Morning Briefing: Homebuilder highlights decline of the first-time buyer

by Steve Randall29 Mar 2016
Homebuilder highlights decline of the first-time buyer
KB Homes, America’s 8th largest builder of homes, has reported its annual financial results and highlighted some of the challenges facing the industry.

The firm reported housing revenues up 28 per cent to $672.6 million in the year to Feb. 28 2016 and improved gross profit of 16 per cent. “A strong start,” CEO Jeff Mezger noted.

However, in a conference call CFO Jeff Kaminski commented that the firm’s proportion of customers who are first-time buyers has been down to around 50 per cent over the past three years; in 2008 the figure was 70 per cent.

The 50 per cent level has held steady despite rising home prices and Kaminski noted that it was hard for some millennials to get on the housing ladder due to an inability, or unwillingness, to take on a large mortgage debt. The firm’s figures show that average selling prices of their properties have increased 5 per cent in the past year, to $344,400.

KB Homes, as with other builders, has found limited supply of building land in city centers to be a problem. Kaminski said that as the labor market improves and people look to move out of low-supply urban areas, builders will be able to meet demand in areas with higher availability of land.

Task force focuses on future of secondary mortgage market
A task force made up of mortgage professionals will consider the future of the secondary mortgage market. The group, which has been formed of members of the Mortgage Bankers’ Association, will be chaired by Rodrigo Lopez, CMB, Executive Chairman of NorthMarq Capital Finance and Chairman-Elect of MBA.

"A strong, sound secondary mortgage market is paramount to the overall success of the real estate finance industry. That is why it is of the utmost importance that policymakers and stakeholders create a strong and stable system that ensures liquidity, affordable mortgage credit and serves consumers,” Lopez commented. 
Homes hit record prices in 25 per cent of markets
More US homes are at record prices than ever before, even during the boom of a decade ago. Zillow’s Home Value Index shows that in the past year, homes in 26 per cent of US markets reached new peaks, even those in the South which have struggled to recover from the crash.

For example, Dallas home values set a new record at $180,700 in February, up 13.7 per cent in a year; Louisville, KY values rose 13.2 per cent to $146,100; and Nashville home values rose 9.5 per cent to a median of $189,100.

"These new records mean we're no longer making up ground lost during the housing recession --we're laying a new path forward, based on demand for housing and economic growth throughout the economy" said Zillow Chief Economist Dr. Svenja Gudell.

He noted that it was a return to normal conditions for some markets but also stressed that even in markets where there has not been a huge surge, it could be that prices reached during the bubble were so overinflated that a return to those levels is some way off.