Some housing data this week basically declared who is the winner in the current housing market.
Still, high prices and high mortgage rates certainly aren’t the homebuyers with too few options to choose from. It’s not a seller, and many of them aren’t even in the game. Those who are ahead will eventually become buyers.
Winner or Winner? Homebuilders.
Demand and supply imbalance – caused by declines and rises The road to higher mortgage rates since the pandemic began has been a boon for builders.
And they know it too.
Builder confidence finally hit positive territory this month for the first time in 11 months, according to the National Association of Home Builders. Expectations for current sales and half-year sales were also optimistic.
“Because there is so little inventory available on the resale side, buyers have to pay a premium for new versus resale because there is not much they want,” said KB Home Chairman and Chairman. President and CEO Jeffrey said. “We’re pretty happy,” Mezger said on a construction company investor call this week.
KB Home (KBH) follows the same path as DR Horton (DHI), PulteGroup (PHM), Toll Brothers (TOL) and Lennar Corp. (LEN) with latest construction with better-than-expected quarterly earnings and positive outlook was a trader. )
That enthusiasm turned into digging more shovels into the ground.
Single-family housing starts in May rose 18.5% from April, to a seasonally adjusted annual rate of 997,000, according to government data released this week. Single-family building permits rose 4.8% from April to a seasonally adjusted annual rate of 897,000 units.
“We haven’t seen levels like this in the decade before the pandemic,” Lawrence Yun, chief economist at the National Association of Realtors, told Yahoo Finance Live (video above). And there are economic incentives to produce more. ”
These homes are in desperate need, in large part because the current owners have lucrative mortgages. Why would you want to turn around and sell just to buy another more expensive home with double the mortgage rate?
I wouldn’t think so.
The numbers speak for themselves. Nearly every homeowner with a mortgage has a current mortgage interest rate below his 6%. Redfin reported last week. Nearly four in five homeowners with mortgages have interest rates of less than 5%, and nearly a quarter are thought to have refinanced during the pandemic, when interest rates hit record lows, at 3%. is less than
As such, the number of existing homes on the market rose to 1.08 million in May, still below the pre-pandemic baseline of 1.9 million, according to the NAR’s release on pre-owned home sales. The total was the lowest ever for May.
According to Redfin, according to new data, It also found that the number of homes for sale in the US hit a record low in May.
“The tight existing inventory environment is helping new home sales,” Morgan Stanley strategist James Egan said in a note to clients on Tuesday. We have the largest share,” he said. First quarter of the year since 2006. ”
More good news for home builders. Mr. Egan revised his outlook for home prices, predicting no gains this year after previously forecasting a 4% decline.
But with mortgage rates showing signs of receding, there is hope for potential buyers of existing homes.
Freddie Mac (FHL.SG) said interest rates had fallen to 6.67% in the past three weeks.and this week Realtor.com Revises Mortgage Rate Forecast, the average 30-year fixed mortgage rate is expected to average 6.4% throughout the year and reach 6.1% by the end of the year. That’s 7.4% for the full year and below previous forecasts of 7.1% by the end of the year.
So is 6% enough to kick-start the resale market?
“There’s no magic number because it’s probably different for each homeowner,” Mark Fleming, chief economist at First American Financial Corporation, told Yahoo Finance. However, “it is likely that interest rates will need to be much closer to 5% rather than 7% to mitigate the economic penalty of interest rate lock-in for most homeowners.”
Dani Romero is a reporter for Yahoo Finance. follow her on her twitter @daniromerotv. Gabriela Cruz Martinez is a personal finance reporter for Yahoo Finance. follow her on her twitter @__Gabriela Cruz. Janna Herron is a Personal Finance Editor at Yahoo Finance. follow her on her twitter @JannaHerron.
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