The Double-Edged Sword of the Housing Market’s Recovery

Posted on November 01, 2017 in Uncategorized | Add Your Voice

The Double-Edged Sword of the Housing Market’s Recovery
Two great articles that have come out over the last few days that highlight the maddening and marvelous Catch-22 in the housing market: “Stuck in Place, U.S. Homeowners Hunker Down as Housing Supply Stays Tight”  (WSJ) and “First-time Buyers Stifled by Low Supply, Affordability: 2017 Buyer and Seller Survey” (NAR) discuss how prospective sellers are not looking to sell their homes because there’s nothing for them to buy and move  into and there’s nothing to buy, because nobody is willing to sell. The housing market’s comeback after the financial crisis has turned out to be a double-edged sword.

Prices have recovered to pre-housing-crisis levels. But with inventories at historic lows, there are fewer affordable houses available for millennials, first-time buyers, and even buyers looking for a bigger home to move up to, especially in bigger cities.

“On the surface, that ought to be good news for existing homeowners looking to sell. This gap has created the most competitive buyers’ market on record for existing homes, judging by how long homes stay listed, according to the National Association of Realtors,” according to The Collingwood Group Chairman Tim Rood. “Existing homes listed for a record-low median of 25 days. Shorter listing times suggest buyers are snapping up houses as quickly as possible, indicating a hot market.”

Generation X Recovery Boosts Homeownership Rate
More Americans became homeowners last quarter, and in an optimistic sign for the housing market, their numbers were boosted by the generation that got smacked the hardest by the crisis of a decade ago.

The national homeownership rate rose to 63.9% in the third quarter, the Census Bureau said Tuesday. That’s up from 63.7% in the second quarter and 63.5% a year ago. Even better, the number of owner-occupied households rose more quickly than the number of renter-occupied households for the second straight quarter.

Because the Census Department’s ownership report spans so much time, it can be hard to discern trends from the data. But now, with multiple quarters confirming the uptick both in the overall rate and the spread between owners and renters, it seems clear that housing in America has turned a corner, said Ralph McLaughlin, chief economist for Trulia.

“Last quarter seems to be an inflection point,” McLaughlin told MarketWatch. “Renters are making the conversion to buying.”

There’s another signal of an improving housing landscape in the Census report. Americans aged 35-44 had by far the biggest improvement in homeownership. That age group saw nearly a full percentage point increase over the past year, compared to a more moderate but still solid 0.6 percentage point for those under 35, and a flat reading for those 45 to 54.

read more: Marketwatch

Lennar, CalAtlantic Strike Deal to Create Largest U.S. Homebuilder
Lennar Corp. agreed to buy CalAtlantic Group Inc. for $5.7 billion, creating the country’s largest homebuilder by revenue in the latest affirmation of a U.S. economic expansion now in its ninth year.

The proposal marks the largest merger of homebuilders since the financial crisis, a milestone for the recovery of an industry that was hard hit by the housing collapse last decade but has contributed significantly to U.S. growth in recent years.

The deal would create a combined company with revenues of more than $17 billion as of last year and a market cap of roughly $18 billion, based on Friday’s closing share prices.

Major homebuilders are looking to control rising costs for land, labor and materials as the U.S. housing market expansion continues. Builders increasingly are focusing on first-time homebuyers purchasing less-expensive homes, which has put pressure on profit margins.

Lennar Chief Executive Stuart Miller said the combination will increase Lennar’s presence in markets it already operates in and allow it to be one of the top three homebuilders in 24 of the top 30 markets in the country.

read more: WSJ

Desperate for Workers, a Colorado Homebuilder Starts a Free School
Inside an unassuming warehouse on the outskirts of Denver, 18 students are learning to saw, tile, drill, plaster and paint.

They are mastering how to build a house. While that number might not sound like a lot, today’s homebuilders are desperate for all of them.

The students are some of the first to enroll in an eight-week “boot camp” at the Colorado Homebuilding Academy, a nonprofit organization that opened this year. The course is free, founded and funded by Oakwood Homes, a Denver-based homebuilder.

“Every single year the labor situation has basically gotten worse,” said Patrick Hamill, CEO of Oakwood. “People retire, and there’s nobody to replace them, and as an industry, ultimately we’ve just done a lousy job marketing our opportunities to young people.”

So Oakwood, which is owned by Berkshire Hathaway, started a foundation to fund the academy and donates $1,000 for every house it closes. This year, Oakwood expects to close on 1,356 homes. In its first year, the program will run 11 boot camps, training approximately 200 workers. Next year, company officials hope to double that.

read more: CNBC

Home Prices Close in on New All-Time Highs, Case-Shiller Says
National home prices accelerated in August, according to a report released Tuesday.

The S&P/Case-Shiller 20-city home price index rose a seasonally adjusted 0.5% during the three-month period ending in August and was up 5.9% compared to the same period a year ago. That was stronger than the 5.8% annual gain in the period ending in July.

Case-Shiller’s broader national index rose 6.1% for the year in August, up from 5.9%. The national index surpassed the high it previously set at the peak of the housing bubble last year, and is now 5.6% higher. The closely watched 20-city index is 1.8% shy of the 2006 peak.

Annual price gains in August ranged from 3.4% in Washington to an astonishing 13.2% in Seattle. Las Vegas was second, with a 8.6% increase.

In August, nine cities had greater annual price increases than in July.

read more: Marketwatch

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