U.S. Housing Market Continues To Improve
The U.S. housing market continued to improve in October, reaching a score of 86.4 on Freddie Mac’s Multi-Indicator Market Index (MiMi).
That’s up 0.42% from September, up 1.86% from July and up 5.88% from October 2015.
The index, which was introduced in 2015, measures the overall strength of the housing market based on four indicators: purchase applications, payment-to-income ratios, percent of borrowers current on their mortgages and employment.
The MiMi has been steadily improving through 2016. As of the end of September, the index value stood at 86. As of the end of August, it was 85.7.
As of the end of October, 80 of the top 100 housing markets across the country showed steady improvement, with one additional state, Georgia, entering into the normal benchmark range of activity.
Since its all-time low in October 2010, the national MiMi has rebounded 46% but remains significantly off its high score of 121.7.
As of the end of October, 41 of the 50 states, plus the District of Columbia, had MiMi values within range of their benchmark averages, with Colorado (98.6), Utah (101.5), Hawaii (98), Idaho (97.2) and Oregon (96.8) ranking in the top five with scores closest to their historical benchmark index level of 100.
Seventy-seven of the 100 metro areas have MiMi values within range of their benchmark averages, with Dallas (100.2); Nashville, Tenn. (100.5); Honolulu (100.8); Ogden, Utah (100.8); and Los Angeles (99.1) ranking in the top five with scores closest to their historical benchmark index level of 100.
The most improving states month over month were Nevada (+1.96%), Connecticut (+1.45%), Arizona (+1.40%), South Carolina (+1.33%) and Washington (+1.31%).
On a year-over-year basis, the most improving states were Nevada (+12.87%), Massachusetts (+12.77%), Florida (+11.65%), Mississippi (+11.53%) and Arizona (+10.28%).
The most improving metro areas were Springfield, Mass. (+1.96%); Tucson, Ariz. (+1.87%); Las Vegas (+1.77%); Ogden, Utah (+1.51%); and Worcester, Mass. (+1.48%).
On a year-over-year basis, the most improving metro areas were Orlando, Fla. (+17.45%); Worcester, Mass. (+16.02%); Chattanooga, Tenn. (+14.78%); Dallas (+14.51%); and Tampa, Fla. (+14.45%).
In October, 43 of the 50 states and 82 of the top 100 metros were showing an improving three-month trend. The same time in 2015, 30 states and 69 of the top 100 metro areas were showing an improving three-month trend.
Len Kiefer, deputy chief economist for Freddie Mac, points out that the report for October “does not yet capture the recent jump in mortgage rates since the election, which will drive down home buyer affordability and likely dampen demand for home sales [in 2017] in some markets.”
“While we see strong house price growth in markets like Dallas, Houston, Orlando, Phoenix and others, most are still well below their pre-2008 peak and still have significant room for improvement,” Kiefer says in a release.
Still, “The purchase applications indicator is up nearly 20 percent from last year and is reflected in the recent better-than-expected existing and new home sales purchase data,” he says.
Existing-Home Sales Increased For Third Straight Month
Was it the final push before the great slowdown?
Despite rising interest rates, existing-home sales in November increased for a third straight month to reach the highest annual rate since February 2007, according to the National Association of Realtors (NAR).
A big surge in the Northeast and a smaller gain in the South pushed existing-home sales to a seasonally adjusted annual rate of 5.61 million, up 0.7% compared with a downwardly revised 5.57 million in October and up 15.4% compared with a rate of 4.86 million in November 2015.
More specifically, existing-home sales in the Northeast increased 8.0% month over month and 15.7% year over year.
Existing-home sales in the South increased 1.4% month over month and increased 9.2% year over year.
In the Midwest, existing-home sales decreased 2.2% month over month but, nonetheless, increased 18.8% compared with a year earlier.
In the West, sales decreased 1.6% month over month but, nonetheless, increased 19.0% year over year.
The median existing-home price for all housing types in November was $234,900, up 6.8% from $220,000 in November 2015.
As of the end of November, there were about 1.85 million existing homes available for sale – about a four-month supply at the current sales pace. That’s a decrease of 8.0% compared with October and a decrease of 9.3% compared with November 2015.
“Existing housing supply at the beginning of  was inadequate and is now even worse heading into 2017,” says Lawrence Yun, chief economist for NAR, in a statement. “Rental units are also seeing this shortage. As a result, both home prices and rents continue to far outstrip incomes in much of the country.”
Meanwhile, mortgage rates have been increasing steadily since the presidential election on Nov. 8. Should rates continue to rise through 2017, it is expected to put a damper on home sales, especially for first-time home buyers.
About 32% of sales in November were to first-time home buyers, according to NAR’s report. That’s down from 33% in October but up from 30% in November 2015.
“First-time buyers in higher-priced cities will be most affected by rising prices and mortgage rates [in 2017] and will likely have to stretch their budget or make compromises on home size, price or location,” says Yun.
About 21% of transactions in November were all-cash sales – down from 22% in October and down from 27% a year ago.
Individual investors, who typically account for the lion’s share of all-cash sales, purchased 12% of homes in November – down from 13% in October and down 16% compared with a year earlier.
Fifty-eight percent of investors paid in cash in November, which matches the lowest share since August 2009.
Distressed sales, including foreclosures and short sales, accounted for about 6% of all sales in November – up from 5% in October but down from 9% a year ago.
Pending Home Sales Dipped In November
Pending home sales dipped 2.5% in November to a score of 107.3 on the National Association of Realtors’ (NAR) Pending Home Sales Index.
That’s down from a score of 110.0 in October and the lowest score since January (105.4).
What’s more, it’s down 0.4% compared with a score of 107.7 in November 2015.
The culprit? Well, November is traditionally not a strong month for contract signings, but Lawrence Yun, chief economist for NAR, says ongoing supply shortages and the recent surge in mortgage rates had their effect.
“The budget of many prospective buyers [in November] was dealt an abrupt hit by the quick ascension of rates immediately after the election,” Yun says in a release. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”
Looking on the positive side, Yun says stronger wage growth in 2017 could help offset the impact of rising rates on home affordability.
“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise,” he says. “Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from. Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment.”
NAR is currently forecasting that existing-home sales will close out 2016 at a pace of around 5.42 million.
Not only does this surpass the rate of 5.25 million seen in 2015, but it is also the highest rate since 2006 (6.48 million).
For 2017, NAR is forecasting that existing-home sales will increase about 2% to an annual pace of around 5.52 million.
The median existing-home price is expected to increase by about 5% in 2016 and by about 4% in 2017.
“Much more robust new home construction is needed to relieve inventory shortages and lessen the affordability pressures present throughout the country,” adds Yun.
Housing Starts Took Steep Dive In November
Housing starts in November were at a seasonally adjusted annual rate of about 1.090 million, a decrease of 18.7% compared with an estimated 1.34 million in October and a decrease of 6.9% compared with about 1.171 million in November 2015, according to figures released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
Most of the drop was in starts of multifamily homes, which saw a sharp increase in October compared with September.
Starts of single-family homes were at a rate of about 828,000, a decrease of 4.1% compared with about 863,000 in October. Starts of multifamily homes (five units or more per building) were at a rate of about 259,000, a decrease of 43.9% compared with 462,000 in October.
Building permits were at a seasonally adjusted annual rate of 1.201 million, a decrease of 4.7% compared with the revised rate of 1.260 million in October and a decrease of 6.6% compared with 1.286 million in November 2015.
Permits for single-family homes were at a rate of 778,000, an increase of 0.5% compared with 774,000 in October. Permits for multifamily homes were at a rate of 384,000, a drop of 15.8% compared with about 456,000 in October.
Housing completions, meanwhile, were up 15.4%, month over month, and were up 25.0% compared with November 2015.
New Home Sales Jumped 5.2% In November
New home sales were at a seasonally adjusted annual rate of about 592,000 in November – an increase of 5.2% compared with about 563,000 in October and an increase of 16.5% compared with about 508,000 in November 2015, according to estimates released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
The median sales price of new single-family homes sold in November was $305,400; the average sales price was $359,900.
As of the end of November, there were about 250,000 new homes available for sale in the U.S. – about a 5.1-month supply at the current sales rate.
Most of the increase was due to a massive, 43.8% increase in the Midwest region. The West didn’t fare bad, either, with a 7.7% increase.
Meanwhile, new home sales were flat, month over month, in the Northeast and were down 3.1% in the South.
Year over year, new home sales were up in all four regions.
Corresponding with the increase in new home sales, builder confidence recently jumped seven points to reach a score of 70 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index. It was the highest reading since July 2005.
“This notable rise in builder sentiment is largely attributable to a post-election bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability,” says Ed Brady, chairman of NAHB, in a statement. “This is particularly important, given that a recent NAHB study shows that regulatory costs for home building have increased 29 percent in the past five years.”
“Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing,” adds Robert Dietz, chief economist for NAHB. “The rise in the [index score] is consistent with recent gains for the stock market and consumer confidence. At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labor.”
With regard to the spike in new home sales, Brady says that “builders expect more of the same [in 2017].”
“A key to continued growth in 2017 will be to ensure that prospective, qualified, first-time home buyers have access to affordable home loans,” he says.
Dietz adds that “a growing economy and solid job growth” will help fuel new home sales in 2017.
“Moreover, builder confidence has risen on anticipation of reductions in regulatory costs, which is good news for home buyers and renters,” he adds. “However, the pace of construction will continue to be restricted by shortages of lots and labor in some markets.”
CoreLogic: U.S. Home Prices Increased 1.1% In October
U.S. home prices increased 1.1% in October compared with September and increased 6.7% compared with October 2015, according to CoreLogic’s home price index report, which includes distressed sales.
As of December, CoreLogic was forecasting that home prices would increase 0.2% from October to November and 4.6% from October 2016 to October 2017.
“While national home prices increased 6.7 percent, only nine states had home price growth at the same rate of growth or higher than the national average because the largest states, such as Texas, Florida and California, are experiencing high rates of home price appreciation,” says Frank Nothaft, chief economist for CoreLogic, in a statement.
“Home prices are continuing to soar across much of the U.S. – led by major metro areas such as Boston, Los Angeles, Miami and Denver. Prices are being fueled by a potent cocktail of high demand, low inventories and historically low interest rates,” adds Anand Nallathambi, president and CEO of CoreLogic. “Looking forward to , nationwide home prices are expected to climb another five percent in many parts of the country to levels approaching the pre-recession peak.”