staircase is meant to feel like a treehouse. “The climb to the top is via several levels and offers both views and privacy,” he says. “From each level of the house you can see up to the next, creating a curiosity to continue to climb and once you’re up, the view is breathtaking.”
Contracts to buy previously owned U.S. houses unexpectedly fell in June after five straight months of increase, suggesting some cooling in home resales activity after recent hefty gains.
The decline in contracts, which came on the heels of reports showing the pace of home price appreciation stalling in major cities and new home sales dropping, did little to change perceptions that the housing market recovery was on track given a tightening labor market.
“The June decline is a hiccup. It is important to bear in mind that there is still plenty of fundamental support for the housing market,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, declined 1.8 percent to 110.3.
Still, the index was the third highest reading for this year and contracts were up 8.2 percent from a year ago.
Pending home contracts become sales after a month or two, and last month’s drop pointed to a pause in sales of existing homes after they reached a near 8-1/2-year high in June.
Economists had forecast pending home sales rising 1.0 percent last month.
U.S. financial markets were little moved by the data as investors awaited the outcome of the Federal Reserve’s two-day policy meeting. The housing index .HGX was up 0.97 percent.
The U.S. central bank’s statement will be scrutinized for clues on the timing of the first rate hike, which is expected later this year. The Fed has kept its short-term interest rate near zero since December 2008.
After a record breaking number of home sales in the Hamptons in 2014, things are beginning to cool down in the luxury real estate destination.
Both sales and median prices of Hamptons real estate are down in 2015 from where they were last year, according to a report by Douglas Elliman Real Estate.
The median sales price for a home in the Hamptons declined 6.5 percent to $849,000 compared to 2014, according to the report. The number of homes that were sold fell 15.7 percent to 590 this year, down from 700 sales at this time last year. However, average home price rose 2.5 percent year over year.
The conflicting data are a result of a reaction in the market from last year’s sales, said Jonathan Miller, president of Miller Samuel Real Estate Appraisers, who authored the report.
Last year saw an explosion of pent-up demand as people began to consider real estate again for the first time since the housing crisis, Miller said. That demand resulted in 700 sales, a record number.
“That demand has mostly been absorbed, so what we have now is the prices showing mixed trends, but sales are down,” he said. “There isn’t the same sense of urgency by buyers that there was a year ago, but there is still above-average activity occurring. It’s just not at the breakneck pace it was last year.”
The current market in the Hamptons is just returning to normal, the CEO of Douglas Elliman, Dottie Herman, said. While sales aren’t record breaking, they are still healthy.
She also noted that in a small market like the Hamptons, big outliers can move data.
For the fabulously wealthy, a Hamptons property is soon to hit the market at $95 million, according to real estate agents at Sotheby’s. The estate, known as Burnt Point, is an 18,000-square-foot shingle traditional built on 25 acres with water on three sides. The home is being sold by the Stewart J. Rahr Foundation, and the proceeds will continue to fund the foundation’s philanthropic efforts.
A big chunk of Rembrandt’s work, including several famous self-portraits and arguably his most famous painting ever, The Night Watch (1642), was created over two decades while he lived in a central Amsterdam house. In celebration of the renowned master’s birthday, more than four centuries ago today, here’s a look at his former home.
The home, which is now the Rembrandt House Museum, seen here, had been drastically remodeled in 1627 and 1628. During the remodel, the home gained a story, a new facade and a triangular corniced pediment — a feature that was the height of modernity at the time, according to the Rembrandt House Museum website. The museum says the remodel was probably spearheaded by Jacob van Campen, who later was the architect for Amsterdam’s town hall, now the Royal Palace, on Dam Square.
During this time, he had a habit of buying old-master paintings and drawings, busts of Roman emperors and suits of Japanese armor, and built up a large collection of antiquities.
In the self-portrait shown here, which Rembrandt painted in 1640 shortly after moving into the house, he looks rather calm and confident, with perhaps just a hint of worry on his brow.
Yesterday on Housecall, we discussed ways to increase your home value with indoor décor. Today, we’re focusing on what you can do outside the home to give it an added monetary boost.
Curb appeal is everything when it comes to selling your home, and that means your home’s exterior needs to be in optimal condition. In fact, 71 percent of prospective home buyers say that a home’s curb appeal is an important factor in their buying decision. This infographic fromLawnStarter shows seven exterior home improvements that can increase resale value and help sell your home even faster:
Replace Your Front Door
Believe it or not, a front door says a lot about you and your home. A quality front door can be a huge asset for your home’s value, and how secure your home feels upon entrance. Kelly Fallis of Remote Stylist says, “It’s the first thing a buyer walks through. Repaint or replace; their first impression rests on it.” According to House Logic, a standard 20-gauge steel door can cost around $1,230, but that investment can more than pay for itself with the amount of value it adds to your home. A quality front door replacement can bring you a return of around 102 percent, which makes it a great bang for your buck.
Over 92 percent of prospective home buyers use the Internet at some point during their search process, meaning a lot of eyes are going to be looking for pictures of your home. You want to be able to showcase your property in the best light possible to drive interested parties in for a closer look. According to Bankrate, a quality landscaping job has the potential to net you a whopping 252 percent return in increased home value. John Harris, a landscape economist, has stated that updated landscaping can increase a home’s value by 28 percent and have it sold 10-15 percent quicker.
Most prospective homeowners tend to look at what they need to update or work on in the homes that they look at. Repainting your home can cause less stress on the buyer since they know that the job is fresh and adds to the look of the home. That being said, don’t go overboard with color choices. Choose warm and inviting colors, such as taupe, tan or white. “Individuals too often minimize the impact of a first impression,” says James Alisch, managing director of WOW 1 DAY PAINTING. “The exterior paint job of a home greatly impacts how potential buyers feel about a place.” You want to make sure that potential buyers can envision themselves inside your home, and having a neutral exterior color is appealing to a larger pool of buyers. If you do feel the need to add some brighter colors, make sure that they aren’t overpowering and can work well with the neutral base. It’s best to consult your local home improvement store to discuss your options and budget.
In the monthly REALTORS® Confidence Index Survey, NAR asks REALTORS® about the characteristics of their last sale for the month. For reported sales for April 2015, distressed sales accounted for 10 percent of sales (10 percent in March 2015; 15 percent in April 2014). About 7 percent of reported sales were foreclosed properties, and about 3 percent were short sales.
With rising home values and a declining foreclosure inventory (except for states with judicial foreclosures such as NY, NJ, CT), sales of foreclosed properties have declined as well. The decline in foreclosed properties on the market may help to explain to some degree why investment sales have generally been on the decline.
Foreclosed property sold at an average 20 percent discount, while short sales sold at an average 14 percent discount. For the past 12 months, distressed properties in “above average” condition were discounted by an average of 9-11 percent, while properties in “below average” condition were discounted at an average of 15-20 percent. Having fewer foreclosures creates further pressure for prices to move up in the coming months.
Some Great Ways to Take Advantage of an “Average to Good” or “Excellent” Credit Score
For those who achieve an “average to good” FICO score (660 and above) or an “excellent” score (740 and above), there are many ways to take advantage of this achievement by opening new doors for opportunity and savings. As a real estate/financing professional, you can share these tips with your client base to bring value added and allow your clients to do further business with you.
Here are some things those with great credit can take advantage of (but must be aware of the potential downsides):
● Transferring Credit Card Balances
Many credit cards can charge an exorbitant interest rate, and these rates coupled with debt can lead to large payments and wasted money. In fact, the average credit card debt in the US is currently over $6,500. Fortunately, those with great credit are eligible for a method to pay debt off rather quickly and easily. People with great credit should be eligible for a 0 percent interest rate on balance transfers, which essentially allows one to transfer credit card debt from a high interest card to a no interest account for a certain time period.
It’s important to note a few things when considering this option:
– Some of these cards will slap on a 3% fee for transferring balances, and you should make sure to find a card that doesn’t charge this fee.
– Opening new credit reduces your average age of credit which will drop your credit scores. Do not open new cards if you plan on applying for a mortgage or loan within 2 years since scores may drop substantially after opening new credit. Make sure the cards you open are done strategically and not often.
● Credit Card Upgrades
High FICO scores will also make consumers eligible for the best credit card offerings. Many of the cards offered to those above a 660 score have better benefits, rewards, and perks unavailable to others. In addition, these cards often offer sign-on bonuses. Clearly if your scores are above a 740 the perks are even better. However, consumers have to make sure that they follow our tips when opening a new card in order to maintain their score (see the tips here) and should contact us with any questions.
● Home Refinance
Those with great credit can also take advantage of historically low home interest rates. With a higher FICO score, many can lock in a much better rate for their mortgage. Even a small improvement in interest rates can lead to savings in the hundreds of thousands over the life of a mortgage.
● Negotiating better interest rates or transfer offers with current credit cards
If you have existing cards and have excellent credit scores you can ask the creditor for lower interest rates or transfer offers on your existing cards. This is great if you don’t want to reduce your scores by opening new credit.
● Requesting limit increases on current cards
The higher your credit limits the more leeway you have to charge without reducing your credit scores. Since balance-to-limit ratios on revolving credit (credit cards) must be under 10% for the best score increases, it is great to have high limits. Calling your creditor and asking for a limit increase can help your scores. The creditor will pull your credit reports and scores for approval so the scores can drop a little from the inquiry. If you have had many third party inquiries during the year it could drop scores significantly and it might be best to wait a year from the latest third party review.
In addition to studies customized to a particular area, NAHB has traditionally produced a “typical local” report using national average inputs. This report—showing the jobs, income and taxes generated by residential construction in a typical local area—is available free to everyone on NAHB’s web site.
In April 2015, NAHB updated the typical local report. A quick summary of the new numbers is as follows:
The updated estimates of the one-year impacts (including income earned during construction and the ripple effect that occurs when some of the income is spent) of building 100 single-family homes are
- $28.7 million in local income,
- $3.6 million in taxes and other revenue for local governments, and
- 394 local jobs.
And the annual, ongoing impacts (resulting from the home becoming occupied and the occupants participating in the local economy) are
- $4.1 million in local income,
- $1.0 million in taxes and other revenue for local governments, and
- 69 local jobs.