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Building Permits Hit 5 Year High

The Commerce Department said Thursday that applications for building permits rose 14.3 percent to a rate of 1.02 million, the most since June 2008.

Builders are benefiting from a sustained rebound in housing that began a year ago. Steady job growth, rock-bottom mortgage rates and rising home values have boosted demand.

Housing starts came in at a seasonally adjusted rate of 853,000 which was a decline from last month.  However, the majority of that decline was in apartment and multi-family and not in single family residences.

Confidence among builders is rising. The National Association of Home Builders says its builder confidence index rebounded in May to a reading of 44, up from 41 in April. The outlook for sales reached its highest point in more than six years.

Pending Home Sales jump 7% from a year ago:

Contracts to buy existing homes rose in March, and would have increased even more it it wasn’t for a historically low supply of for-sale listings nationwide.

The Pending Home Sales Index from the National Association of Realtors increased 1.5 percent month to month which was better than the 1.0 percent increase that economists expected. It is 7 percent higher than March of 2012.

“Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply,” said the Realtors’ chief economist Lawrence Yun in a release. “Little movement is expected in the near-term sales closings, but they should edge up modestly as the year progresses.

The lack of inventory is due to several factors but one of the newer trends is that many sellers are waiting to put their homes on the market because they are waiting to see how much further home prices will increase.

Regionally, the Realtors’ pending home sales index was unchanged in the Northeast from February, up 0.3 percent in the Midwest, up 2.7 percent in the South and up 1.5 percent in the West.

Homes Appreciating Faster than Wages:

home

As we have been reporting for over a year, home prices are rising. That is
the good news. The bad news is that wages are not.

While historically low mortgage rates are translating into big savings for
homeowners, those same low monthly payments are masking a troubling trend.
While home values have been on the rise for the past year – in some areas
appreciating by 15 percent or more annually – median wages haven’t kept
pace. As a result, home price-to-income ratios in many areas are climbing.

By looking at two metrics – an affordability index and a price-to-income
ratio – Zillow researchers have determined that low mortgage rates that make
homes appear incredibly affordable are overshadowing a bigger overall trend
in which the overall prices of homes are actually significantly more
expensive than historic norms relative to annual incomes.

Homeowners in 24 of the 30 largest metros covered by Zillow were paying more
for homes in the fourth quarter of 2012 relative to their region’s median
income than they were from 1985 through 1999. Metros with the largest
difference between their pre-bubble and fourth quarter 2012 price-to-income
ratios included San Jose (52.1 percent more), Los Angeles (48.8 percent
more), Portland, (45.4 percent more), San Diego (44.6 percent more) and
Denver (40.8 percent more).

Pending Home Sales Rise 8.4%

The National Association of Realtors reported that their index of Pending Home Sales rose 8.4% from February 2012 and was constrained only by the lack of inventory available for sale. Thinking about buying a home in 2013? This is not the same market where you can take your time and view many different homes. Home prices are moving up and the number of available homes for sale that are in good condition are moving fast.

Lawrence Yun, NAR chief economist, said limited inventory is holding back the market in many areas. “Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 percent from current levels,” he said. “Most local home builders are small businesses and simply don’t have access to capital on Wall Street. Clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market.”U.S. home resales (the largest segment of the housing market) hit a three-year high in February and prices jumped, adding to signs of an acceleration in the housing market recovery.

More good news: Yun projects existing-home sales to rise about 7 percent in 2013 to approximately 5 million sales, which is near the current level of activity and the national median existing-home price is forecast to rise nearly 7 percent this year, while mortgage interest rates should remain historically low, but trend up slowly.

So, the industry experts are saying: 1) Good quality Inventory is moving fast and at 2) higher prices and 3) with mortgage lenders rates rising throughout the year. What does this tell you?

Jumbo Loans Availability and Rates Point To Growing Housing Market:

Even as mortgage rates begin to rise, the difference between conforming and jumbo loan rates is shrinking, and that is good news for buyers of higher-priced homes. Conforming loans are largely financed by Fannie Mae and Freddie Mac, and are valued at up to $417,000 – although they can be as high as $625,000 in some of the nation’s pricier markets. Mortgage loans in Denver certainly fall in this category.

Jumbo Loans are anything above that and are funded by banks or private investors. Rates used to be far higher for jumbo loans, but that is changing fast. As reported by the Mortgage Bankers Association, The spread between a jumbo and a conforming mortgage rate was as wide as 0.875 percent last summer. It has now dropped to between 0 and 0.25 percent as of Monday.

The jumbo market has heated up, as tight lending guidelines have drastically reduced consumer late payments, strategic defaults, and foreclosures, this gives investors confidence to buy jumbos again, which means lower rates for consumer borrowers.

The rebirth of jumbo securitization is being driven not just by investor confidence, but by growth in jumbo origination, which increased after the conforming loan limit was lowered.  Origination of non-agency jumbo mortgages jumped by over 19 percent in 2012 from 2011, according to Inside Mortgage Finance.

 

Another Sign Of Housing Strength – Taking Equity Out Again!

During the housing boom of the last decade Americans withdrew over $1 trillion in home equity. They did it through cash-out refinances, home equity loans, and home equity lines of credit. The latter allowed them to use their homes like an ATM. They spent the money on cars, televisions, vacations and fancy home upgrades. It was seemingly endless equity, until suddenly that equity was gone.

But the Home Equity Line of Credit (HELOC) is back and millions of homeowners are tapping into their equity to put it back to work. Nationally there has been a 31 percent increase in HELOC’s year-over-year.

With home prices up 8 percent year-over-year in December, according to the latest reading from CoreLogic, homeowners are regaining home equity at a fast clip-1.4 million borrowers rose above water on their home mortgages through the end of September. That number likely increased as price appreciation accelerated toward the end of the year.

Unlike the equity grab during the housing boom, this is real equity that borrowers are tapping into.  During the housing boom, banks were relaxed in their valuation processes, often times only requiring a statistical valuation or at the most a drive-by-appraisal.  But not this time. After getting burned by their second lien positions, banks are making sure that the equity is really there and are using very strict underwriting guidelines.  The fact that under these new strict guidelines and appraisal scrutiny more and more HELOCs are being approved is another sign that the housing market has some real strength.

Home Price Index gains 5.5%

2013-02-04_112930The S&P/Case-Shiller 20-city composite posted that home prices were 5.5% higher than during the same period in the prior year, for the strongest year-over-year growth since August 2006, with increases in 19 of 20 cities.

Housing is clearly recovering, with positive trends for new- and existing-home sales. However, prices remain 30% below a bubble peak in 2006, according to Case-Shiller data. This, coupled with favorable rates from mortgage lenders in Nebraska means that there is still an excellent opportunity to select your next home while home prices still have room to move upward.

New and Existing Home Sales Jump – Best in Several Years:

resaleEXISTING HOMES:
The National Association of Realtors said that December sales of previously-owned homes were up 12.8% from a year ago. That brought full-year sales to 4.65 million, up 9% from 2011 and the best year for home sales since 2007, when there were 5 million homes sold just before the start of the recession.

The improved demand for homes in December led to the inventory of homes for sale to fall to 1.82 million homes on the market, the lowest supply since January 2001. The tighter supply, and the drop in distressed sales, have helped to lift home prices so that the median sales price for the year rose to $176,600, up 6.3% from 2011. That’s the biggest gain in prices in since the bubble year of 2005.

Realtors are predicting strong sales should continue into 2013 and beyond. It has a forecast for 5.1 million existing home sales this year, and 5.4 million next year.

NEW HOMES:
The Commerce Department said than New U.S. single-family home sales hit a seasonally adjusted 369,000-unit annual rate.

The median price for a new home rose to $248,900 in December from $245,600 in November, according to figures that are not adjusted for seasonal swings. Rising prices are seen as a sign of improving health in the housing market.

Economists think home building added to economic growth last year for the first time since 2005. Friday’s report showed 367,000 new homes were sold last year, the most since 2009.

New housing starts reach the best in over 4 years

The rebound in U.S. home building accelerated in December, capping the best year for the industry since 2008 and adding to signs that residential real estate is contributing to economic growth.

According to Commerce Department data, New Home Starts climbed 12.1 percent last month to a 954,000 annual rate, which exceeded all forecasts of economists. Spurred by record-low mortgage rates, home construction will probably keep making headway in 2013 as it recovers from the worst slump since the Great Depression.

Housing starts remain short of the 2.07 million in 2005 at the peak of the boom, which was three-decade high. They averaged 1.74 million a year from 2000 through 2004. All four regions of the country showed a gain in starts last month, led by a 24.7 percent surge in the Midwest. Construction of single-family houses climbed 8.1 percent in December from the prior month, to the highest level since June 2008. Work on multifamily homes jumped 20.3 percent.

With economic growth starting to pick up in 2013, so will mortgage rates

Home prices are now rising at their fastest pace since 2005. Housing bulls are running again, pointing to rising construction starts, rising home sales and falling mortgage delinquencies.“Low prevailing mortgage rates, the limited supply of existing homes for sale (either due to the few foreclosure completions or the number of underwater borrowers who cannot sell), and the anemic levels of new home construction are facilitating affordability and feeding demand,” noted analysts at Fitch Ratings. “These factors are offsetting weak fundamentals that would otherwise hinder home price growth, such as high structural unemployment and lackluster wage growth. With economic growth starting to pick up in 2013, so will mortgage rates.Mortgage rates directly correlate with economic growth. As the economy grows, so will rates. But is that a bad thing for housing? Actually, its not. Historically, when mortgage rates start to trend upward, purchasers finally “get off the fence” and pull the trigger on that next home particularly with home prices rising. Plus, the uptick in mortgage rates that results from a growing economy will still be relatively low compared to other periods when the housing market flourished. It will certainly dampen the activity of mortgage refinance in Nebraska, but will spur purchase activity.