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

Will First-Time Home Buyer Demand Withstand Rising Rates?

By Mark Fleming on June 12, 2018

Given the strong likelihood of rising mortgage rates in 2018, many savvy real estate market observers are curious how rising rates may impact demand, especially among millennial first-time home buyers. As part of our quarterly First American Real Estate Sentiment Index (RESI), we recently surveyed title insurance agents and real estate professionals across the nation for their perspective on how sensitive they thought first-time home buyers were to rising mortgage rates and at what rate they would withdraw from the market.

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Topics: Housing, millennials, Real Estate Sentiment Index, insider

Unadjusted House Prices Are Higher Than Ever, But What Is The Real Story?

By Mark Fleming on May 24, 2018

As the home-buying season continues, the inventory of homes for sale remains historically low, while demand is increasing. Not surprisingly, house prices continue to rise. In March, unadjusted house prices increased by 6.4 percent compared with a year ago and they are now 8.7 percent above the housing boom peak for unadjusted house prices reached in 2007. But, does that tell the real story?

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Topics: Real House Price Index, affordability, insider

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

What Does The Change In The 10-Year Treasury Note Mean For Housing Affordability

By Mark Fleming on May 7, 2018

At the May Federal Reserve (Fed) meeting last week, all eyes were on the 10-year Treasury yield. In late April, that yield topped 3 percent for the first time in more than four years. With yields on the rise, housing market participants expect this to mean higher interest rates from central banks. It’s often overlooked that the popular 30-year, fixed-rate mortgage is benchmarked to the 10-year Treasury bond. In fact, as shown in the chart below, since the end of the recession, the 30-year, fixed-rate mortgage has on average remained 1.7 percentage points higher than the 10-year Treasury bond yield. So, if that trend remains consistent, if the 10-year Treasury yield rises above 3 percent, then the 30-year, fixed-rate mortgage rate should also rise to 4.5 percent.

“The recent increase in the 10-year Treasury yield indicates higher mortgage rates are likely in the very near future. But, even as mortgage rates increase, we remain well below the historical average of about 8 percent for a 30-year, fixed-rate mortgage – and house-buying power remains strong.”

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Topics: Interest Rates, Real House Price Index, Federal Reserve, affordability, insider, mortgage rates

The Link Between Wage Growth And House-Buying Power

By Mark Fleming on May 5, 2018

Yesterday, the Bureau of Labor Statistics released the employment situation report for April. Here are the highlights. Total non-farm payroll jobs increased by 164,000 in April. In fact, total non-farm payroll jobs have now increased every month since October 2010. Since that date, the U.S. economy has added more than 17.5 million jobs. The unemployment rate edged down to 3.9 percent, a 17-year low, in April and average hourly earnings are up 2.6 percent over a year ago for production and non-supervisory employees. So, why would an uptick in wages matter to a housing economist? Read on.

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Topics: Housing, income, insider, employment situation, jobs report

The Powerful Forces Reducing Affordability

By Mark Fleming on April 23, 2018

Last week, the average 30-year, fixed-rate mortgage rose 5 basis points to 4.46 percent, reaching its highest level since January of 2014. The consensus among economists is that the 30-year, fixed-rate mortgage will approach 5 percent by the end of this year. All else held equal, this will make housing more expensive. However, some perspective is important. The historical average for the 30-year, fixed-rate mortgage is about 8 percent so, even with the expected increase, mortgage rates will still be low by historical standards.

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Topics: Real house prices index, affordability, insider