Home builder confidence rises again.
For August 2012, the National Association of Homebuilders reports the monthly Housing Market Index at 37 — an increase of more than 100% from one year ago and the highest HMI value since February 2007.
The Housing Market Index is an indicator of homebuilder confidence and when it reads 50 or better, the HMI suggests favorable conditions for home builders. Readings below 50 suggest unfavorable conditions for builders.
Despite the recent rise in home builder attitudes, however, the Housing Market Index remains mired below 50 where it’s been since April 2006.
For new construction home buyers in Allen , the HMI may offer insight into the market for new homes through the end of this year. This is because the NAHB Housing Market Index is a composite survey, meant to gauge builder sentiment in three specific areas — current business, future business, and buyer activity.
When all three fronts are rising, it points to an improving market for sellers (i.e. home builders). Unfortunately, though, what’s good for sellers can be damaging to buyers. Builders are less willing to make concessions on price or product when markets are getting stronger.
In August, home builders saw strength across all three categories :
- Current Single-Family Sales : 39 (+3 from July)
- Projected Single-Family Sales : 44 (+1 from July)
- Buyer Foot Traffic : 31 (+3 from July)
Especially noteworthy in the August HMI is that builders project more sales for the next six calendar months than they have projected at any time in the last 5 years. With mortgage rates at all-time lows and buyer foot traffic growing, it’s no wonder confidence is high.
When demand for homes is strong amid stagnant or falling supplies, home prices rise and that’s exactly what we’re seeing in many U.S. markets. It’s a good time to be a Texas home buyer today, but market momentum appears to be shifting.
If you’re in the market for a newly-built home, therefore, the best “deal” may be the one you get today. Next year, your costs may be higher.
Rising home prices are taking a toll on today’s home buyers.
For the first time in 4 quarters — and despite falling mortgage rates — home affordability is sinking.
Earlier this week, the National Association of Home Builders reported the Home Opportunity Index, a measure of home affordability, down to 73.8 for the second quarter of the year. This marks the metric’s first “down” quarter since the second quarter of 2011, and is its lowest reading since December 2010.
A home is considered “affordable” when its payments meet standard mortgage underwriting criteria for families earning the local median income. This definition is used for homes across all U.S. markets — including for homes in Allen.
73.8% of homes sold last quarter were affordable to households earning the national median income of $65,000. This is the 13th straight quarter dating back to 2009 that the index surpassed 70. Prior to 2009, the Home Opportunity Index had not crossed 70 even one time.
Like all real estate data, home affordability varied by locale.
In the Midwest, for example, affordability was highest. 7 of the top 10 most affordable markets nationwide were spread throughout the nation’s heartland. An Alaskan city took the top spot.
The top 5 most affordable cities for home buyers in Q2 2012 were:
- Fairbanks, AK (98.7%)
- Mansfield, OH (98.1%)
- Springfield, OH (95.9%)
- Carson City, NV (95.4%)
- Kokomo, IN (95.4%)
At #23, Ocala, Florida (91.7%) was the top-ranked South Region city last quarter.
By contrast, the Northeast Region and Southern California remained among the least affordable housing markets nationwide. Led by the New York-White Plains, NY-Wayne, NJ area, 9 of the 10 least affordable areas were in the Mid-Atlantic and California, and for the 17th consecutive quarter the New York metro area was ranked “Least Affordable”.
Just 29.4 percent of homes were affordable to households earning the area’s median income there, down from 31.5 percent three months ago.
The rankings for all 225 metro areas are available for download on the NAHB website.
Foreclosure pipelines are re-filling nationwide.
And Texas is one of them! We account for 5.2% of the total filings nationally. But it’s not all bad news. There was actually a decrease from prior months.
The number of foreclosure filings dipped below 192,000 in July 2012, a 3 percent decrease from the month prior, according to data from RealtyTrac, a national foreclosure-tracking firm.
RealtyTrac defines a “foreclosure filing” as any foreclosure-related action, including a Notice of Default, a Scheduled Auction, or a Bank Repossession.
July marks the 22nd straight month during which foreclosure filings fell on a year-over-year basis.
At some point soon, however, that streak may end. This is because, for the third straight month, on an annual basis, foreclosures starts are on the rise.
More than 98,000 homes started the foreclosure process in July, a 6 percent increase from July of last year. Connecticut, New Jersey and Pennsylvania experienced the biggest increases, rising 201%, 164% and 139%, respectively.
Each is a judicial foreclosure state, which means that foreclosures must go through the state court system prior to auction.
Just 5 states accounted for more than half of July’s total foreclosure activity nationwide:
- California : 21.9 percent
- Florida : 13.3 percent
- Illinois : 7.2 percent
- Georgia : 5.7 percent
- Texas : 5.2 percent
Collectively, these 5 states represent just 33 percent of the nation’s population.
In contrast to the five states above, the bottom 14 states accounted for just 1 percent of the nation’s foreclosure activity, led by North Dakota. In North Dakota, just 3 foreclosure filings were made in July. Other “fewest foreclosure” states in July included District of Columbia (7 filings), Vermont (31 filings), and South Dakota (63 filings).
For home buyers in Collin County, with more foreclosed properties expected to go for sale this year and next, there will be some “good deals” and discounts — foreclosed homes typically sell at discounts of 15% or more as compared to comparable, non-distressed homes. However, foreclosed homes are normally sold as-is, which means they may have defects. They are often vacant for long periods of time, as well, and that leads to defects that are not visible. Professional inspections are critical!
Before making an offer on a foreclosed property, make sure to have an experienced real estate agent on your side. Buying a foreclosed home may save you money at your closing, but may cost you money longer-term.
Call Norma Wall, Broker, 214-212-6770 when you’re ready to buy or sell. Our real estate professionals at North Point Realty will do the heavy lifting for you!
80 U.S. metropolitan markets are showing “measurable and sustained growth” this month, according to the National Association of Homebuilders’ Improving Market Index.
It’s good news for the economy and good news for housing.
The NAHB’s Improving Market Index is meant to identify U.S. markets in expansion. It’s a composite of the three distinct data sets which, as a group, present a more holistic view of a given city’s growth :
- From the Bureau of Labor Statistics, the IMI tracks employment figures
- From Freddie Mac, the IMI tracks home price data
- From the Census Bureau, the IMI tracks single-family building permits
The home builder trade group compiles this data and, in order for a given metropolitan area to earn the label “improving”, the area must meet two specific growth conditions.
First, in a given city, each of the above data sets must show growth or expansion in the current calendar month. If one of the three do not show growth, the city cannot qualify.
Second, in a given city, at least six months must have passed since the most recent trough of all of the above metrics. It’s this second clause that can make the Improving Market Index meaningful.
By focusing on long-term growth trends within a city, the IMI ignores “blips” and seasonal irregularities.
The August IMI shows 80 improving markets nationwide, a 4-city decrease from July 2012. 5 new cities were added to the index including Miami, Florida; Terre Haute, Indiana; and Lubbock, Texas. Nine cities fell off the list.
Overall, 32 states are represented in the IMI, and the District of Columbia, too.
For today’s Allen home buyers, the IMI doesn’t provide much actionable information. It doesn’t show home prices, for example, nor the current demand for homes. What it shows is the strength of local economies, though, and in many cases, as the economy heats up, so do home prices.
The complete Improving Markets Index is available for download at the NAHB website.
Home sales appear headed for a mid-summer breather.
One month after posting a multi-year high, the Pending Home Sales Index retreated to 99.3 in June — a strong reading in its own right.
A “pending home sale” is a home that is under contract to sell, but not yet sold. June’s value of 99.3 marks the 14th consecutive month during which the index showed year-to-year gains.
Last year in June, the index read 90.7.
For home buyers in Plano and nationwide, the 14-month winning streak is one worth noting — specifically because the Pending Home Sales Index is different from the other housing market data that tends to make headlines.
Unlike the FHFA’s Home Price Index, for example; or the monthly New Home Sales data which both report on how housing performed in the past, the National Association of REALTORS®’ Pending Home Sales Index looks at how housing will perform in the future.
With high correlation, the Pending Home Sales Index predicts how Existing Home Sales will perform two months hence. This is because 80% of homes under contract convert to “closed sales” within 60 days of going into contract, and many of the rest convert within Months 3 and 4.
In addition, June’s near-100 reading is significant.
The Pending Home Sales Index is normalized to 100, a value which corresponds to the average home contract activity in 2001, the index’s first year of existence. 2001 was an historically-strong year for the housing market which means that June’s market action was also strong.
For today’s home buyers, the Pending Home Sales Index implies that the current market is somewhat “soft” as compared to May, a scenario which lends itself to buyer-friendly negotiations. Plus, with mortgage rates at all-time lows, home affordability has never been higher.
It’s an opportune time to buy a home. By next month, the market may look different.