Real Estate News

Still many positive indicators in the housing market

Published: 14 Sep 2017

As the summer comes to a close, many housing industry veterans might expect the market to cool down with the temperature. However, the last several months have shown that this is no ordinary housing market, and the activity seen within it during the month of August may portend a stronger autumn than has been common in recent years.

Indeed, the total number of applications for mortgages on new home purchases rose 7 percent from July (a month that did not meet expectations for a litany of reasons), as well as 6.8 percent on an annual basis, according to the latest Builder Application Survey from the Mortgage Bankers Associations.

Lynn Fisher, the MBA's vice president of research and economics, noted that there could be some potential hurdles with purchases of newly built homes going forward, the report said. These expected issues include the fact that the average price of these properties reached an all-time high of nearly $335,000 in August, which could discourage some buyers. Moreover, about 1 in every 3 applications for these properties came for homes in either Texas or Florida, meaning it's probable that activity could take a step back - both in terms of building and purchasing - in the wake of Hurricanes Harvey and Irma.

Shoppers sought out more newly built homes in August.Shoppers sought out more newly built homes in August.

Looking at July's downturn
The big rebound from July's application activity surrounding new homes might come as a surprise to some because sales during that month took a huge step back. Census Bureau data showed new home sales fell more than 9 percent in July, largely due to sharp increases in median sales prices of those properties and builders' inability to keep up with the significant demand seen in the market today.

In addition, industry experts note that prices for newly built homes are huge in comparison with historical norms, especially when compared to prices for existing homes, the a CNBC report said. A recent research note from John Burns Real Estate Consulting added that new home prices today are about 35-40 percent higher than those for existing homes, compared with the average of just 10-20 percent seen since 1990.

Nonetheless, as more builders add to the newly built home supply nationwide, and buyer competition wanes as fall progresses, prices could moderate.

Financial institutions lend a hand
Meanwhile, lenders continue to make it easier for buyers of just about all types to obtain a home loan, according to the MBA's latest Mortgage Credit Availability Index. The overall MCAI rose 0.7 percent in August, to a reading of 180.2, versus a benchmark of 100 set in March 2012. Had the MCAI existed prior to the economic downturn, it would have read close to 900.

Interestingly, 3 of the 4 MCAI components - conventional, conforming and jumbo mortgages - all ticked up at least 1.4 percent in the month, while access to government-backed home loans rose just 0.1 percent.

Easing restriction may be good news for would-be buyers because it could allow them to lock in more affordable terms on their home loans over the next few months. That benefit might be vital, as rates are expected to rise more sharply toward the end of the year and beyond.