Renters Say It’s A Good Time To Purchase A Home
Renters think the housing market is finally loosening up, fueling a sudden optimism among homebuyers
- Recently, too few homes have been for sale, leading to high prices and fierce competition among buyers.
- Yet there has been a sudden burst of optimism among potential homebuyers in a monthly sentiment survey from Fannie Mae.
- Housing confidence rose in September to match the all-time high set in June.
All year, the overwhelming sentiment in the housing market has been frustration. Too few homes for sale drove prices sky high and led to fierce competition among buyers, especially at the entry level. So it was a little bit more than surprising to see a sudden burst of optimism among potential homebuyers in a monthly sentiment survey from Fannie Mae.
The main driver: a big jump in the share of current renters surveyed saying now is a good time to buy. In addition, the share of those respondents saying they believed home prices would go up in the next year dropped significantly.
” Perceptions of easing inventory helped boost the net share saying that now is a good time to buy, which is consistent with less bullish home price appreciation sentiment during the month,” wrote Doug Duncan, Fannie Mae’s chief economist, in the release.
That perception is puzzling, to say the least, as the numbers don’t support it. Inventory at the end of August was down 6.5 percent from the year-earlier period, according to the National Association of Realtors. Home price gains also began accelerating again after plateauing at the start of the summer. Pending home sales, which measure contracts signed, fell in August and have been down five of the last six months, due to low supply.
” Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search,” wrote Lawrence Yun, chief economist for the Realtors.
The supply of existing homes is very low, but the supply of newly built homes is rising. Builders are still nowhere near their normal historical levels of production, but they are increasing supply– albeit at higher prices. Some builders are reporting that renters are skipping the traditional starter home and jumping to that move-up, newly built home instead. That may be due to income growth and the fact that millennials have been renting for a longer period of time than previous generations, putting them higher up on the pay scale.
“Given the 30-year low in existing supply, that’s a reasonable dynamic to see.”
Both imply more spending ahead and consequently higher prices. Despite all of it, some argue that buying a home today is still affordable at least by historical standards.
“Indeed, the median household currently has just over 150 percent of the income needed to buy a median-priced home, which compares to a long-run average of 125 percent,” wrote researchers at Capital Economics in a monthly report on the U.S. housing market.
They also point to loosening mortgage lending standards. The median FICO score in August fell slightly from a year ago, according to Ellie Mae. Lenders are also approving loan applications at the highest rates since 2011, with 77 percent of applications for loans to purchase a home approved– compare that to just 59 percent in 2012.
The Mortgage Bankers Association reported credit availability increased in September, as well. Not surprisingly, credit has eased most for larger loans to buy more expensive homes. That is because most of the sales activity today is happening on the higher end of the housing market, where there are more homes for sale.
“For the year-to-date, the supply of credit has increased only modestly in the non-jumbo space, while it has expanded significantly among jumbo programs,” noted Lynn Fisher, MBA’s vice president of research and economics, in the report.
“Renters Say It’s A Good Time To Purchase A Home”: was provided by Art Di Segna, a recognized leader in his field. Art can be contacted via email at Art@FineHomesOfTexas.com by phone at (281) 415-5888 or Contact Me on this site. Art has helped hundreds of people move in and around many Houston towns for the last 14+ years.
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