Gearing up for the Spring Homebuying Season

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According to the National Association of Home Builders, most recent Housing Market Index which measures builder confidence released This Week in Real Estate, 2019 ends with the highest reading since June of 1999.  Below are a few highlights from the third week of December that influence our business:

Guess What? Spring Homebuying Season Now Starts in January. According to Realtor.com, homebuyers have started their home search earlier and earlier over the last several years. As Realtor.com notes, historically, April was considered to be the start of homebuying season. But in many larger markets, January is actually the start of prime homebuying season. “As shoppers modify their strategies for navigating a housing market that has become more competitive due to rising prices and low inventory, the search for a home is beginning earlier and earlier,” said Realtor.com Senior Economist George Ratiu. “With housing inventory across the U.S. expected to reach record lows in 2020, we expect to see this trend continue into the new year,” Realtor.com said that January 2019 was just 1% behind February for the highest number of views per listing. Beyond that, in 20% of large markets, January saw the highest listing views in 2019. That’s a big shift from just a few years ago. In 2015, the peak month for average views per listing on Realtor.com was April, and January lagged by 16%.

Home Building Defies Expectations, Up 11% From 2018. The numbers for November residential construction permits and housing starts came in higher than expected, marking the second straight month of increases and putting the rate for both well ahead of last year. The Census Bureau and the Department of Housing and Urban Development said building permits nationwide were at a seasonally adjusted annual rate of 1,482,000 during the month, up 1.4 percent from a slightly revised October rate of 1,461,000. Construction authorizations are now up 11.1 percent from the November 2018 rate of 1,334,000. Housing starts rose 3.2 percent from October to a seasonally adjusted rate of 1,365,000 units, an annual gain of 13.6 percent. Lawrence Yun, Chief Economist for the National Association of Realtors, provided the following assessment of the construction numbers. “The latest housing starts numbers are good and rising, but still short by 135,000 compared to the long term average – and well short of the 5 to 6 million that is now needed to fully end the housing shortage. More home construction appears to be on the way as we move into 2020, as reflected in the very high confidence of home builders. There was an increase of 1.3 percent in permits issued in the West compared to October and they rose 16.8 percent year-over-year. Starts increased by 1.4 percent and were 22.7 percent higher on an annual basis. Completions were down for both periods, by 16.1 percent for the month and 2.6 percent annually.

Builder Confidence Ends Year Strong on Solid Economic Fundamentals. Builder confidence in the market for newly-built single-family homes increased five points to 76 in December off an upwardly revised November reading, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. This is the highest reading since June of 1999. Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates, and a strong labor market. While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability.  Higher development costs are hurting affordability and dampening more robust construction growth. Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 61, the Midwest increased five points to 63, the South moved one point higher to 76 and the West rose three points to 84.

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