HOME AFFORDABILITY STILL PROBLEMATIC – BUT FOR HOW LONG?

HOME AFFORDABILITY STILL PROBLEMATIC – BUT FOR HOW LONG

 

Home prices are falling. In some markets one could argue that it is the beginning of a strong correction. Maybe that is just want the housing market needs as home affordability is still at a 10-year low (Attom Data Solutions).

 

Wage growth is increasing, but at a snail’s pace, and home prices have been far outpacing incomes. As housing inventory increases, home prices continue to fall, and interest rates stabilize (momentarily), we may have the perfect storm for a strong buying season this spring.


BUILDERS NOT BUILDING

 

Housing starts dropped 11.2% in December according to the last report from HUD. Despite the monthly loss, both single-family and multifamily starts posted an annual gain. Single-family production increased 2.8% in 2018 to a rate of 872,800. Multifamily starts posted 5.5% growth in 2018 to 373,700 units. (housingwire.com)

 

Lack of new inventory will continue to put pressure on home affordability. Rising construction costs and lack of labor pose the greatest challenges for home builders.

 

NO HOMES FOR SALE – FAKE NEWS

According to a recent report from RE/MAX, there are now more homes for sale on the market than there have been at any point in time in the last 10 years. Inventory is up 6.4% nationally over last year. Inventory is anticipated to continue to climb in the first quarter of 2019. We are in a buyers’ market. Don’t forget to ask for seller concessions.

SIGNS OF RECESSION?

 

There is a lot of mixed messages when it comes to calling the likelihood and timing of the next recession. The Federal Reserve has backed down from the initial forecast of multiple rate hikes in 2019 as the economy slows. Long terms rates are experiencing a gradual pullback off 2018 highs. Reuters reports that the likelihood of a recession in the next twelve months is now at 25%. The likelihood of a recession in the next twenty-four months is now at 40%; both numbers on the climb. The “most pessimistic call was 75%,” per Reuters.

 

The silver lining? If recession concerns continue to grow, interest rates will likely continue to pull back making homeownership more affordable.

 

EQUITY RICH

 

More than 14.5 million home owners in the U.S. have homes with a loan to value at 50% of less. Accounting to a report from ATTOM Data Solutions, this is the highest level since they started collecting data in 2013. 5 million homeowners, nearly 9% of all homeowners, still owe more than the property is worth. (ATTON Data Solutions)

 

FANNIE MAE STILL PRINTING MONEY

 

Fannie Mae posted $3.2 billion in income in the forth quarter of 2018. Down from the third quarter, but considerably higher than the forth quarter of 2017 when it posted income of $2.3 billion. A major contributor of the increase in net income was the Tax Cuts and Jobs Act of 2017 which lowered the Company’s tax rate. Fannie Mae acquired 1.9 million mortgages in 2018; 39% of the total mortgage market.

 

HOME VALUES FALL FURTHER

 

In November, home values posted their largest single-month decline in a decade, and the third consecutive month decline since 2012 according to new data by Black Knight. The greatest slowing is reported in western states.

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