Trump likes to build things, and if you ask 100 real estate agents from around the country what is the one thing that would help them sell more homes, the most common answer would be increasing available housing inventory, especially in the affordable price ranges.
The home-building industry was nearly decimated during the housing crisis. New-home construction was almost non-existent between 2008 and 2013. During that same period of time, the country added nearly five million new households. The net result of this shortage of housing supply has been a sharp increase in home prices and an equally sharp decrease in affordability, leaving millions of would-be homeowners on the sidelines.
This has proven to be a difficult problem to solve, as rising construction costs and an increasingly complicated regulatory environment have made the business prospect for the construction of affordable homes unviable in many markets. The Trump Administration could inject a powerful boost to the industry and go a long way toward reversing the trend of decreasing homeownership rates across the country.
Members of the new administration have promised an overhaul of our financial regulations. Many leaders in the housing finance industry, believe the market would benefit by some selective regulatory relief. While nobody wants a return to the irresponsible lending, pulling back on a few regulatory levers would stimulate demand.
The share of those surveyed in Fannie Mae’s recent Home Purchase Sentiment Index Survey who reported “significantly higher household income” in 2016 increased five points to 15 percent in January, while the share of those who reported it is “a good time to sell” a house increased two points, also to 15 percent. The share of those who reported home prices will rise increased seven points to 42 percent. The Index overall increased two points to 82.7—a historical high.
Three months after the presidential election, measures of consumer optimism regarding personal financial prospects and the economy are at or near the highest levels we’ve seen in the nearly seven-year history of the National Housing Survey according to Doug Duncan, chief economist at Fannie Mae.
“Any significant acceleration in housing activity will depend on whether consumers’ favorable expectations are realized in the form of income gains sufficient to offset constrained housing affordability,” Duncan says. “If consumers’ anticipation of further increases in home prices and mortgage rates materialize over the next 12 months, then we may see housing affordability tighten even more.”
Existing-home sales closed out 2016 as the best year in a decade, even as sales declined in December as the result of ongoing affordability tensions and historically low supply levels, 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, finished 2016 at 5.45 million sales and surpassed 2015 (5.25 million) as the highest since 2006 (6.48 million).In December, existing sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million in December from an upwardly revised 5.65 million in November. With last month’s slide, sales were only 0.7 percent higher than a year ago.
Lawrence Yun, NAR chief economist, says the housing market’s best year since the Great Recession ended on a healthy but somewhat softer note. “Solid job creation throughout 2016 and exceptionally low mortgage rates translated into a good year for the housing market,” he said. “However, higher mortgage rates and home prices combined with record low inventory levels stunted sales in much of the country in December.”
Added Yun, “While a lack of listings and fast rising home prices was a headwind all year, the surge in rates since early November ultimately caught some prospective buyers off guard and dimmed their appetite or ability to buy a home as 2016 came to an end.”
National Association of Realtors
Americans are “cautiously optimistic” about the housing market, with 69 percent recently surveyed by ValueInsured believing 2017 will be a better year for real estate than 2016, and 52 percent believing housing will become more favorable under the Trump Administration.
The outlook is primarily felt among millennials. According to the survey, 62 percent of millennials believe the housing market will turn in their favor this year, while the level of confidence held by millennial non-homeowners has gone up the most in the first quarter, to a score of 61.3 in the Housing Confidence Index. The Index overall, however, has trended downward to 68.0 since September 2016—the first decline since March 2016.
The sentiment comes in contrast to the drop in share of first-time homebuyers who plan to purchase a home during the spring real estate season this year. A recent report by the National Association of Realtors reveals the percentage of first-time homebuyers who plan to enter the housing market this spring has gone down 10 percent since October 2016—before the presidential election—due to concerns over higher mortgage rates.