Markets in 162 of the approximately 340 metro areas across the US returned to or exceeded their last normal levels of economic and housing activity in 3Q 2016, ac- cording to the National Association of Home Builders/First American Leading Markets Index (LMI) released Tuesday.In 2017, sales of existing homes are forecast to grow roughly 2 per cent to around 5.46 million and continue with a more prominent jump of 4 per cent in 2018 (5.68 million), according to the National Association of Realtors Monday.
US Home Sales, House Prices, and Homeownership Rate: 3Q 2016
The LMI index’s nationwide score ticked up to .98, meaning that based on current permit, price and employment data, the nationwide average is running at 98 per cent of normal economic and housing activity. Meanwhile, 91 per cent of markets have shown an improvement year over year
Elsewhere, the long-expected influx of millennial home buyers may finally occur over the next two years, but a shortage of new entry-level homes will keep inventory tight and prices high, says the National Association of Realtors.
In 2017, sales of existing homes are forecast to grow roughly 2 per cent to around 5.46 million and continue with a more prominent jump of 4 per cent in 2018 (5.68 million), according to the NAR’s chief economist, Lawrence Yun. Yun expects existing-home sales for 2016 to finish at a pace of about 5.36 million — the best year since 2006 (6.47 million).
The national median existing-home price is expected to rise to around 4 per cent both this year and in 2017.
Currently, only 14 percent of homes bought by first-time buyers this year were new construction, the lowest since 2003.
US HOME OWNERSHIP RATES
Despite the challenges of low inventory, rising home prices and some difficulties getting financing, Americans are finding ways to transition away from renting and make homeownership happen. The modest uptick in the homeownership rate in 3Q from 2Q was driven by almost 1 million new homeowner households created in the quarter, and a drop in renter households of more than 600,000 over the same time — the largest quarterly gain and drop, respectively, since 2001.
Household formation overall was strong, rising 1 per cent from a year ago. In September alone, the US add- ed more than 730,000 new households, and has added more than a million since last September. There has been a lot of hand wringing lately about the declining homeownership rate and slowing household formation rate, but this quarter’s data prove that homeownership is stabilizing and buying a home remains an important goal for millions of Americans.
- The 3Q 2016 homeownership rate ticked up to 63.5 per cent from 62.9 per cent in 2Q on the back of strong owner household formation, but remains down slightly from 3Q 2015, according to the US Census Bureau.
- The number of US homeowner households grew by 922,000 in 3Q from 2Q, the highest quarterly change in owner households since 3Q 2001.
- The number of US renter households fell by 606,000 in 3Q from 2Q, the largest decline in at least 15 years.
US Housing Starts Forecast
Looking to next year, National Association of Realtor’s Yun thinks the tight supply and affordability issues affecting buyers in many markets will very slowly but surely start to abate. As housing starts steadily increase, both he and Lockhart are optimistic that housing demand will include leading-edge millennial households finally dipping their toes into the market at a growing rate.
Yun anticipates housing starts to jump 5.3 per cent next year to 1.22 million. However, this is still under the 1.5 million new homes needed to make up for the shortfall in recent years and keep up with the growing demand. New single-family home sales are likely to total 570,000 this year and rise to around 620,000 in 2017.
US HOUSE PRICES
US housing supply is down and prices are up, but there is at least one sign of softening. Landlords and sellers are increasingly cutting prices in order to find takers.
According to a new Trulia analysis, in the 12-months through September, advertised prices were reduced on 9.32 per cent of rental listings around the country, up from 7.97 per cent in the prior year. The share of rentals with price reductions increased in 80 of the 100 largest metropolitan areas.
Meanwhile, 10.66 per cent of for-sale listings took price reductions. That’s up from 10.14 per cent last year. Of the 100 largest metro areas, 70 experienced an increase price reductions on for-sale listings year-over-year.
In the past five years home sale prices across the country are up more than 20 per cent and rentals more than 12 per cent, leaving many to wonder if a peak could be near. In most markets the climb continues, but the price reduction trend Trulia has charted suggests fault lines at the fringes.”
HOUSE PRICE INDEX
The Case Shiller Home Price Index in the United States is expected to be 193.38 Index Points by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, Trading Economics estimate Case Shiller Home Price Index in the United States to stand at 193.50 in 12 months time. In the long-term, the United States S&P Case-Shill- er Home Price Index is projected to trend around 211.00 Index Points in 2020, according to econometric models.
HOME SALES FORECAST
The early signs of softening aren’t enough for the 1 million-member Realtors association to revise its bullish outlook. The association expects about 5.4 million homes to trade in the US this year and another 5.5 million in sales in 2017.
That’s up by more than 1 million annually from the worst of the recession but lags decade-ago peaks by more than 1.5 million transactions.
Yun said student debt levels are keeping many young homebuyers on the sidelines.
He said the absence of younger homebuyers has fueled the overall decline in ownership in America.
The home ownership rate was at a 50-year low two weeks ago,” Yun said. “The decline in home-ownership at 65 and older has been minimal. The decline has been much sharper among the younger generation.”
A growing wealth gap between younger and older households has also held down millennial homeownership, he said. But more adults will soon be in the 30 to 39 age range, which is the sweet spot for first time buyers.
“I believe in the coming years we will see a greater share of first time buyers coming into the market,” Yun said. “If we have more people, more jobs and more wealth, surely home sales should be doing better. We think housing will continue to march forward in the coming years.”
US Existing Home Sales
Existing Home Sales in the United States is expected to be 4,900 Thousand by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, Trading Economics estimate Existing Home Sales in the United States to stand at 5,000 Thousand in 12 months time. In the long-term, the United States Existing Home Sales is projected to trend around 5,000 Thousand in 2020, according to econometric models.
Inventory is still an issue for existing-home sales, which hit a seasonally adjusted rate of 5.47 million in September. That’s up 3.2 percent from August’s pace and up 0.6 per cent from September 2015. Buyer traffic in most states is strong, while seller traffic is weak in many — one of the several indicators of low inventory of existing homes.
Inventory decreased 6.8 per cent year-over-year in September. Properties sold that month were typically on the market for 39 days, compared with 49 days in September 2015. Meanwhile, new-home construction isn’t growing fast enough to meet demand.
Price growth for US homes will continue at the pace of recent months.
The nation’s hottest markets continue to be in the West: Portland, OR, posted an 11.7 percent year-over-year gain, Seattle, WA, was up 11.4 percent, and Denver, CO, showed an 8.8 percent increase.
With the latest gains, home values are inching closer to the pre-recession high set in July 2006.