Great news at the beginning of 2018 from the end of 2017-- existing home sales jumped 5.6% in November 2017 to its highest level in 11 years. The U.S. housing market recovered from its hurricane-based slowdown and pent up demand for purchases caused a surge in existing home sales; it's unlikely to see more significant increases like this until new housing can meet current demand. Additionally, the Case-Shiller U.S. National Housing Prices Index continued to climb past its 2007 peak before the Great Recession. (Image below displays data from Jan. 2006 to present)
Some economists are concerned by the latent demand for housing by financially-strained millennials. "Higher student debts and the difficulty of getting on the housing ladder have made it harder for millennials to build a nest-egg. That disparity might come back to bite the baby-boomer generation, who are fast moving into retirement. When baby-boomers want to cash in their assets, they may find millennials can’t afford to buy them at current prices," full article here. Whether or not millennials will be able to purchase those assets could be the crux of another macroeconomic issue in the housing market.
The U.S. Senate convenes today and the House of Representatives will start again next Monday. At the top of the agenda: passing a budget deal by January 19th to avoid a government shutdown, renewing funding for the Children's Health Insurance Program, and reauthorizing the Foreign Intelligence Surveillance Act.
Be on the look out for our Calls-For-Action as congress and the state legislature reconvene!
In October, the latest month for which data is available, existing-home sales rose by 2.0% to their fastest pace since earlier this summer. A continued short supply of homes led to lower sales year-on-year for last October, however. Additionally, pending home sales rose a robust 3.5% in October, following three months of diminishing activity. Pending sales also fell behind in a year-on-year comparison, however.
The market conditions caused by having a limited supply of homes for sale are prevalent in all relevant economic and behavioral metrics, particularly in October's foot traffic, which rose by 28.8 points last month and is up over 33.9 points year-on-year. Dr. Lawrence Yun, the National Association of REALTORS®' resident economist, views foot traffic as an indicator of future sales between two and three months into the future.
While the labor market has become rather tight over the last couple of years and wage growth has increased accordingly, the market for home-sales is likely to remain taught (with continued price increases) for some time into the future. As the Federal Reserve acts to increase interest rates, the costs of borrowing for home-buyers will increase as well, outpacing any rise in wages causing downward pressure on housing prices. This, according to market data and forecast for the next three quarters, is likely to be met with increased new-home construction. Notably, labor productivity in construction has remained constant since about 1960, dramatically lagging behind other economic sectors of labor. As these trends continue, the market seems amenable to a long-term spate of new-home construction, exactly what our economic data seems to indicate for 2018Q2.
As the North Carolina Homeowners Alliance closes out the 2017 year, we are keeping our eyes on National Tax Reform and the National Flood Insurance Program-- should these developments materialize, we will reach out to you with a call for action!
The National Association of REALTORS released its quarterly Metropolitan Median Area Prices and Housing Affordability Index; the report showed that the majority of the 146 metropolitan statistical areas (MSAs) surveyed have a sever lack of housing stock, driving prices higher.
In North Carolina, 7 cities are classified as MSAs by the Office of Management and Budget, their quarterly Median Home Price changes were:
- Durham-Chapel Hill Area- 7.3% increase
- Fayetteville- 0.4% decrease
- Raleigh- 6.9% increase
- Wilmington- 6.9% increase
- Greensboro-High Point Area- 5.7% increase
- Winston-Salem- 3.6% increase
- Charlotte- 8% increase
While increasing home prices have largely been considered good news, housing affordability has decreased across the country as the supply for home sales has become too small to meet demand. National Association of REALTORS' Economist, Dr. Yun, forecasts a 9.4% jump in construction of single-family homes next year, which should help meet demand and slow price increase; this 9.4% jump will only produce 950,000 new homes, far below the 1.2 million average for the last 50 years, however.
As the federal government begins to take on Tax-Reform, we urge to you to review our positions and take action on our consumer protection website-- many of the exemptions that benefit homeowners (like the Mortgage-Interest Deduction) are on the chopping block and need your help. You'll hear more about this from us soon!
Be sure to check out this month's housing minute!