Median Home Prices, Single Family Homes, and Builder Confidence Reach New Heights

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Median home prices reached a new peak during the second quarter of 2019, up 6.4% from the same quarter prior year and 10.8% from last quarter, respectively. ATTOM Data Solutions also reported This Week in Real Estate that U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since purchase of $67,500, up from an average gain of $57,706 in Q1 2019 and up from an average gain of $60,100 in Q2 2018. The average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of the original purchase price. Below are a few highlights from the third week of July that influence our business:

Single-Family Starts Expand in June. According to estimates from the U.S. Housing and Urban Development and Commerce Department, single-family starts improved in June, consistent with the recent stabilization of the NAHB/Wells Fargo Housing Market Index (HMI). Single-family starts increased by 3.5% to a 847,000 seasonally adjusted annual pace in June. However, total housing starts were down approximately 1% (1.253 million annual rate) due to a decline in apartment construction. Multifamily starts declined 9.2% to a still-strong 406,000 annualized rate after an elevated reading in May. On a year-to-date basis, single-family starts are 4.9% lower than the first six months of 2018. NAHB’s forecast and the forward-looking HMI suggest that future data will show stabilization followed by slight gains due to recent declines in mortgage interest rates. However, single-family permits continued to be soft, with just a slight increase to an 813,000 annualized rate. Single-family permits are down 6.1% on a year-to-date basis. However, the number of single-family units authorized but not under construction declined in June to 85,000 units, down from 90,000 a year ago and a potential signal of additional permit growth ahead. Single-family units authorized but not under construction reached a recent high of 103,000 in December. We expect additional single-family growth, as areas beyond the exurbs respond to for-sale housing demand and ongoing healthy labor markets. The next quarterly edition of the HBGI will report on such conditions. On a regional and year-to-date basis, single-family starts are down 13.6% in the Northeast, 13.4% in the West, 8.3% in the weather-challenged Midwest (but improving) and up 1% in the South – the only region with net gains. As of June 2019, there were 519,000 single-family homes under construction. This is roughly flat from a year ago.

Builder Confidence Holds Firm in July. Builder confidence in the market for newly-built single-family homes rose one point to 65 in July, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This marks the sixth consecutive month that sentiment levels have held at a steady range in the low- to mid-60s. Builders report solid demand for single-family homes. However, they continue to grapple with labor shortages, a dearth of buildable lots and rising construction costs that are making it increasingly challenging to build homes at affordable price points relative to buyer incomes. All the HMI indices inched higher in July. The index measuring current sales conditions rose one point to 72, the component gauging expectations in the next six months moved a single point higher to 71 and the metric charting buyer traffic increased one point to 48. Looking at the three-month moving averages for regional HMI scores, the South moved one point higher to 68 and the West was also up one point to 72. The Northeast remained unchanged at 60 while the Midwest fell a single point to 56.

U.S. Median Home Prices Reach a New Peak in Q2 2019. ATTOM Data Solutions released its Q2 2019 U.S. Home Sales Report on Thursday, which shows that U.S. single-family homes and condos sold for a median price of $266,000 in the second quarter, up 10.8 percent from the previous quarter and up 6.4 percent from a year ago – reaching a new median home price peak. Meanwhile, the report also shows that homeowners who sold in the second quarter had owned an average of 8.09 years, reaching a new peak, up 3 percent from last quarter and up 4 percent from Q2 2018. Homeownership tenure averaged 4.21 years nationwide between Q1 2000 and Q3 2007, prior to the Great Recession. “As warmer weather brings a rush of house hunters to the market, the latest spike in median home prices marked the largest quarterly increase since the second quarter of 2015 and the third biggest increase since the market started climbing out of the Great Recession in 2012,” said Todd Teta, chief product officer at ATTOM Data Solutions. “However, in looking at historical trends, the second quarter of every year has always shown a quarterly increase, going as far back as 2005. So, with mortgage rates dipping to new lows, it’s no surprise that people were wanting to buy a home, even if prices were at their peak. We expect to see milder home prices in the coming quarters.” U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since purchase of $67,500, up from an average gain of $57,706 in Q1 2019 and up from an average gain of $60,100 in Q2 2018. The average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of the original purchase price. Among 149 metropolitan statistical areas analyzed in the report, those with the highest average home seller returns in Q2 2019 were San Jose, California (85.0 percent); San Francisco, California (71.6 percent); Seattle, Washington (65.6 percent); Salem, Oregon (62.3 percent); and Salt Lake City, Utah (60.7 percent). All-cash sales represented 25.0 percent of all single-family and condo sales in Q2 2019, down from 27.7 percent of all sales in the previous quarter, and down from 26.9 percent of all sales in Q2 2018.

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