Gain in Builder Sentiment for Spring

Gain in Builder Sentiment for Spring. Image courtesy of imagerymajestic / FreeDigitalPhotos.net

Builder confidence in the single-family new-home market ticked up by only one point in March as builders remain concerned about several challenges in the sector, according to the latest reading on the National Association of Home Builders/Wells Fargo Housing Market Index.

“The March HMI mirrors last month’s sentiment, as builders continued to be affected by poor weather and difficulties in finding lots and labor,” says NAHB Chairman Kevin Kelly.

Several factors are raising concerns about meeting demand for the spring buying season, says NAHB Chief Economist David Crowe.

“These include a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale,” Crowe says.

NAHB’s index gauges builder perceptions of current single-family home sales and sales expectations for the next six months, as well as buyer traffic. Overall, builder sentiment in March was 47; any number below 50 indicates that more builders view conditions as poor than good.

Broken out, the component gauging current sales conditions was 52 in March; the component measuring sales expectations for the next six months was 53; and the component measuring buyer traffic rose two points to 33.

Source: National Association of Home Builders

Fallout to the Refinancing Bubble?

Fallout to the Refinancing Bubble? Image courtesy of supakitmod / FreeDigitalPhotos.net

Home owners who refinanced when fixed mortgage rates inched in record territory below 4 percent may be less likely to sell their homes as interest rates climb, according to a recent survey of 1,900 Americans by the Seattle-based real estate brokerage, Redfin.

If so, tight inventories of homes for-sale may persist. Home buyers said that “low inventory” topped their list of frustrations in the housing market, according to the survey.

While those who nabbed a low-refinance rate may want to keep their homes, they may opt to rent them out instead of sell. According to Redfin’s survey, 39 percent of home owners said they planned to buy a home and rent out an existing-home instead of selling it.

“Many of my home buying clients refinanced and locked in a very low mortgage rate in recent years,” says Taylor Connolly, a Redfin real estate professional based in Baltimore. “The low rate, combined with a strong rental market, means they can charge more in rent than they pay in mortgage each month, so they are going for it. … Keeping their old home means they won’t have to risk becoming temporarily homeless like those whose homes sell quickly, but can’t find a new home before they have to move out.”

Source: “Fallout From Refinancing,” The New York Times (March 13, 2014) and “39% of Buyers Prefer to Rent Out Their Last Home Rather Than Sell,” Redfin (Feb. 27, 2014)

Despite Price Gains, Homes Still Undervalued

Despite Price Gains, Homes Still Undervalued. Image courtesy of Danilo Rizzuti / FreeDigitalPhotos.net

Despite double-digit percentage increases in home prices, homes are still undervalued relative to incomes, according to CoreLogic.

“Much of the recent house-price appreciation is a result of market correction for the significant undervaluation caused by the price declines in the late aughts,” CoreLogic chief economist Mark Fleming writes in a blog post. He adds that “there is no need to fear a bubble for at least a few years to come, if at all.”

Fleming says that home prices did get way ahead of income levels in the early 2000s, but a significant over-correction has taken place. He argues that incomes are key to forecasting home prices, saying that home-price growth cannot be sustained at higher levels than income growth because housing would become unaffordable and demand would decline.

“Rising interest rates and the ‘unlocking’ of pent-up supply as home prices continue to increase are expected to slow the pace of home price appreciation,” Fleming notes. “At the same time, continued improvement in the economy will modestly increase income growth. The net effect is that home prices are expected to remain slightly undervalued relative to income levels through the end of 2015.”

Source: “Home Prices Actually Undervalued Based on Incomes: CoreLogic,” Mortgage News Daily (March 12, 2014)

Model Home for Your Tabletop

Model Home for Your Tabletop. Image courtesy of Naypong / FreeDigitalPhotos.net

If you sell new construction, you’re probably familiar with the CAD files used by builders to design the home, and you’ve probably experienced the frustration of helping home buyers imagine the look of the home from those files. If one company has its way, you may be able to turn those files into 3-D models of homes soon.

The Plan Collection hosts floor plans for over 20,000 homes created by a variety of architects. The company is moving forward with a plan to include data so that 3-D printers can create miniature versions of the homes that will fit on a desk or table, giving buyers a better impression of the layout of the home.

So far, the company has released a CAD file of a 3,300-square-foot home with six bedrooms and 3 1/2 baths. “Many home owners have a tough time visualizing how floors stack on top of each other,” The Plan Collection says in a press release. “The to-scale model allows users to quickly understand how these floors work together as a whole.”

3-D printers use Computer-Assisted Design files to create miniature models by melting and extruding plastic, building up layers to create full surfaces. Along with the benefits to buyers, the company touts improvements such as the ability to visualize all angles of a home both inside and out and to test the orientation of a home on a property to optimize sunlight in the home.

The Plan Collection compares the state of 3-D printing now with the evolution of PCs that were invented in the ’70s and mobile phones that first appeared in the ’80s. The technology is currently most popular with craftmakers and hardware tinkerers,

Source: “You Can Now 3D Print a Model of Your New Home,” Gizmodo.com (3/16/2014)

Why Education Will Keep Housing Crisis at Bay

Why Education Will Keep Housing Crisis at Bay. Image courtesy of anankkml / FreeDigitalPhotos.net

Arming today’s youth with greater financial knowledge is the key to making sure there is no repeat of the housing and economic crisis, Richard Cordray, director of the Consumer Financial Protection Bureau, said at a meeting Monday of the President’s Advisory Council for Financial Capability for Young Americans.

“Now more than ever, as we emerge from the deepest financial and economic crisis of our lifetimes, people need the know-how to manage the ways and means of their lives,” Cordray said. “The choices they face in the financial marketplace, with instruments like mortgages, credit cards, auto loans, student loans, credit reporting, and more, are increasingly complex.”

Cordray said that childhood education is crucial to shaping housing’s future and should include:

• Financial education: Cordray said that financial education needs to begin at a young age, with the benefits of compound interest being taught in math classes; economic costs and risks in social studies classes; and overall curriculum involving how to use and protect money.
• Experimental learning: Cordray said that financial management should be practiced through experimental learning, whether that’s through simulating a banking experience or a computer game that teaches financial skills.
• Integration into standardized tests: Financial education concepts should be integrated into standardized tests, which would then make it more of an incentive for more teachers to teach such concepts, Cordray said.
• Parent involvement:  “Parents help set expectations, and research has shown that if parents engage their children by establishing a savings account for them, these children are seven times more likely to attend college than those without a savings account,” Cordray said.

Source: “5 Ways Children Hold the Key to Housing’s Future,” HousingWire (March 10, 2014)