Category: New Home Construction

Cost of Building Materials, Homebuilders, and the Housing Market – July 2021

The housing market has been as hot as the day is long. Are we finally beginning to see a cooldown?

Although the housing market is still expected to favor sellers, we may be at a tipping point. Prices have risen so dramatically that buyers appear to be backing off, and home sales seem to have slowed.

Market Temperature Is Relative

Even with slowing sales, we still see bidding wars and cash offers over asking price. These will likely continue, especially for valuable properties in desirable locations. What we are seeing now is probably a softening of the housing market. Days on the market for properties is increasing, the amount of price cuts are going up, and properties are sitting for a bit longer, especially if they are not the crème de la crème. All this is thanks to a decrease in demand.

Lack of Affordability Is the Coolant

After experiencing a housing surge through the pandemic, the number of mortgage purchase applications appears to be close to pre-pandemic levels. According to a new Redfin study released earlier this week, home sales fell 1.2% from May to June, the largest drop at this time of year on record since at least 2012. In June, we entered a new phase of the housing market; home sales cooled because prices have increased beyond what many buyers can afford.

Builders Still Deal With High Material Costs

In the meantime, builders struggle with supply shortages, elevated costs for building materials — particularly lumber — which has skyrocketed to more than 500% above its January 2020 level. While lumber prices have decreased slightly, those relative “savings” have not yet been realized by remodelers, builders, or consumers yet.

Bullish Builders?

Why are Builders & Developers being so bullish while unemployment ticks up? Because they recognize an opportunity when they see one. Here are two key factors:

Home price growth in the last 12 months: 15-20% year-over-year growth, according to K. Schiller, gives builders an opportunity to profit by selling new homes while demand is hot, and
Interest Rates are relatively low: It is easier and more affordable to get financing for newly build homes.

Housing is not a “Recession-Proof” Market

Is the housing market immune from the effects of other sectors of the economy? Not exactly. In an effort to support the economy in the face of the COVID-19 pandemic, the government chose to intervene, by means of the following:

Foreclosure and Evictions moratorium: preventing those economically impacted by the pandemic from losing their homes. (expiration at end of July)
Extended Unemployment assistance: to give financial support for those whose jobs may have been lost due to the pandemic.
Stimulus Checks: to lend financial support for the general economy at large.
Lower interest rates: the US Treasury has been buying mortgage-backed securities, creating artificial demand to drive down interest rates.

These factors have made it hard to see the effects of the US having lost 6 million jobs from the nation’s pre-covid levels.

However, not all areas in of the US economy have grown much over the last year. In fact, during the job losses, the accumulated debt, and the decline in legal immigration due to COVID, fundamentally, the demand for homes and apartments is not increasing that much. However, the permitting of New House & apartments and the construction of these is increasing a lot to help give relief to the housing shortage that we have been experiencing for several years. The increased inventory may also help bring balance to an overheated market.

Need a hand navigating the housing market?

If you are interested in buying a new or next home, refinancing your current home, or looking to fund a renovation, Benchmark is ready to be in your corner.

Contact your local Benchmark branch. Contact us today for personalized information. Call me yourself or request a call from me. WeI would be honored to provide you with our famous excellent service.

Benchmark brings you home.

Sources:

https://www.nahb.org/news-and-economics/industry-news?q&sortBy=relevance&sortOrder=asc&page=1
https://www.ghba.org/news/
https://www.nar.realtor/
https://reventureconsulting.com/insights/
https://www.housingwire.com/category/mortgage/
https://www.housingwire.com/category/real-estate/housing-market/

Construction Loans: What to Expect

by I Am Benchmark

Building a new home offers many advantages over purchasing an existing home on the market. You are able to customize the home to your specific needs and preferences and avoid costly repairs of outdated features. New homes are often also more energy efficient and technologically equipped.

Different from Traditional mortgages.

Securing financing for a construction loan does differ from obtaining a traditional mortgage, however. Since the home is not yet built, there is more risk for the lender because the home being purchased is used as collateral for the loan. In other words, there is no present collateral to back the loan before it is approved. Much like applying for a traditional mortgage, you will be required to submit documentation pertaining to your income, assets, and credit history to determine if you meet requirements set by the lender to qualify for the construction loan. You and your builder will also provide detailed documentation on the building plans and construction timeline to the lender to evaluate the ability for the project to be completed on time and within budget.

Because of the increased risk that comes with building a house, you can typically expect to need a credit score of 700+ with a sizeable down payment of at least 10-20%. The specific requirements will vary based on your lender and the type of construction loan you choose.

One-Time-Close, or “Construction-to-Permanent” loans

A one-time-close construction loan, also commonly known as a construction-to-permanent loan, is a popular choice among borrowers, because it allows you to avoid the extra expense of two closings when building your new home. Because construction and permanent financing are combined into one loan, you will save on costs associated with title and appraisal fees that would occur if there were two separate closings.

With a one-time close program, the borrower will take out all of the financing to build the home, and the loan is closed before starting construction. Permanent house payments will not typically begin until the construction is completed. The loan is funded as the house is being built through construction draws to the builder. In order to receive these draws, the lender will conduct regular check-ins and inspections of the property to ensure the project is being completed according to the plans and timeline. Generally, you are making interest-only payments as the builder draws funds to build the home. Once construction is completed, the loan will be converted into a permanent note, and your permanent monthly house payment will begin.

In Summary…

Construction loans are a great option for aspiring home owners who want to build their custom dream home from the ground up. While the process differs from obtaining a mortgage on an existing home, your lender can walk you through the process and advise you on the advantages and disadvantages of undergoing a building project.

Have questions about construction financing? Get in touch with me or call me !Get in touch with your local Benchmark branch!Get in touch with us!

Jump in New Home Sales Highest Since 2008

by I Am Benchmark

According to a press release from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, new single family home sales in June grew by 3.5%* over May, and 25.4%** over June 2015. The seasonally adjusted annual rate was 592,000 in June, and 572,000 was the revised rate in May. The rate in June of last year was estimated to be 472,000.

Economists Weigh In

June 2016 is the highest new single family home sales we’ve seen since February of 2008, according to Ralph McLaughlin, Chief Economist for Trulia, who writes, “This is a continued sign that demand for homes remains solid and aptly reflects increasing homebuilder confidence.”

Brent Nyitray, a Chartered Financial Analyst specializing in economics and financial markets, said, “New Home Sales rose to 592k in June, much higher than the Street expectation. The median new home price rose 6.1% YOY to $306,700. There is about 4.9 month’s worth of inventory right now, compared to 5.1 months in May.” (read more)

Home Prices Rose

In June, the median new home sale price was $306,700, with the average sales price at $358,200.

Home prices nationwide rose 5% in May (compared to May 2015), according to the CoreLogic Case-Shiller Indices.

The Takeaway

New Home sales have seen an increase since last year, and since last month, with the highest numbers since February of 2008, 100 months ago. This has surpassed expectations, and signals that demand really is the driving force in the housing market. With the inventory at only 4.9 months, compared to 5.1 months in May, low housing inventory is still driving values up.

With inventory shrinking, home values are likely to increase. With rates still low, it’s a great time to buy. Call us today!

*(±23.9%), **(±27.9%) – 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

How Home Builders Are Appealing to Multiple Generations

by bmadmin

What are home builders thinking about? Multi-generational communities designed to meet the needs of Baby Boomers, Gen X and Gen Y families all living in close proximity.

MarketWatch recently showed how home builders are appealing to the various generational families in the market for a new home and how they are meeting all their different needs.

What are your thoughts on generational living? Can you foresee a time when you may have your parents living with you?

New Construction Starts Highest Since October 2008

by bmadmin

Housing starts rose to 699,000 in January 2012 which is the highest level since October 2008. Prior to the announcement, Econoday was predicting 657,000 – 675,000 housing starts for January. This is a great sign for the real estate market showing builders are regaining confidence.

In fact, homebuilder confidence in the single-family homes market increased for the fifth consecutive month in February, reaching a four-year high. “This is the longest period of sustained improvement we have seen in the HMI since 2007, which is encouraging,” said NAHB Chief Economist David Crowe in the National Association of Home Builders/Wells Fargo press release.

“Builder confidence has doubled since September as measured by the HMI,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “Given the recent improvements in new home starts and the increasing number of markets included in the NAHB/First American Improving Markets Index, this consistency suggests that the housing market is moving toward more sustainable growth.”

HousingWire is also reporting construction of multifamily housing increased by 14% to an annualized rate of 175,000 in January and building permits inched up 0.7% to an adjusted rate of 676,000.

2012 Homes Sales Looking Up

by bmadmin

National Association of Realtors has released their latest home sales information and things are looking up.

According to the “Pending Home Sales Index”, homes under contract are up 7.3%, the second straight month with an increase.

This is the first time since the Homebuyer Tax Credit that the Pending Home Sales Index has gone above 100, a great sign for the market. The best part of these figures is the growth is occurring organically through great affordability and job creation.

So what are the sales trends showing? Lower priced homes are moving quickly while the upper end market is still sluggish. New home sales and new construction starts are both up, a great sign for the months ahead.

Through the broader economy, we are seeing increased job growth from 100,000 per month and may even increase to 150,000 jobs created per month, which will continue to grow the real estate market.

For the full interview with Lawrence Yun, National Association of Realtors Chief Economist, view it below:

New Home Construction on the Rise

by bmadmin

According to the latest release from the U.S. Department of Housing and Urban Development, privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 653,000. This is 10.9 percent (±1.6%) above the revised September rate of 589,000 and is 17.7 percent (±3.4%) above the October 2010 estimate of
555,000.

Housing starts also saw a marked increase of 16.5% over October 2010 with 628,000 new homes under construction.

While construction is definitely picking up, completed construction saw a small dip in numbers. This was to be expected from the slow construction starts over the last 90 days.

With the increase in building permits and housing starts, we should a continual improvement in completed construction over the next few months.

To read the full press release, visit www.census.gov.