While housing affordability rose to its highest level in three years in the third quarter as reported This Week in Real Estate by the NAHB, NAR chief economist, Lawrence Yun, predicted this week at the NAR EXPO that new home sales will reach a 13-year high in 2020 and existing home sales will likely increase 3.7% in 2020, the highest total since 2017. Below are a few highlights from the first week of November that influence our business:
Lower Mortgage Rates Push Housing Affordability to Highest Level in Three Years. With mortgage rates at a three-year low and a healthy job market, housing affordability rose to its highest level in three years in the third quarter of 2019, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI). In all, 63.6 percent of new and existing homes sold between the beginning of July and the end of September were affordable to families earning the U.S. median income of $75,500. This is up from the 60.9 percent of homes sold in the second quarter of 2019 that were affordable to median-income earners and slightly higher than a first-quarter 2019 reading of 62.6. The national median home price remained steady at $280,000 in the third quarter, flat from the previous quarter, but significantly higher than in the first quarter ($260,000). At the same time, average mortgage rates fell from 4.07 percent in the second quarter to 3.73 percent in the third quarter, reaching a three-year low.
Sales of New Houses Will Rise to 13-Year High in 2020, NAR’s Chief Economist Says. Sales of new homes probably will rise to a 13-year high in 2020 as the U.S. dodges a recession, according to Lawrence Yun, chief economist of the National Association of Realtors. New-home sales probably will jump 11% to 750,000, according to Yun’s new forecast, which would be the highest reading since 2007. Sales of existing homes likely will increase 3.7% to 5.56 million in 2020, the highest tally since 2017, Yun said. “Some loosening in inventory will happen in 2020, and so we expect home sales to rise,” Yun said at NAR’s convention in San Francisco. “We’ll see an increase in inventory, but not any oversupply, so home prices should continue to move higher – our hope is in a much tamer fashion,” Yun said he expects the median price of an existing home in the U.S. to be $270,400 next year, rising 4.3% from 2019. That would be a slower pace than the 4.9% annual gain in the median price he forecasts for 2019 and the 5.7% recorded for 2018.
Home Price Growth Regains Momentum. National home prices increased 3.5% year-over-year in September 2019 and are forecast to increase by 5.6% from September 2019 to September 2020, according to the latest CoreLogic Home Price Index (HPI) Report. The September 2019 HPI gain was down from the September 2018 gain of 5.3% and was up a bit from the August 2019 gain of 3.3%. Home prices have been increasing year- over-year in a narrow range of 3.2% to 3.5% over the past six months, indicating that the rate of home price growth regained some momentum. The overall HPI has increased on a year-over-year basis every month for more than seven years (since February 2012) and has gained 62% since hitting bottom in March 2011. As of September 2019, the overall HPI was 9% higher than its pre-crisis peak in April 2006. Adjusted for inflation, U.S. home prices increased by 2.6% year-over-year in September 2019.
