Homebuyers continued to surge the new-home market that explains why builders increased the construction of single-family homes in August. The pace of single-family starts last month reached its highest level since February, just before the COVID-19 pandemic ignited across the U.S.
Based on the report from the Commerce Department, single-family rose by 4.1% in August to a seasonally adjusted annual rate of 1.02 million. Meanwhile, homebuilder sentiment last month rose to an all-time high as builders felt optimistic about current and future sales.
However, rising lumber costs could threaten to price more homebuyers out of the new-home market over the coming months, according to National Association of Home Builders’ Chairman Chuck Fowke and Chief Economist Robert Dietz. Low mortgage rates are helping to offset the rising costs somewhat.
Overall, housing production in August dropped 5.1% due to a double-digit decrease in the multifamily sector. Construction of apartment buildings and condos plunged 22.7% to an annual pace of 395,000 units. “Total housing starts were down in August on a decline for multifamily construction, with multifamily 5+-unit permits now down 8.3% on a year-to-date basis,” Dietz explains. “But low interest rates and solid demand are spurring single-family construction growth, which makes up the bulk of the housing market. Single-family permits continue to rise as well and are now up almost 7% on a year-to-date basis.”
Regionally, combined single-family and multifamily housing starts were highest in the Midwest, increasing 13.6% on a year-to-date basis, followed by a 5.4% increase in the South and a 3.8% increase in the West. Housing production, meanwhile, was 4.5% lower in the Northeast last month.
Homebuyers continue to show strong demand and prove that there isn’t a summer slowdown despite the Covid-19 pandemic.
According to the National Association of Realtors, pending home sales, which measure signed contracts to purchase existing homes, increased 5.9% in July compared with June, and sales were 15.5% higher annually.
NAR’s Chief Economist Lawrence Yun said, “Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”
Yun does not expect sales to drop or become slower this fall season. He anticipates existing-home sales to reach 5.8 million in the second half of this year. This would then bring the full-year total to 5.4 million, showing a 1.1% increase compared with 2019.
Based on NAR’s index, the housing market activities from pent-up demand is in good shape. Pending home sales in the Northeast rose 25.2% for the month and were up 20.6% from a year ago. In the Midwest, sales rose 3.3% monthly and 15.4% annually. Sales in the South increased by 0.9% for the month and were up 14.9% from July 2019. Sales in the West rose 6.8% monthly and 13.2% annually.
“Anecdotally, Realtors are telling me there is no shortage of clients or home seekers, but that scarce inventory remains a problem,” Yun said. “If 20% more homes were on the market, we would have 20% more sales, because demand is that high.”
July sales of newly built homes, which are also measured by signed contracts, surged dramatically, as buyers are now looking for new, high-tech, smart homes with floor plans designed for working and schooling at home. Builders are also benefiting from the severe shortage of existing homes for sale.
U.S. home sales increased for the second straight month in July and home prices also hit a record as low-interest rates increased the demand for homes even if the coronavirus pandemic put millions of people out of work.
According to the National Association of Realtors, existing-home sales rose by 24.7% to a seasonally adjusted annual rate of 5.86 million units last month. Data for June was revised slightly to a 4.70 million-unit pace from the originally reported 4.72 million.
July’s rise was the second consecutive increase, followed soon after a monthly increase in June, and raised the sales pace above the 5.76 million pace in February before the pandemic caused a momentary drop in sales. July’s level was the highest since December 2006.
“The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days,” said Lawrence Yun, NAR’s chief economist. “With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”
Economists surveyed by Reuters had projected sales rising 14.7% to a rate of 5.38 million units in July.
Existing home sales, which make up about 85% of U.S. home sales, increased 8.7% on a year-on-year basis in July.
The 30-year fixed mortgage rate is at an average of 2.99%, hovering near levels last seen in the early 1970s, according to data from mortgage finance agency Freddie Mac. Data earlier this week showed homebuilding surge by the most in nearly four years in July.
Housing has been a bright spot in the economy even as other sectors suffer amid widespread coronavirus infections that have slowed commerce and kept unemployment high. More than 28 million people were collecting jobless benefits at the end of July.
The pandemic steered the economy into recession in February, ending a record-long expansion that had brought U.S. unemployment to a 50-year low.
Home sales rose in all four regions in June.
There were 1.5 million previously owned homes on the market in July, down 21.1% from a year ago. The median existing house price increased 8.5% from a year ago to a record of $304,100 in July.
At July’s sales pace, it would take 3.1 months to exhaust the current inventory, down from 4.2 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
CANNON BEACH, OR. (August 13, 2020) — Two recent oceanfront sales in Cannon Beach increased Cascade Sotheby’s International Realty market share to 26%, ranking as top firm in Cannon Beach by sales volume from January through July.
Within the first month of joining the firm, broker Jenny Rapp brought the buyer for 158 N Larch Street, a captivating oceanfront home listed by real estate veteran Sally Conrad. The home sold for $2,195,000 on July 31st.
“I attended a special open house hosted by Sally Conrad. She made sure we met the builder who explained the unique aspects of the construction. Having this detailed knowledge of the home was key as I described it to a customer who walked into our Gearhart office.” Jenny Rapp explained. “Having the stories to share about the history of the home helped my client feel connected to the property right away.”
On June 30th, another oceanfront home listed by Sally Conrad, 288 W Gulcana Ave, sold for $1,895,000. Located on the north end of quiet Tolovana Park, this exceptional home has both ocean and mountain views.
Cascade Sotheby’s International Realty boasts dedicated divisions serving Farm, Ranch and Vineyard and new development properties. The firm continues its innovative approach and continues to build upon these statistics:
15 offices serving The Pacific Northwest;
$1.7 billion sales volume in 2019 – a company record.
2X amount of sales volume generated versus the nearest competitor in Central Oregon
51% market share growth in Portland Metro in 2019 over 2018;
• 49 brokers increased their business by at least 50% in 2019.
The firm’s affiliation with Sotheby’s International Realty offers a global referral network with over 23,000 sales associates in 1,000 offices, located in 70 countries. In 2019, $114B in sales was generated worldwide. The Sotheby’s International Realty network and effective advertising programs allow properties in Oregon and SW Washington to be thoughtfully marketed into key buyer feeder markets that include cities in California, Washington, and Arizona.
Pending home sales continued to increase rapidly for the second consecutive month in June despite the COVID-19 pandemic. Based on the Pending Home Sales Index from the National Association of REALTORS®, an increase was seen in the month-over-month contract signings from each of the four major regions in the U.S. as home buyers rushed out to purchase homes across the country.
NAR’s index shows that contract signings increased by 6.3% compared to a year ago.
NAR’s Chief Economist Lawrence Yun said that the contract activity for home purchases is higher compared to a year ago is quite surprising and remarkable considering that we are all amid a global pandemic. Consumers are taking opportunities from the record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy.
NAR’s Pending Home Sales Index jumped 16.6% month over month in June to a reading of 116.1.
See snapshot of housing report below:
Yun also said that the strong bounce-back comes after a longer lockdown in the Northeast region. The South, on the other hand, has consistently outperformed the rest of the country. And these remarkable rebounds equate to exceedingly a higher buyer demand.
Upbeat Forecasts for 2020 and Beyond
Because of the recent turnaround in contract signings, NARs adjusted its overall housing forecast. For 2020, NAR is now projecting existing-home sales to decrease by only 3%, with sales increasing to 5.6 million by Q4. New-home sales are projected to increase by 3% this year.
Yun is auspicious that positive GDP growth of 4% in 2021 will drive, on both existing and new, higher home sales. He forecasts existing-home sales to increase by 7% in 2021 and new-home sales to increase by 16%.
Home prices are also projected to increase by 4% in 2020. Yun predicts prices will moderate in 2021 but still increase by 3% as more supply is expected to hit the market.
Low financing costs are expected to continue to attract home buyers. NAR predicts that mortgage rates will stay at or near 3% over the next 18 months.
Coronavirus made consumers reassess the factors that make up the “perfect home”. Locations and layouts of their existing homes were taken into consideration. The appeal of a more congested city life appears to be giving way to either suburban or less congested rural life. The interest with an open floor plan faded as people needed more privacy while working from home.
A recent report from news.com showed that buyers are now leaning heavily for more listings of suburban and rural properties.
Here are the year-over-year percentage increases in views per property type:
Urban – 7%
Suburban – 13%
Rural – 16%
Realtor.com’s Director of Economic Research said that the migration to the suburbs is not a new trend but it became more prominent. After several months of staying home, the urge to have more space, and the probability for more people to work from home are factors contributing to this.
Realtor Magazine also reported that the desire to move is strongest in our city markets.
The pandemic also altered how consumers think about floor plans that is
The pandemic also altered how consumers think about floor plans that is why builders are anticipating changes in how future homes will look like. Zillow explained in a recent press release that:
Builders believe as people spend more time at home during the pandemic, buyers are realizing which features of their homes are working and not working.
Homebuilders predict open-concept floor plans will be a thing of the past, as people now value more walls, doors, and overall privacy.
New construction, which offers the chance to personalize home features, saw its listing page views grow by 73% over last May.
The pandemic is impacting the luxury market too. Realtor.com’s Chief Economist previously reported that stay at home and social distancing orders made ‘extra space’ even more relevant. This leads high-end buyers to find a second home that is within driving distance from their primary residence.
It seems that a percentage of people are preparing to leave many American cities. These moves may be permanent, while others may be temporary. In either case, many consumers are on the move and Real Estate Professionals are always ready to help.
With the rising home prices, it seems that luxury homes are bouncing back as homebuyers returned to the market in full force in May.
According to realtor.com’s Luxury Housing Report released on Thursday, the luxury market outpaced the rest of the housing market in both price growth and views.
Luxury home sellers returned to the market with new listings of homes priced above $1 million, dropped by 15.1% year over year in May, compared to 57.8% in April. This means that luxury home new listings were still reduced, but to a lesser degree than the month prior. However, like the rest of the market, low inventory is the biggest challenge for these homebuyers.
Chief Economist, Danielle Hale, says the luxury market is leading the recovery. Stay at home and social distancing orders made ‘extra space’ even more relevant. This leads high-end buyers to find a second home that is within driving distance from their primary residence.
Only 25 of the 94 luxury markets tracked by realtor.com showed listing price growth since January. The pandemic has also slowed price growth in the luxury market, which had increased by 15% at the beginning of the year.
Zillow said new listings of higher-end homes dropped by 46%, while the less expensive homes are reduced by 32%. In response to the pandemic, new listings of the most expensive homes were the first to drop below 2019 levels, while cheaper listings fell over a week later.
According to realtor.com, luxury listing price entry points reached $2.97 million in May despite a small pace of growth. This is up 0.5% from April and 6.1% year over year.
As Hale said, it’s the luxury market that led the housing market’s median price growth, which was up 1.6% in May year over year.
After falling 9.5% year over year in April, searches for million-dollar homes grew 7.3% year over year. This topped the 6.2% growth that we saw before the pandemic slowed things down.
Not only are luxury listings seeing more viewers, but popular second-home markets are seeing the love, too.
As Covid-19 caused cities and businesses to shut down operations, new home constructions were also put to a pause in the previous months.
Fortunately, those days are almost over as the Census Bureau has released data last June 17th showing that the housing starts have increased by 4.3% in May, with 934,000 new starts recorded for the month. Building permits also rose to 14.4% over April. Single-family permits also jumped by 11.9%.
This bodes well for the supply-strapped housing market but this is not a quick relief. It usually takes about 8 months for a permit to become a housing completion or a finished property ready for sale. This means that buyers won’t see the outcome from the production in May until early next year.
Fannie Mae’s chief economist says the Census Bureau report was weaker than expected but it seems that the housing construction has already turned a corner. Single-family starts should see a stronger June due to the limited housing supply and record-low mortgage rates, which have sent applications to purchase a home rising for the last nine weeks straight.
The rising buyer demand should also inspire builders. A data released by Redfin earlier this week shows that homebuying demand increases by 25% over pre-pandemic levels.
The latest data from the National Association of Home Builders proves as much. Based on their latest survey, builder confidence jumped from 21 points to 58 this week. Anything over 50 indicates general optimism among builders. Their chief economist said that as the nation reopens, the housing is currently well-positioned to lead the economy forward.
Concerns about the country’s financial standpoint continue to come up daily now that everyone is thinking about the U.S. economy. The top question emerging is -when will the economy begin to recover? No one knows when the economic rebound is likely to happen, but expert economists are becoming aligned on when this will transpire.
Based on Economic Forecasting Survey from the Wall Street Journal, 85.3% believe a recovery will begin in the second half of 2020.
Chris Hyzy who is the Chief Investment Officer for Merrill stated they are fully expecting that the economy could begin to pick up in late June and July, then a strong recovery in Q4 of this year will follow.
Furthermore, five of the major financial institutions are also forecasting positive GDP in the second half of the year. Today, four of the five expect a recovery to begin in Q3 of 2020, and all five agree a recovery should start by Q4.
Leading economists, analysts, and financial institutions are all in agreement that the economic recovery should begin in the second half of 2020.