The first quarter of 2017 saw the strongest quarterly home sales pace in a decade, according to the latest quarterly report from the National Association of Realtors.
This increase in home sales put downward pressure on housing inventory levels and caused home prices growth to accelerate its rate of increase in the first quarter, the report states. In fact, metro home prices now accelerated for three consecutive quarters.
The national median home price increased to $232,100, up 6.9% from the first quarter of 2016. This represents the fastest rate of growth since the second quarter of 2015.
“Prospective buyers poured into the market to start the year, and while their increased presence led to a boost in sales, new listings failed to keep up and hovered around record lows all quarter,” NAR Chief Economist Lawrence Yun said. “Those able to successfully buy most likely had to outbid others, especially for those in the starter-home market, which in turn quickened price growth to the fastest quarterly pace in almost two years.”
Single family home prices increased in 85% of markets as 152 of 178 metropolitan statistical areas showed sales prices gains in the first quarter, the report states. However, in 14 MSAs, home prices decreased year-over-year.
“Several metro areas with the healthiest job gains in recent years continue to see a large upswing in buyer demand but lack the commensurate ramp up in new home construction,” Yun said. “This is why many of these areas, in particular several parts of the South and West, are seeing unhealthy price appreciation that far exceeds incomes.”
Total existing home sales, including single-family homes and condos, increased 1.4% in the first quarter to a seasonally adjusted rate of 5.62 million, the highest rate since the first quarter of 2007. This is up from 5.55 million in the fourth quarter of 2016 and from 5.36 million in the first quarter of 2016.
Housing inventory, however, decreased 6.6% from 1.96 million homes for sale in the first quarter last year to 1.83 million this year. This average supply rested at 3.7 months in the first quarter, down from 4.2 months last year.
And while median income is increasing,, hitting a national average of $71,201, higher mortgage rates and home prices weakened affordability.
“Last quarter’s robust pace of sales was especially impressive considering the affordability sting buyers experienced from higher prices and mortgage rates,” Yun said. “High demand is poised to continue heading into the summer as long as job gains continue. However, many metro areas need to see a significant rise in new and existing inventory to meet this demand and cool down price growth.”
Multiple closely watched mortgage rates moved higher today. The average rates on 30-year fixed and 15-year fixed mortgages both rose. The average rate on 5/1 adjustable-rate mortgages, meanwhile, also increased.
Rates for mortgages are constantly changing, but they continue to represent a bargain compared to rates before the Great Recession. If you’re in the market for a mortgage, it may make sense to lock if you see a rate you like. Just make sure you shop around first.
30-year fixed mortgages
The average 30-year fixed-mortgage rate is 3.89 percent, up 4 basis points over the last week. A month ago, the average rate on a 30-year fixed mortgage was higher, at 3.99 percent.
At the current average rate, you’ll pay principal and interest of $471.10 for every $100,000 you borrow. That’s an increase of $2.29 over what you would have paid last week.
15-year fixed mortgages
The average 15-year fixed-mortgage rate is 3.10 percent, up 5 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $695 per $100,000 borrowed. The bigger payment may be a little harder to find room for in your monthly budget than a 30-year mortgage payment would, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more quickly.
The average rate on a 5/1 ARM is 3.16 percent, up 5 basis points over the last 7 days.
These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
Monthly payments on a 5/1 ARM at 3.16 percent would cost about $430 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
With the end of 2016 approaching, NAHB’s Eye on Housing is reviewing the posts that attracted the most readers over the last year. In July, Na Zhao examined typical construction durations for various types of single-family homes and regions.
The 2015 Survey of Construction (SOC) from the Census Bureau shows that the average completion time of a single-family house is around 7 months, which usually includes almost a month from authorization to start and another 6 months to finish the construction. The timeline from authorization to completion, however, is not consistent across the nation, depending on the housing category, the geographic location, and metropolitan status.
Among all the single-family houses completed in 2015, houses built for sale took the shortest time, 6 months to completion after obtaining building permits, while houses built by owners required the longest time, almost a year. Homes built for rent took 9 months from permit to completion, and those built by hired contractors normally needed around 8 months. A large proportion of single-family homes built for sale and on owners’ land built by contractors began construction within the same month after obtaining building authorizations. However, homes built for rent and built by owners had a one-month lag between permits and construction start in 2015.
The average time from authorization to completion also varies across the nation. New England division had the longest time of 10 months, followed by the Middle Atlantic of 9.6 months, East South Central, East North Central, and Pacific of 8 months in 2014. These four divisions all had above average time from permit to completion. The shortest period, 6 months, happened in the Mountain division, which also had the shortest waiting period from permit to construction start.
The metropolitan status indicates how long it takes to build a single-family home. Houses in metropolitan areas, on average, took nearly 7.5 months to completion, which was 2 months shorter than those in non-metropolitan areas. This pattern was quite consistent across the nation, except for the Middle Atlantic division where the average month to completion in metropolitan areas was longer than in non-metropolitan areas in 2015.
The SOC also collects sale information for houses built for sale, including the sale date when buyers sign the sale contracts or make a deposit. In 2015, the share of single-family sold while under construction was 66%, with 32% even sold before construction start and 12% sold during the same month of completion. The percent of single-family houses completed in 2015 stayed unsold at the first quarter of 2016 was only 6%.
Home prices continued their increasing trends continued to increase in July, but at a slower rate than before, according to the most recent report by S&P CoreLogic Case-Shiller Indices released by S&P Dow Jones Indices and CoreLogic.
“The S&P CoreLogic Case-Shiller National Index is within 0.6% of the record high set in July 2006,” said David Blitzer, S&P Dow Jones Indices managing director and chairman of the Index Committee. “Seven of the 20 cities have already set new record highs.”
“The 10-year, 20-year, and National indices have been rising at about 5% per year over the last 24 months,” Blitzer said. “Eight of the cities are seeing prices up 6% or more in the last year. Given that the overall inflation is a bit below 2%, the pace is probably not sustainable over the long term.”
Annually, the National Home Price index showed a gain of 5.1% in July. This is up slightly from June’s 5% annual gain. The 10-City Composite increased by 4.2% annually and the 20-City Composite increased by 5%. Each of these is down from June’s 4.3% and 5.1% for the respective composites.
Click to Enlarge
(Source: S&P Dow Jones Indices, CoreLogic)
“Both the housing sector and the economy continue to expand with home prices continuing to rise at about a 5% annual rate,” Blitzer said. “The statement issued last week by the Fed after its policy meeting confirms the central bank’s view that the economy will see further gains.”
While the Federal Open Market Committee did not raise rates at their last meeting, Janet Yellen, Federal Reserve System chair of the Board of Governors, explained, “Our decision does not reflect a lack of confidence in the economy.”
She explained the Fed preferred to take a more cautious approach to see if current growth would continue.
“Most analysts now expect the Fed to raise interest rates in December,” Blitzer said. “After such Fed action, mortgage rates would still be at historically low levels and would not be a major negative for house prices.”
Out of the 20 cities, Portland, Seattle and Denver reported the highest annual gains over the last six months. In July, Portland increased 12.4%, Seattle increased 11.2% and Denver increased 9.4%.
After seasonal price adjustment, the National Index increased by 0.4% monthly but the 10-City Composite decreased 0.1%. The 20-City Composite remained unchanged.
The Pending Home Sales Index declined 2.5% in January, but has increased year-over-year for 17 consecutive months. The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts reported by the National Association of Realtors (NAR), decreased 2.5% in January to 106.0 from an upwardly revised 108.7 December, and was 1.4% above the same month a year ago.
The PHSI increased slightly in the South by 0.3%, but fell in the remaining three regions, ranging from a 3.2% decrease in the Northeast to a 4.9% decrease in the Midwest. Year-over-year, three regions increased, ranging from 10.9% in the Northeast to 0.4% in the West. The South decreased 1.3% from the same month a year ago.
Existing sales increased 11.0% in 2015, and improving economic conditions and rising employment suggest a continuing recovery in existing sales. However, both housing starts and new home sales stumbled in January. Also, the long-term weakness among first-time buyers will continue to dampen all sales in 2016.
MCLEAN, VA–(Marketwired – Nov 18, 2015) – Freddie Mac
- Gen Xers more likely than Millennials or Boomers to buy a home
- Millennials more likely to save for short- and long-term goals
- Renters offset rent hikes by spending less on essentials and are considering getting a roommate
Renters indicate they still feel challenged with their finances and 66 percent are carrying debt each month, according to a recent Freddie Mac (OTCQB: FMCC) survey. Yet, the majority of renters (56 percent) are optimistic about managing their debt. Renters are also saving money for numerous priorities and a down payment on a home is not at the top of their list. In addition, Gen Xers are more likely than Millennials or Boomers to buy a home in the next three years.
For the Freddie Mac quarterly online survey, conducted in October on its behalf by Harris Poll, renters currently saving for all listed goals place a higher priority on saving money for an emergency/unexpected expense (59 percent), retirement (51 percent) and children’s education (50 percent) than a down payment on a home (39 percent) or a vacation (26 percent). They also indicate that they are behind in saving for those things.
Looking across generations, Millennial renters are more likely to be saving for short- and long-term goals than Boomer and Gen X renters. For example, Millennial renters are more likely to be saving for a major purchase (92 percent) and a vacation (94 percent), when compared to Boomers (82 percent and 81 percent respectively) and Gen Xers (77 percent and 75 percent respectively).
“We know rents are rising faster than incomes and now we have data to show that many renters don’t have enough to pay all their debts each month, which is forcing them to make tradeoffs, such as cutting spending on other items,” said David Brickman, Freddie Mac executive vice president of Multifamily. “Despite this, some renters feel optimistic about managing their debt.”
Brickman added, “Growth in the renter segment will most likely occur through multifamily properties as more than half of those currently renting single-family properties are planning to become homeowners in the near future. The data shows single-family renters are increasingly more dissatisfied than multifamily renters.”
Ways to Offset a Rent Hike
The many ways in which renters are making adjustments due to rent increases include:
- 51 percent are spending less on essentials, the same as last quarter.
- 52 percent put off plans to purchase a home, compared to 44 percent in June.
- 35 percent are contemplating getting a roommate, up from 29 percent in June.
- 26 percent say they need to move into a smaller rental property, compared to 20 percent in June.
The Future Homebuyer
When broken out by generations, 58 percent of Gen X renters expect to purchase a home in the next three years, compared to 42 percent of Millennials and 33 percent of Baby Boomers.
Overall, almost half (48 percent) of renters in single-family properties are dissatisfied with renting, and are more likely to purchase a home in the next three years than multifamily renters (57 percent vs. 28 percent).
Satisfaction with Rental Experience
The satisfaction rates from the March, October and June surveys this year are virtually unchanged, with a third of renters being very satisfied with their rental experience and almost a third (30 percent) indicating they are moderately satisfied. In the October survey,
- 70 percent of satisfied renters are likely to continue renting for the next three years, up slightly from 68 percent in the previous quarter.
- 30 percent of satisfied renters indicate they are more likely to buy a home, compared to 32 percent in the previous quarter.
In addition, the top favorable factors for renting remain about the same and are freedom from home maintenance (79 percent), more flexibility over where you live (74 percent) and protection against declines in home prices (68 percent).
Additional details about the survey, including charts, are on the Freddie Mac website.
Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates reversing course and nudging higher for the first time in four weeks.
- 30-year fixed-rate mortgage (FRM) averaged 3.94 percent with an average 0.6 point for the week ending August 13, 2015, up from last week when it averaged 3.91 percent. A year ago at this time, the 30-year FRM averaged 4.12 percent.
- 15-year FRM this week averaged 3.17 percent with an average 0.6 point, up from last week when it averaged 3.13 percent. A year ago at this time, the 15-year FRM averaged 3.24 percent.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.93 percent this week with an average 0.5 point, down from last week when it averaged 2.95 percent. A year ago, the 5-year ARM averaged 2.97 percent.
- 1-year Treasury-indexed ARM averaged 2.62 percent this week with an average 0.3 point, up from last week when it averaged 2.54 percent. At this time last year, the 1-year ARM averaged 2.36 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for theRegional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.
Attributed to Sean Becketti, chief economist, Freddie Mac.
“The jobs report for July showed that the economy added 215,000 jobs, in line with expectations. Wage growth remains modest at 2.1 percent compared to the same time last year, and another solid if not stellar employment report leaves a potential Fed rate hike on the table for September. However, this year’s theme of overseas economic turbulence continues with the focus shifting east to China. Over the past few days the Chinese Yuan has fallen sharply. In the midst of these mixed data mortgage rates inched up, increasing 3 basis points to 3.94 percent. Headed into the fall, we’ll likely see continued interest rate tension, with dollar appreciation weighing against possible Fed rate hikes leaving the rate outlook clouded.”
Strong job gains in April and May were revised downward by 60 thousand and the unemployment rate fell 0.2 percentage points based on a reversal of the labor market expansion in May. Overall, the employment situation in June was decent, but the recovery from the weakness in March was less vibrant than originally estimated.
The Bureau of Labor Statistics (BLS) reported that payroll employment expanded by 223 thousand in June. This brings average monthly payroll gains to 208 thousand in the first half of 2015 compared to 239 thousand in the first half of 2014 and 260 thousand for all of 2014. The unemployment rate dropped to 5.3% in June from 5.5% in May despite a decline in employed persons in the household survey and based on a reduction in the labor force of 432 thousand. The labor force expanded by 397 thousand in May.
Average fixed mortgage rates followed 10-year Treasury yields higher and rose for the third consecutive week, according to Freddie Mac.
At 3.85%, the average 30-year fixed-rate mortgage is just below the high for 2015.
“Mortgage rates rose for the third consecutive week as 10-year Treasury yields continued to climb,” said Len Kiefer, deputy chief economist for Freddie Mac.
“The labor market continues to improve with U.S. economy adding 223,000 jobs in April, a solid rebound from merely 85,000 job gains in March. Also, the unemployment rate dipped to 5.4% in April as the participation rate ticked up to 62.8% and jobless claims were far less than expected.”
The 30-year fixed-rate mortgage averaged 3.85% with an average 0.6 point for the week ending May 14, 2015, up from last week when it averaged 3.80%. A year ago at this time, the 30-year FRM averaged 4.20%.
The 15-year FRM this week averaged 3.07% with an average 0.6 point, up from last week when it averaged 3.02%. A year ago at this time, the 15-year FRM averaged 3.29%.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.89% this week with an average 0.5 point, down from last week when it averaged 2.90%. A year ago, the 5-year ARM averaged 3.01%.
The 1-year Treasury-indexed ARM averaged 2.48% this week with an average 0.4 point, up from last week when it averaged 2.46%. At this time last year, the 1-year ARM averaged 2.43%.