New home sales hit 7-year high
The sale of new homes has hit a 7-year high according to the latest data from HUD and the US Census Bureau. Sales of newly built, single-family homes rose 2.2 per cent to a seasonally adjusted annual rate of 546,000 units in May although there were wide regional differences; sales up 87.5 per cent in the Northeast and 13.1 per cent in the West while the Midwest saw a 5.7 per cent decline and the West fell 4.3 per cent. “This month’s new-home sales report is consistent with other government data and rising builder confidence that indicate a continual recovery of the housing market,” said National Association of Home Builders chief economist David Crowe. “The uptick in existing-home sales bodes well for builders, as it shows that the sellers are able to buy a new home.”
National trends in real estate less prevalent says report
The effect of national trends in the housing market are becoming less prevalent in local markets according to a new report from Zillow. While the financial crisis and the aftermath saw similar trends sweeping across many metros there are now widely different trends in local markets.
"What we're seeing is the passing of the baton – as mortgage rates begin to rise and incomes and household formation rates increase – from a stimulus-driven housing market to one driven by fundamentals," said Zillow chief economist Dr. Stan Humphries. "This transition from housing recovery to a more normal market is a good thing in the long-term, but we can expect some bumps along the way. In the end, increasing household formation and stronger income growth should be able to overcome the headwind of rising mortgage rates and return markets to health."
While home values increased by 3 per cent nationally in May according to Zillow’s data there are some metros with record prices (Denver, San Francisco and San Jose for example) while others such as Las Vegas, Tampa and Orlando are still well below their pre-crisis levels.
Freddie forecasts more Americans ready to take on mortgages
The June Economic and Housing Market Outlook from Freddie Mac shows that low interest rates and improved household finances are prompting more Americans to take on mortgages but homeownership is unlikely to increase. The corporation expects mortgage debt outstanding to increase this year through 2017 but despite the increased demand, don't expect the homeownership rate to increase. Demographics will continue to trump demand. As the labor market continues to improve, millions of additional households and homeowners will be added to the economy, but homeownership rates are likely to keep falling this year.
Freddie Mac’s deputy chief economist Len Kiefer commented: "This is good news and will present mortgage, housing and capital markets with new opportunities. Going forward we'll see a slow shift from Boomers as the dominate cohort in housing to the Millennials, who are just now entering prime homeownership years and unleashing further pent-up demand."