The Mortgage Corner
Total existing-home sales1, https://www.nar.realtor/existing-home-sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.1 percent in 2017 to a 5.51 million sales pace and surpassed 2016 (5.45 million) as the highest since 2006 (6.48 million).
This is a sign that 2018 could be a record year for housing sales, in spite of the housing shortage that slowed sales in the fourth quarter, and builders hard put to find enough construction workers to ramp up housing construction.
The homeownership rate is back up to historical levels, for starters. Marketwatch’s Andrea Riquier reports the homeownership rate jumped in the fourth quarter of 2017 to 64.2 percent, the Census Bureau said Tuesday to a 3-month high, and in line with 1980 and 1990 averages, before rising into bubble territory in the 2000s.
There were 1.52 million more owner households compared to a year earlier, and 76,000 fewer renter households, according to Riquier. It hit an all-time high of 69.1 percent in 2004 as the housing bubble inflated. In the aftermath of the crisis, it skidded lower and lower, finally bottoming out at 62.9 Percent in 2016.
Lawrence Yun, NAR chief economist, says the housing market performed remarkably well for the U.S. economy in 2017, with substantial wealth gains for homeowners and historically low distressed property sales.
“Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand,” said Yun. “At the same time, market conditions were far from perfect. New listings struggled to keep up with what was sold very quickly, and buying became less affordable in a large swath of the country. These two factors ultimately muted what should have been a stronger sales pace.”
That’s in part because total housing inventory3 at the end of December dropped 11.4 percent to 1.48 million existing homes available for sale, and is now 10.3 percent lower than a year ago (1.65 million) and has fallen year-over-year for 31 consecutive months. Unsold inventory is at a 3.2-month supply at the current sales pace, which is down from 3.6 months a year ago and is the lowest level since NAR began tracking in 1999.
What about new-home construction? A surprising but perhaps one-time drop in single-family starts masks what is otherwise a very solid housing starts and permits report for December. Starts fell 8.2 percent to a 1.192 million annualized rate and reflect an 11.8 percent plunge in single-family starts to an 836,000 rate that far offsets a 1.4 percent gain in multi-family starts to 356,000. But it’s probably the cold weather and snows that reach all the down to Florida in January. Starts are affected by the winter weather which along with related adjustments are always factors for this reading.
But the backlog behind future starts continues to build as permits came in very strong, virtually steady at a 1.302 million rate and showing a noticeable 1.8 percent gain for single-family permits to 881,000. Lack of homes has been holding down new home sales though new supply did move into December’s market, as completions for single-family homes jumped 4.3 percent to an 818,000 rate.
We mustn’t forget interest rates either, which are still low in spite of the stock market panic over the possibility of higher rates. Guess what? That’s not happening, especially with the Fed’s preferred PCE core index still at 1.5 percent, and mortgage rates for the 30-year fixed conforming rate still @ 4.0 percent, just 0.50 percent above its low.
Harlan Green © 2018
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen