NEW HOMES DOMINATE REAL ESTATE MARKET IN MANY AREAS

Dated: 06/06/2018

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REALTOR REPORT

NEW HOMES DOMINATE REAL ESTATE MARKET IN MANY AREAS

If you are a homebuyer looking for a brand-spanking new house, you’re in luck in many parts of the country. The market is now flooded with the most brand-new, single-family houses to hit the market since the Great Recession, according to Realtor.com.

The number of these newly-built homes, 795,000, jumped 7.7% from 2016 to 2017, according to the U.S. Census Bureau report on the 2017 Characteristics of New Housing. Median square foot size was up a bit as well, to 2,426 from 2,422 the year before.

Chief NAR economist Danielle Hale says, “It’s good that there’s more construction, but there’s still plenty of room for more building,” who adds that builders seem to be catering almost exclusively to upper-end or move-up buyers. She stresses that there is still plenty of room for affordable homes to be built.

This recent crop of new, larger homes tend to be more expensive than older, existing residences. For example, the median price of a new home was $312,400 in April—compared with $257,900 for an existing home. That's 21.1% more, no doubt due to high land, construction labor, and materials costs.

The overwhelming majority of these brand new homes have three or four bedrooms and 2.5 or 3 baths, and 2-car garages. About a quarter of them have full or partial basements (most notably in states where basements are expected in new homes).

It seems homebuilders are not leaving future maintenance of these (mostly suburban) new home neighborhoods up in the air; in many cases, they are putting homeowners’ associations in place from the start. About 487,000 of these new homes were to be governed by HOAs, adding fees on top of mortgage payments, boxing out many first-time homebuyers in the process.

Because of land costs, ”Construction is slowly shifting back from the core of metro areas to the outer suburbs. It’s because that's where your normal buyers look for houses," says Issi Romem, chief economist at BuildZoom, an online homebuilding and remodeling marketplace. "They're going to be larger than the homes you'll find in the center of town.”

Source: Realtor.com, NAHB,TBWS

THIS WEEK'S MORTGAGE RATE SUMMARY

HOW RATES MOVE:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

RATES CURRENTLY TRENDING: HIGHER

Mortgage rates are pushing higher today.  Last week the MBS market worsened by -1bps.  This was not enough to move rates higher last week. There was a great deal of mortgage rate volatility last week.

THIS WEEK'S RATE FORECAST: HIGHER

Three Things: These are the three areas that have the greatest ability to impact mortgage rates this week. 1) Trade War, 2)Geopolitical and 3) Across the Pond.

1) Trade War: Now that the metal Tariffs are in place, the bond markets will continue to monitor the non-stop trickle of "tit-for-tat" responses from the impacted countries. But foreign tariffs on bourbon, soybeans and other small target but big headline moves are not going to move rates. Instead, the bond markets are solidly focused on China and trade talks there.

2) Geopolitical: While Spain and Italy seemingly have new governments in place, there is still plenty of unrest and instability in the Eurozone. And no one has a plan to solve the massive amounts of debt problems. Most of that debt is owned by European banks or the ECB itself. And unlike Greece, these are much more threatening to the system.

3) Across the Pond: Domestically, we have a very light week for data and zero Fed speeches or Treasury Auctions to contend with. Only Tuesday's ISM Services has the significance to move rates. But overseas we get a lot of PMI and GDP data that could have an impact on long bonds and rates.

THIS WEEK'S POTENTIAL VOLATILITY: AVERAGE

There's not a lot of domestic economic news coming out this week that has the ability to move the markets. Rates will be looking to the trade talks for direction.

BOTTOM LINE:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

Next Page Realty    480-648-7442

info@nextpagerealty.com

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Sina Sabeti

Sina Sabeti is the owner and designated broker of Next Page Realty. His specialties are fix and flip deals, rental property acquisition, short sale processing, mortgage origination, and commercial....

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