Housing Shortage in Major Markets

Single-family home construction is currently lacking in 80 percent of metro areas despite steady job creation. The low activity is creating a shortage that is curtailing affordability according to new research from the National Association of Realtors.
The NAR’s study reviewed new home construction to determine the markets with the greatest shortage of single-family housing starts. The findings reveal that single-family construction is underperforming in most of the U.S.
Lawrence Yun, NAR chief economist, says, “Inadequate single-family home construction since the Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home – especially young adults,”
NAR analyzed employment growth in relation to single-family housing starts in the three-year period from 2012 through 2015. Historically, the average ratio for the annual change in total jobs to permits is 1.6 for single-family homes. The research found that 80 percent of measured markets had a ratio above 1.6, which indicates inadequate new construction in most of the country.
The top 10 metro areas with the biggest need for more single-family housing starts are New York, Dallas, San Francisco, Miami, Chicago, Atlanta, Seattle, San Jose, Denver, and San Diego. Their healthy job markets continue to attract an influx of potential homeowners, only fueling the need for more housing.
Single-family housing starts are seen as adequate to local job growth in Pensacola, Florida; Huntsville, Alabama; Columbia, South Carolina; and Virginia Beach, Virginia.

Commercial Real Estate Expansion Foreseen

Buoyed by a steadily improving labor market and strong demand for multifamily housing, commercial real estate activity should remain on an upward trajectory, with a growing share of it is expected to be in smaller markets, according to the National Association of Realtors quarterly commercial real estate forecast.
National office vacancy rates are forecast to fall 1.5 percent to 10.4 percent over the coming year as employment gains boost demand for office space. The vacancy rate for industrial space is expected to decline 0.7 percent to 8.7 percent, and retail availability to decrease 1.0 percent to 10.5 percent. Only vacancies in the multifamily sector are expected to edge higher over the next year, from 5.9 percent to 6.1 percent, as new apartment construction comes to the market.
Lawrence Yun, NAR chief economist, says the commercial real estate sector is on firm ground in spite of the numerous global and domestic headwinds that continue to keep U.S. economic growth in a headlock. “Ongoing overseas weakness and the slowdown in business investment despite historically low interest rates held second quarter growth at a tepid and disappointing pace,” he said. “Only steady job creation, solid consumer spending and residential construction – albeit not enough of it – kept the economy afloat during the first half of the year.”
Adds Yun, “Strengthening local job markets has fueled sustained demand for commercial space and has pushed vacancy rates down in all commercial sectors. A growing concern from Realtors®, who mostly have clients that rely on financing to secure deals, is that underwriting standards have stiffened in light of increased regulatory scrutiny.

Existing-Home Sales

Nationally, total existing home sales, fell in July, 3.2 percent to 5.39 million in July from 5.57 million in June. For only the second time in the last 21 months, sales are now below (1.6 percent) a year ago (5.48 million).
Lawrence Yun, NAR chief economist, says existing sales fell off track in July after steadily climbing the last four months. “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country last month,” he said. “Realtors® are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”
According to Freddie Mac, the for a 30-year, conventional, fixed-rate mortgage dropped from 3.57 percent in June to 3.44 percent in July. Mortgage rates have now fallen five straight months and in July were the lowest since January 2013 (3.41 percent).
The median existing-home price for all housing types in July was up 5.3 percent from July 2015 . July’s price increase marks the 53rd consecutive month of year-over-year gains.

Maine’s July home sales were down slightly with 4110 ‘solds’ with a median sale price of $191,000 with a total ‘sold volume’ of $956 million.
“Although home sales are still expected to finish the year at their strongest pace since the downturn, thanks to a very strong spring, the housing market is undershooting its full potential because of inadequate existing inventory combined with new home construction failing to catch up with underlying demand,” adds Yun. “As a result, sales in all regions are now flat or below a year ago.”

Home Sales Slowed in July

Existing-home sales lost momentum in July and decreased year-over- year for the first time since November 2015, according to the National Association of Realtors®.
Total existing home sales, which are completed transactions fell 3.2 percent to an annual rate of 5.39 million in July from 5.57 million in June. For only the second time in the last 21 months sales are now below a year ago.
Lawrence Yun, NAR chief economist, says existing sales fell off track in July after steadily climbing the last four months. “Severely restrained inventory and the tightening grip it’s putting on affordability is the primary culprit for the considerable sales slump throughout much of the country,” he said. “Realtors® are reporting diminished buyer traffic because of the scarce number of affordable homes on the market, and the lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historical lows.”
The median existing-home price for all housing types in July was $244,100, up 5.3 percent from July 2015 ($231,800). July’s price increase marks the 53 rd consecutive month of year- over-year gains.
The share of first-time buyers was 32 percent in July, up from 28 percent a year ago. First- time buyers represented 30 percent of sales in all of 2015.
According to Freddie Mac, the average interest rate for a 30-year, conventional, fixed-rate mortgage dropped from 3.57 percent in June to 3.44 percent in July.

Consumers Win Big With ‘Know Before You Owe’ Rule

Since the 2015 implementation of the Consumer Financial Protection Bureau’s ‘Know Before You Owe’ mortgage initiative, over challenges in gaining access to the mortgage “closing disclosure” form, or CD. The CD is delivered to homebuyers in advance of their closing and contains important financial information related to their purchase.  Unfortunately, many lenders have chosen to withhold this document from real estate agents since Know Before You Owe went into effect, despite a longstanding tradition of sharing similar information.
The Consumer Finance Protection Bureau announced that it is usual, accepted and appropriate for creditors and settlement agents to provide a closing disclosure to consumers, sellers and their real estate brokers or other agents.
The National Association of Realtors® believes this announcement marks significant progress for consumers, as well as for its members. Giving Realtors® access to the CD would strengthen consumers’ understanding of their mortgage and home purchase by helping agents continue to provide expert advice to their clients.
Tom Salomone, NAR President said, “Realtors® have reported challenges gaining access to the Closing Disclosure… despite a long history of access to the substantively similar HUD-1 that is replaced. The CFPB acknowledged that concern by making it clear that it is appropriate and accepted for creditors and settlement agents to share the CD with consumers, sellers and their real estate agents.”

Home-Price Gains in Most Metro Areas

Home prices maintained their robust, upward trajectory in a vast majority of metro areas during the second quarter, causing affordability to slightly decline despite mortgage rates hovering at lows not seen in over three years, according to the latest quarterly report by the National Association of Realtors®. The report also revealed that for the first time ever, a metro area – San Jose, California – had a median single-family home price above $1 million.
Lawrence Yun, National Association of Realtors chief economist, says a faster pace of home sales pushed home prices higher in most metro areas during the second quarter. “Steadily improving local job markets and mortgage rates teetering close to all-time lows brought buyers out in force in many large and middle-tier cities.”
The national median existing single-family home price in the second quarter was $240,700, up 4.9 percent from the second quarter of 2015 ($229,400).
At the end of the second quarter, there were 2.12 million existing homes available for sale 3 , which was below the 2.25 million homes for sale at the end of the second quarter in 2015. The average supply during the second quarter was 4.7 months – down from 5.1 months a year ago.

Existing-Home Sales Up Again in June

Boosted by a greater share of sales to first-time buyers not seen in nearly four years, existing-home sales maintained their upward trajectory in June and increased for the fourth consecutive month, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, climbed 1.1 percent to a seasonally adjusted annual rate of 5.57 million in June from a downwardly revised 5.51 million in May.
After last month’s gain, sales are now up 3.0 percent from June 2015 (5.41 million) and remain at their highest annual pace since February 2007 (5.79 million).

Lawrence Yun, NAR chief economist, says the impressive four month streak of sales gains through June caps off a solid first half of 2016 for the housing market. “Existing sales rose again last month as more traditional buyers and fewer investors were able to close on a home…” he said. “Sustained job growth as well as this year’s descent in mortgage rates is undoubtedly driving the appetite for home purchases.” Cautions Yun, “Looking ahead, it’s unclear if  his current sales pace can further accelerate as record high stock prices, near-record low mortgage rates and solid job gains face off against a dearth of homes available for sale and lofty home prices that keep advancing.”

The median existing-home price 2 for all housing types in June was $247,700, up 4.8 percent from June 2015 ($236,300). June’s price increase marks the 52 and consecutive month of year-over- year gains and surpasses  May’s peak median sales price of $238,900.