Welcome to today’s real estate news roundup! In this edition, we’ll be covering a range of topics that are shaping the housing market in 2024. From predictions on when home prices will become affordable again to the challenges faced by builders and the impact of incentives on homebuyers, we have all the latest insights. Discover why the housing market is facing headwinds despite an increase in resale inventory and learn about the ongoing struggles in new home construction. We’ll also delve into the debate surrounding the design choices of new homes and the factors driving their aesthetic. Lastly, find out how one of the largest homebuilders in the US is disclosing the cost of incentives offered to homebuyers. Get ready to dive into the fascinating world of real estate!
Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again? – Forbes Advisor
What many had hoped would be a rosy spring home-buying season ended as a thorny challenge for many prospective home buyers already demoralized by a frustrating market. Yet, even as sales stalled amid elevated mortgage rates and home prices, one silver lining emerged—more resale inventory entered the market, which has begun to put some downward pressure on the pace of home price growth. Other good news for home shoppers is the decline in the median price for a new home—now below the median resale home price—even as builders continue offering incentives to lure buyers. Nonetheless, experts say the housing market will only see renewed momentum once mortgage rates drop enough to ease buyer affordability obstacles and incentivize homeowners locked in at low rates to move. Experts insist the housing market will improve despite high mortgage rates, out-of-reach home prices and sluggish sales transactions amid dampening demand. Unfortunately, hopeful buyers continue to see a delay in this yearned-for transformation, thanks to several ongoing headwinds. One is inflation taking its sweet time cooling off, further delaying the Federal Reserve from cutting the federal funds rate. Mortgage rates indirectly track this benchmark interest rate banks use as a guide for overnight lending. Consequently, with the federal funds rate at its highest level in over two decades, mortgage rates—and borrowers—are feeling the added impact on their ability to afford a home. Meanwhile, U.S. home prices remain unaffected by persistently high mortgage rates, posting an annual 6.3% gain in April, according to the latest S&P CoreLogic Case-Shiller Home Price Index. Even as this annual gain marked a slowdown from the 6.5% gain in March, the index still broke the previous month’s record high. Many experts expect a Fed rate cut will help stimulate the housing market, but it remains unclear when—and if—even a single cut will occur in 2024. For a housing recovery to occur, several conditions must unfold. “For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.” Of course, mortgage rates would need to cool off, which seems promising given the recent declines. The average 30-year fixed mortgage rate trended down over the course of June and early July, coming in at 6.95% for the week ending July 3. However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound. “Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says. He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates. Following years of litigation, the NAR has agreed to pay $418 million to settle a series of high-profile antitrust lawsuits filed in 2019 on behalf of home sellers. The settlement received preliminary court approval in April. A judge is expected to grant final approval in November. Meanwhile, NAR announced that the new required practices will go into effect on August 17. The required new rules prohibit broker compensation offers on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings. Moreover, sellers will no longer be responsible for paying buyer broker commissions—upending an accepted practice that has been in place for years—and real estate agents participating in the MLS must establish written representation agreements with buyers. If you sold a home in the past ten years, you may be eligible for a small piece of this settlement pie. Visit realestatecommissionlitigation.com for more information about filing a claim. Despite more resale homes entering the market, the inventory shortage remains severe and likely will for some time, thanks to multiple headwinds. For one, many homeowners remain “locked in” at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will for a while. “I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm. New home construction has provided some relief, but not enough to fill the inventory gap meaningfully. The U.S. remains 4.5 million homes short, up from 4.3 million a year ago, according to Zillow analysis. Entry-level home supply is particularly dire, contributing to an ongoing cycle of propped-up demand and inflated prices. Here’s what the latest home values look like around the country. Builder sentiment continues to wilt with the summer heat. High mortgage rates and sticky inflation are largely to blame for the dampened outlook for new construction, with builder confidence sliding from 45 to 43 in May, according to the most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This is the second consecutive month of downward movement and negative sentiment. A reading of 50 or above means more builders see good conditions ahead for new construction. Meanwhile, the construction of new homes, which had been on a tear, helping to fill the hole left by scant resale inventory, has slowed. Permits for new single-family homes fell to their lowest seasonally adjusted annual rate since June 2023 amid builder blahs, dipping 2.9% month-over-month in May, according to the latest data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD). Housing starts were down 5.2%, and completions slid 8.5% from April. However, there’s a silver lining for hopeful buyers—25% of builders slashed prices in May to boost sales, and more were open to offering incentives. Current and anticipated home sales transactions fizzled across the board in May thanks to scorching-high mortgage rates. Here’s what the latest home sales data has to say. Existing-home sales dipped 0.7% in May, according to the latest report from NAR, marking the third straight month of declines as ascending mortgage rates and home prices deterred potential buyers. In May 2023, home buyers could get a mortgage rate well over half a percent lower at a time when homes were also more affordable. Sales also fell 2.8% compared to May last year. Experts believe home sales activity will perk up once inflation eases and the Fed finally starts to cut interest rates. Nonetheless, many prospective buyers—particularly first-time and lower-income home shoppers—will likely be left out in the cold, with the median price for an existing home in May soaring 5.8% from a year ago to a new record high of $419,300. “Home prices reaching new highs are creating a wider divide between those owning properties and those who wish to be first-time buyers,” said Lawrence Yun, chief economist at NAR, in the report. “The mortgage payment for a typical home today is more than double that of homes purchased before 2020.” One upside to fewer sales is that resale inventory has been loosening since December. The latest NAR data shows inventory growing 6.7% month-over-month, logging 1.28 million unsold homes at the end of March. Still, only 3.7 months of inventory remain at the current monthly sales pace. Most experts consider a balanced market between four and six months. Meanwhile, new homes are also not invulnerable to high mortgage rates despite their shiny appeal. Amid mortgage rates hovering close to or above 7%, May sales of newly constructed single-family houses plunged 11.7% compared to April and 16.5% from a year ago, according to the latest U.S. Census Bureau and HUD data. The good news for prospective buyers is that the slow pace of new home sales puts new home inventory at a level not seen since early 2008, according to Lisa Sturtevant, chief economist at Bright MLS. “Buyers that remain in the market are starting to have more leverage, and sellers of existing homes are increasingly offering concessions, including help with closing costs and money toward repairs,” said Sturtevant. Moreover, those shopping for new construction will be happy to hear that the median price for a new home in May fell $500 to $417,400—nearly two thousand dollars below the median existing-home price. See MoreSee Less And don’t expect home sales numbers to heat up much as we move through summer. NAR’s Pending Homes Sales Index dipped 2.1% in May. This reading comes on the heels of a dismal April when the index plummeted 7.7%. Mortgage rates remained above 7% over much of those two months. Year-over-year pending transactions also took a nosedive in May, sinking 6.6%. A pending home sale marks the point in the purchase transaction when the buyer and seller agree on price and terms and is considered a leading indicator of a closed existing-home sale within the next one to two months. With a 70.8 index reading, the pending sales pace remains at a four-year low—or the weakest since the earliest days of the pandemic. However, despite home prices continuing to break records, experts expect loosening inventory and evidence of a slowing
Building Permits by State and Metro Area | NAHB
View the latest national, regional, and metro-level data from the U.S. Census Bureau on residential building permits. The data illustrate year-to-date (YTD) numbers of building permits for both multifamily and single-family homes, total building permits, and YTD comparisons of the previous year’s pace of permits issued. NAHB’s new Housing Permit Data Portal allows for easy access to data from the U.S. Census Bureau’s monthly building permits survey. Users can customize their search to view specific data at the metro, county, or local builders association level. The information available in the portal is estimated permit data such as the number of buildings, units, and valuation for single-family and multifamily housing. Users can start by using the search box to find specific geographies. The chart at the bottom of the page illustrates the YTD single-family permits, and it can also show side-by-side comparisons of multiple geographical areas selected by the user. In 2023, all states and the District of Columbia reported declines in single-family permits except for: Hawaii (+16.7%), Maryland (+8.7%), Nevada (+5.8%), West Virginia (+4.7%), Virginia (0.8%), North Carolina (0.7%), and Alabama (0.0%). The ten states issuing the highest number of single-family permits combined accounted for 63.9% of the total single-family permits issued. Texas, the state with the highest number of single-family permits issued, declined 6.5%. The second highest permit-issuing state, Florida, saw a decline of 6.9%, while the next highest, North Carolina, posted an increase of 0.7%. In 2023, 15 states recorded growth in multifamily permits, while 35 states and the District of Columbia recorded a decline. Delaware (+96.3%) led the way with a sharp rise in multifamily permits, while Wyoming had the greatest decline of 74.2%. The ten states issuing the highest number of multifamily permits combined accounted for 63.2% of the multifamily permits issued. For the year, Texas, the state with the highest number of multifamily permits issued, experienced a decline of 24.0%. Following closely, the second-highest state in multifamily permits, Florida, saw a decline of 12.4%. California, the third largest multifamily permit-issuing state, declined by 3.4%. Get the latest updates on key developments in the housing industry. NAHB serves the entire home building, development, and remodeling industry. Explore community. The rewards of building the houses and communities that people call home are immeasurable. Learn more.
Why New Homes Look so Ugly: Bad Design Choices, High Building Costs – Business Insider
Thanks to dumb rules and greedy builders, we’re suddenly mired in an architectural nightmare. Bailey McInnes first noticed the house during one of her lunch hours. She likes to walk on her midday breaks, admiring the charming, little craftsman homes that dot her Northern Virginia neighborhood. The homes she passes share a lot of similarities — brick and wood, a modest front porch, details that suggest someone put in a lot of time and care a century ago. On one of these walks last fall, she noticed something new: One of the homes was gone. McInnes assumed the builder must have a captivating vision for the vacant plot. But the replacement, to her dismay, was a “monstrosity.” The facade was an awkward mess of windows and cheap-looking wood panels. The previous home’s gently sloping roof had been replaced with an imposing cliff. You can probably guess the color: blinding white with black trim, the signature look favored by investors and HGTV aficionados. After the first home fell, this cycle of replacement kept happening again and again. McInnes, who is 25 years old and works in public health, is no architecture expert. But she often commiserates with others who share similar frustrations. “People who have little to no experience are able to look in their neighborhoods and be like, ‘What is happening here?'” McInnes told me. Recently she posted a video on her YouTube channel in which she phrased the question more bluntly: “Why are homes so ‘ugly’ now?” These days it seems like every freshly built house comes with a standard feature: a whole bunch of haters. In Reddit forums and Facebook groups, many Americans grumble about the stifling blandness of the cookie-cutter home, the shameless excess of the suburban McMansion, the clunkiness of the modern box. And that’s just the view from the front lawn. Step inside, and you’ll likely encounter a mix of white walls, gray countertops, and faux-hardwood floors, copied and pasted from an episode of “Property Brothers.” Most people agree that America needs more houses, but nobody seems all that thrilled with the ones being built. Some of the gripes with homebuilding can be chalked up to not-in-my-backyard sensibilities — construction is a nuisance, and it’s easier to nitpick design choices than accept change. Maybe some of it is just renters’ jealousy talking. In light of the nation’s housing shortage, hand-wringing over aesthetics might even seem beside the point. We need to pump out millions more homes to meet demand. If people are buying them, who really cares what they look like? But there’s a reason for this nagging discontent with new homes. The distaste is, in part, an unconscious response to big problems with how these houses are built and even larger flaws in the American dream itself. The cute craftsman and midcentury homes on younger generations’ mood boards are relics of a time when land was cheap and local builders accounted for the lion’s share of new construction. Now development lots are almost prohibitively expensive, and the soaring cost of materials is forcing builders to cut back on bedrock design necessities and pleasing architectural flourishes. The new economics favor large-production builders focused on scale, while a mess of micromanage-y local rules is driving up costs and forcing homes into cookie-cutter territory. The blame for America’s architectural nightmare, however, doesn’t stop at production builders, rising costs, or local codes. There’s something deeper going on here. Homes look this way because they’re not just places where we live — they’re also supposed to help us get rich. That requires playing it safe. We’re supposed to think of homeownership not as a means of putting a roof over our heads but as an investment that will one day provide a massive windfall. Homes are assets to be Airbnb’d, upgraded, flaunted on Zillow, and eventually sold for a huge profit. Everyone’s a home flipper now. When every part of the homebuilding process is executed with an eye toward the bottom line, this is the result: a mix of trend-chasing eyesores and sterile subdivisions. For a generation of hopeful homeowners, neither option sounds all that appealing. “There’s this trade-off that’s increasingly happening,” McInnes told me. “People are like, ‘I’ll just take whatever.'” Stepping into a community of new homes can sometimes feel like an eerie nightmare. The streets are obscenely wide, the lawns mostly bare. The structures themselves are haphazard arrays of garage, door, windows, and driveway. They may have splashes of brick or stone, but only in small patches that echo a sturdier past. A few variations of floor plans add some texture to the neighborhood, but paint shades are the main differentiators. You may feel disenchanted or trapped. Taken to the extreme, the scenario makes for a decent horror movie. Sure, some builders are trying to break this mold. But for most developers, the forces conspiring to make homes expensive and aesthetically distasteful are too powerful to resist. Builders are struggling to produce something that reaches the moderate-income level, and that may be where you get some pushback as far as ugliness and scale-back. That’s probably where you may be getting cookie-cutter, all that kind of thing — which they have to do. They can’t add all the frills. The primary driver for the move toward mediocrity is cost — land, materials, and permitting are all huge money sucks. Prices for building materials are up a staggering 38% since early 2020, according to the Bureau of Labor Statistics, compared with a 10% rise from 2016 to 2020. New homes are roughly five times as expensive to build compared with 1980, according to price indexes from the Census Bureau. In 2022, construction costs for the typical new home came in at $392,241, while land added another $114,622. This all trickles down into the final sale price, which came in at an average of $644,750. As they stare down these rising costs, builders and architects have almost no choice but to streamline or opt for cheaper design elements. Homes built 50 or 100 years ago were primarily brick or wood — high-quality stuff that offers a comforting, timeless appeal. Those materials are used more sparingly nowadays. Just 25% of new-home exteriors last year were made of wood or brick, compared with 70% of homes in 1980. Builders have turned to vinyl siding or fiber cement, more affordable options that may last longer and are often easier to maintain but can contribute to a cheaper feel. Inside the home, nice touches like ceramic tile, built-in shelving, and other quality finishes have pretty much disappeared from modest homes and can be found only in “upscale” products. Those kinds of “charming details” require craftsmanship-intensive labor that’s pretty much impossible to rationalize when speed and volume are the name of the game. To hit their bottom-line targets, developers are even cutting back on basics like the number and size of windows and “making homes boxier.” The grumblings over the state of home design aren’t just coming from haters looking for something to hate, though. They reflect both the tough economics of the building business and a homeownership mindset that’s fixated on resale values. Like McInnes, the dismayed YouTuber in Northern Virginia, you may favor homes from a bygone era. But where you see boring and neutral, someone else sees dollar signs. Through our Discourse journalism, Business Insider seeks to explore and illuminate the day’s most fascinating issues and ideas. Our writers provide thought-provoking perspectives, informed by analysis, reporting, and expertise. Read more Discourse stories here.
What’s the Cost of Mortgage-Rate Buydowns and Other Incentives to Homebuilders? Lennar Discloses the Numbers | Wolf Street
Lennar, one of the largest homebuilders in the US, has revealed the cost of incentives it offers to homebuyers. In the first half of 2024, the average incentive costs, including mortgage-rate buydowns, rose to $47,100 per house sold, accounting for 10.1% of the average sales price. The costs vary by market, with Texas reaching 16.9% and “Other” regions, including Florida, amounting to 13.4%. Despite the increase in incentives, Lennar’s average sales price fell 5.1% in Q2 2024. The report highlights the ongoing challenges in the housing market, with high prices and increased supply. Read more on Wolf Street.