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Economic Center Blog

Mind The Gap…Between Household Formation And Home Building

By Mark Fleming on June 20, 2018

Closing the Housing Stock Gap

Today’s Census Bureau report sends an optimistic message about the housing market. Building permits increased 8.0 percent since this time last year, while housing starts rose 20.3 percent. The year-over-year increase in housing starts tells us that an increase in new housing supply is on the way. The pace of housing completions, at a 1.29 million seasonally adjusted annualized rate (SAAR), is particularly important as it brings new supply that can offset current housing shortages.

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Topics: Housing, Homeownership, housing starts, insider

What's The Outlook For Housing Market Potential Amid Rising Mortgage Rates?

By Mark Fleming on June 18, 2018

With the Federal Reserve Open Market Committee (FOMC) decision to increase the Federal Funds Rate last week, the prospect of higher mortgage rates remains top of mind among real estate professionals and continues to generate headlines. Yet, changes to the short-term rate matter little to the housing market.

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Topics: Interest Rates, Homeownership, Potential Home Sales, Federal Reserve, insider, mortgage rates

The Surprising Impact Of Rising Rates On Market Potential

By Mark Fleming on May 23, 2018

In April, the housing market continued to underperform its potential. Existing-home sales were 6.5 percent below the market’s potential for existing-home sales, according to our Potential Home Sales Model. Lack of supply remains the primary culprit. The inventory of homes for sale in most markets remains historically low, yet demand continues to rise as millennials further age into homeownership.

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Topics: Interest Rates, Homeownership, Potential Home Sales, insider, mortgage rates

What Does California's Solar Panel Mandate Mean For Affordability, And April Housing Starts Data Signal Optimism

By Mark Fleming on May 17, 2018

California moved to the center of the new residential construction solar system last week as it became the first state to mandate solar panels on new residential homes. The mandate is part of California’s “Energy Efficiency Strategic Plan,” which includes the goal that both residential and commercial construction be zero net energy by 2030. The jury is split as to whether the benefits of the new requirement will outweigh the costs. On one hand, the mandate will significantly expand mainstream use of solar power. However, it will add thousands of dollars to the cost building a new of home when the shortage of affordable housing is a significant concern in California. Clean energy advocates claim lower energy bills will more than offset the extra cost. We put this notion to the test.

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Topics: Housing, Homeownership, affordability, housing starts, insider

Are Baby Boomers The Key To The Housing Market Shortage?

By Mark Fleming on May 14, 2018

Baby boomers – those born between 1946 and 1964 – have steered economic trends for decades and have the highest rate of homeownership in the country, approximately 80 percent. Now, as the oldest members of the generation edge into their 70s, they are deciding to stay in their homes. According to a Realtor.com housing shortage survey, boomers have the least interest in selling their home. Approximately 85 percent of baby boomers surveyed indicated they are not planning to sell their home in the next year. The main reason, according to the survey, is that their current home meets the needs of their family.

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Topics: Homeownership, Homeownership Progress Index, insider

Two Trends Signal Housing Supply Relief On The Way

By Mark Fleming on April 18, 2018

It’s no secret that the limited supply of homes for sale is the biggest issue facing the housing market today. From a short-term perspective, this month’s overall pace of housing starts, 1.32 million units, may modestly alleviate the supply shortage. Housing starts increased 1.9 percent month over month and are 10.9 percent higher compared with March 2017. Housing completions, the number of net new homes added to the housing stock, increased by 1.9 percent compared with a year ago, which provides some immediate relief for the supply shortage.

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Topics: Housing, Homeownership, housing starts

Busting The Myth Of The Millennial Renter Generation

By Mark Fleming on April 13, 2018

It’s a popular myth – the millennial generation is destined to be a generation of renters – avocado toast, anyone? With student loan debt burdens, the scars of the Great Recession, and limited housing supply, the myth is rooted in some real challenges for millennials. However, despite these challenges, millennials are not only interested in homeownership, they are the primary reason that the homeownership rate increased over the past year.

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Topics: Homeownership, millennials, Homeownership Progress Index, insider

How High Is Too High For Mortgage Rates?

By Mark Fleming on March 20, 2018

The Federal Open Market Committee (FOMC) meeting is just around the corner, and experts agree that an increase in the Federal Funds Rate is almost certain. In fact, the expectation of future Fed rate hikes is already putting upward pressure on mortgage rates. The benchmark 30-year, fixed-rate mortgage rate jumped three basis points to 4.4 percent this past week. Since the start of the year, the benchmark rate has climbed almost half a percentage point and has increased for eight consecutive weeks. Concern is growing about the impact of the rising mortgage rates on the housing market, but it is important to keep today’s mortgage-rate environment in perspective.

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Topics: Interest Rates, Homeownership, Potential Home Sales, insider, mortgage rates

How Will Rising Rates Impact Home Sales?

By Mark Fleming on February 20, 2018

This month, the market potential for existing-home sales increased to a 6.1 million seasonally adjusted annualized rate (SAAR), a 0.4 percent month-over-month increase, and a gain of 210,000 (SAAR) sales from January 2017. The gap between actual market performance (existing-home sales) and market potential (potential home sales) has significantly narrowed as actual existing-home sales have surged in recent months. Nonetheless, the housing market is still underperforming its potential.

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Topics: Interest Rates, Homeownership, Potential Home Sales, mortgage rates

Housing Market Potential Little Changed, But Will The Supply Shortage Continue In 2018?

By Mark Fleming on January 23, 2018

First American’s proprietary Potential Home Sales model examines December 2017 data and includes analysis from First American Chief Economist Mark Fleming on how the real estate market is performing versus its potential.

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Topics: Interest Rates, Homeownership, Potential Home Sales, mortgage rates