US Housing Market Summer 2019
Enjoy the following insight and data from Hud, NAR, US Census Bureau, NAHB, Trading Economics, Freddie Mac, Attom Data Solutions, Zillow, from today’s most credible housing information sources.
Investors and homebuyers compete for available residential properties, because housing is in demand and in short supply. Properties below $200,000 for sale fell 10% YoY and are selling 30 days faster than more expensive homes. If investors were to lose interest due to falling prices, home buyers would soon pick up the slack.
What’s Supporting the Property Market?
What is underpinning the continuing strength of the US property markets? The stats pointing to greater demand from Millennial buyers, strong job and wage numbers, and lots of interest from individual investors.
Individual rental property investors continue to believe rental income housing is a high performing investment, especially as the peaking stock market threatens to fall. With severe housing shortages and high purchase prices, it’s easy to see why these investors keep buying properties and why the demand for property management solutions is brisk.
Prices rose 5.5% YoY in July which is the lowest rate of growth in the last 3 years. Full NAR July data will be released on August 21st.
NAHB reports in July that builder confidence is high despite rising building costs and labor shortages, and despite rising single family affordability issues. The good news is mortgage rates should drop and lumber prices are half of what they were a year ago.
July Similar to June Stats
Existing home sales dipped 1.7% in June, lower by almost 200,000 homes nationwide vs May. Given a persistent lack of supply, average home prices continued their upward trend rising 4.3% to $285,700 from 12 months ago.
The regional trend is perhaps a little worrisome too as home sales fell 3.4% in the South and 3.5% in the West. Yet they did increase 1.5% in the Northeast and 1.6% in the Midwest. Is this just more volatility, or should propsective buyers reconsider their buy vs rent decision?
June Building Numbers Decline Overall
Builders sentiment appears to be dropping as building permits slid 6.1% to a 1.22 million pace in June. Housing starts slipped 20,000 units, or down 0.9% to an annual pace of 1.25 million last month. 68% of those were single family detached units. Multifamily construction remains strong however with those with 5+ units or more slipped last month after soaring in May to a one-and-a-half year high. This is still 25% higher compared to last year.
“Restrictive and costly regulations, rising construction costs and an ongoing labor shortage in the construction industry continue to put pressure on builders,” Odeta Kushi, the deputy chief economist at First American – from Inman report.
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Is This the Right Time to Buy a Home?
If you’re hoping to time the purchase of a home, are deciding on whether you should buy a second home or rental income property, feel uncertain about the economy, and mapping out your future, you’ll find these real estate market insights valuable. It may be the right time to buy in most cities, while in some, perhaps not.
In this well viewed chart from Zillow Research, you can see an upward trend in home prices. Zillow calls the market hot and expects average home prices across the country to reach $232,000. Their reports aren’t all rosy however. They expect home prices in San Jose to drop $53,000 in one year, while New York and Miami will see flat prices.
With prices flat, mortgage rates low, available housing units rising, and a strong economy, many young buyers will be purchasing a home in 2019/2020. They are borrowing more to do it. While market conditions vary across the country, the strength of the economy was moving the market (although the Northease and Midwest saw rises). Should they panic at availability and prices?
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“The month of May ushered in the home sales upswing that we had been expecting,” said NAR President John Smaby, a second-generation Realtor® from Edina, Minnesota and broker at Edina Realty. “Sales are strengthening in all regions while we see price appreciation for recent buyers.” — from NAR news release.
Housing Price Changes Over Time
Nationally, there are some surprises in housing prices. In this chart, courtesy of Kiplinger research, prices in San Jose have jumped 130% since the recession bottom, while Denver, Seattle, San Francisco, Los Angeles, and Las Vegas home prices have doubled as well. Honolulu, New York, Boston, and Washington are a few cities that haven’t seen a full recovery. Property investors: please check out the property management software that smart individual investors are using.
|City||Median Home Price||% Change Since Peak|
% Change Since Bottom
|San Jose, Calif.||1,100,000||48.8||130.1|
|San Francisco, Calif.||860,000||22.4||127.4|
|Los Angeles, Calif.||634,000||6.1||91.6|
|San Diego, Calif.||545,000||4.4||84.1|
|New York, N.Y.-N.J.||410,000||-4||38.1|
|Washington, D.C.-No. Va.||375,000||-13.9||37.5|
|Riverside-San Bernardino, Calif.||339,000||-14.7||100.3|
|Colorado Springs, Colo.||280,000||34.7||60|
|Las Vegas, Nev.||266,000||-20.9||137.1|
|Salt Lake City, Utah||255,000||68.5||101.1|
2019 Summer Real Estate Update
The 2019 summer real estate market report is colored by rising employment and wages, lowered interest rates, and a booming US economy.
Yet builders and buyers base purchases and investments on longer term outlooks.
The economic news has been so good however, that even longer term views are considerably brighter, and builders are getting back to work building homes, condos and apartments. This is one of those bright periods to buy.
What Are Some Reliable Housing Predictions?
Most experts are making predictions or forecasts of rising home sales and ultimately rising home prices and rental prices, while other media outlets are still insisting on housing market crashes ahead.
Property Management: if you’re a Realtor, Landlord or Property Manager, please see our posts on multifamily, rental property markets, and on trends in Proptech, growing asset value, and adopting cloud software and automation, improve your property income strategy and investment ROI.
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Mortgage Rates Today
Today, The Bank of America was offering 30 year fixed rate mortgages at a rate of 3.375% for a suggested monthly payment of $884. Their 5/1 ARM variable rate is currently at 2.875%. With a further interest rate cut, more homes could become affordable for buyers.
Without inflation, it’s difficult for the FED to inflate the rates which would also jump up mortgage rates. The red is expected to cut rates in the fall and that’s music to the ears of everyone in property management and residential real estate.
The Big 4 Housing Market Factors
The economy, jobs rate and wages, low mortgage rates and rising housing availability are the 4 key factors which could revive the housing sector in 2020. Wages haven’t risen well, and if wages rise, we would likely be in for rapid price appreciation. With buyer and seller fear easing along with low mortgage rates, it’s a good time to buy a home. It may be a great time for multifamily apartment investors to grow their portfolios.
When the big 4 housing factors are present, it’s hard not to suggest stronger housing sales. As you’ll read here, sales and prices are predicted to rise into 2020.
In the buying vs renting question, the weight is in favor of buyers and rental investors, because mortgage and lending costs are so low. Yardi reports that the U.S. average rent price increased by 2.5% or $35 year over year. As of July 2019, the national median rent for a one-bedroom apartment is $1,220. Although rents have flattened (.5% for 1 bedrooms and .5% for 2 bedrooms), they may too see rises soon enough.
This summer with price rises ahead, more homes for sale, and low mortgage rates, this seems to be an onboarding period for the great American home buying train.
Existing Home Sales Keep Rising
HUD reports that purchases of new homes fell for a 2nd straight month while sales of existing homes rose to a 3 month high. In response to political uncertainties, new home construction was down, yet more homes are being put up for sale.
According to NAR, total existing-home sales (single-family homes, townhomes, condominiums and co-ops), rose 2.5% from April to a seasonally adjusted annual rate of 5.34 million in May. Census Bureau stated that number of new home sales fell to a five-month low of 626,000 in May.
Given how monthly volumes and prices fluctuate, next month’s results might reverse. Year over year home price increases were up 3% to 5% and not deterred by growing housing stock. Housing prices cooled the most in the West, including California.
With interest rates declining, and rumored to fall further this year, it’s no surprise to see big increases in mortgage refinancing, and a decline in the number of underwater borrowers. Inventory across the nation is becoming critically low again, and with low mortgage rates and fast rising sales, affordability will become the issue that will paint the headlines.
New Housing Needed
Lawrence Yun, NAR’s key rep says “more homes need to be built” yet despite continuing low lending rates, builders confidence does seem to be there. Building permits rose slightly in May to 269,000 units. Permits for the multi-family housing sector dropped 5% to 479,000 units.
According to Census.gov, here are the national new building stats:
⦁ Building Permits: 1,294,000
⦁ Housing Starts: 1,269,000
⦁ Housing Completions: 1,213,000
Building permits rose in the South (6.8% to 693,000) and West (1.8% to 335,000) while they dropped in the Midwest (-8.4% to 174,000) and Northeast (-24.6% to 92,000).
Census.gov also reports that privately‐owned housing completions in May dropped 9.5% to an annual rate of 1,213,000. The April forecast was for 1,340,000 housing completions. Single‐family housing completions in May were at a rate of 890,000 which was 5% below the revised April rate of 937,000. The May rate for units in multifamily buildings with five units or more was 319,000.
Homeowner Equity Report
People buy homes and property to build equity and Americans are gaining big traction. A lot of young buyers are concerned and don’t want to lose out on the wealth building benefits of home ownership. Millennials in particular are ready to buy and are very frustrated at government action in the last 10 years. The memories of the last recession continue to fade however, and fewer mortgage holders are in trouble.
Homeowner equity in the US rose $264 billion in the first quarter of 2019. The gain over the last 4 quarters was $817 billion to reach $13.4 trillion. This means American wealth is growing fast creating plenty of funds for home upgrades, rental property upgrade, and a booming property management industry.
What are the Key Drivers of the Housing Industry:
They are low interest rates, high rent prices, strong employment and GDP, insufficient housing stock and the wrong kind of housing, demographic makeup, wages, population growth and migration, housing regulations, and builder and consumer optimism.
Should I Buy a Home This Year or Wait?
Buyers and renters are asking whether they should buy now or wait. Their decision is one thing, yet mortgage financing will have the biggest impact on whether renters can become buyers. Low mortgage rates and rising income will cause many to take the home buying leap, this summer.
Is it a Good Time to Buy a Home?
- low interest and mortgage rates
- American buyer wealth growing
- new housing construction dropping
- lots of new construction being released
- recent economic data is positive
- more housing stock available
- high rent prices
The chance of a housing crash is so mininal given low mortgage rates, tight supply, high employment, excellent economy, and
US Rental Housing Market 2019
Despite flat year over year growth of renta, some apartment rental markets are seeing stong price growth, particularly in the 2 bedroom segment. Due to affordability issues, higher rent prices may fuel multifamily building across the country. Take a look at the Denver housing market, Phoenix housing market, Hawaii housing market, San Jose housing market, San Francisco housing market and even the Oakland housing market for trends in multifamily building and apartment rental.
Millennials Driving the Market
Sales numbers from Freddie Mac and Fannie Mae, show most loan originations are from Millennials who are finding more starter homes to buy. With more Millennials hitting their family forming, home buying years, they’re outpacing even Generation X’s previous record home buying numbers. Millennials took out 45% of all mortgages last year.
2020 Housing Market Forecast
Corelogic HPI Forecast predicts home prices will increase 5.6% year over year by May 2020. They believe home prices will rise over the next month by .8%. Home prices in states such as Idaho, Utah, South Dakota, Nevada and Arizona are seeing price growth above 6.0%.
Their U.S. Home Price Insights report just released shows a large list of cities that are undervalued and overvalued. This might help investors learn which cities are the best to buy in this year.
Best Cities to Buy a Home?
The stats show mid-sized cities across the nation are growing in popularity, with improving economies and migration. These locations may give resistant sellers (Generation X and Babyboomers) a destination to move too. That’s an important factor for homeowners.
Check out the Phoenix housing market, Las Vegas Housing Market, Denver Housing Market, Chicago Housing market, Oakland housing market, New York housing market, and the Honolulu housing market for conditions in those cities.
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