Material Shortages Causing Housing Problems – Real Estate Market Update
May 7, 2021 | Posted by: Joe Cortez
Spring is here, and with it come the usual home buying season. If you're in real estate, it's about to get truly fascinating. There are likewise some distinct challenges you and your purchasers might be facing in the market now. Let's get to what you require to know.
The Big Story
The Real Estate market has been red-hot across most of the country for a long time now. Sales for both new and existing homes have been on an outright tear. Last month, both of these metrics took an action back.
One most likely reason for this is no doubt a moderate increase in home loan rates. However, it appears to me we discuss that enough. Today, we want to highlight another element causing concerns in the housing market and potentially even delaying building of homes in some areas.
There's a real shortage of the required materials for building and refurbishing houses at this point. According to a December report from the U.S. Chamber of Commerce, 71% of contractors were dealing with a scarcity of at least one material.
That means your houses that were being built in December that may just be preparing yourself to come on the market now might either be delayed or included greater costs. The product most in demand was lumber, with 31% of professionals experiencing a shortage.
In addition, most professionals are stating that increased cost variation is having a moderate to high effect on their company, with 74% agreeing with that declaration.
This environment, when combined with home loan rates that are beginning to rise, might cause your purchasers to have a more difficult time finding a home at the moment. Your roles as a finder, negotiator and amateur psychologist for your clients are truly going to can be found in useful right now. Be the support they require.
Consumer Price Index (CPI).
Inflation was up 0.4% total in February for customers and 1.7% over the last 12 months. When food and energy were eliminated, prices were only up 0.1% and 1.3% each year.
Of particular interest to this audience was the reality that the expense of shelter was up 0.2% for the month. Furthermore, gas prices were up 6.4%. As the outlook enhances with the virus and individuals go back to the office a minimum of part of the time, some may be trying to find locations with a shorter commute. Obviously, this will be heavily dependent on the customer and their work circumstance.
Real Estate Market Index.
The U.S. housing market is still incredibly strong, according to contractors. In this survey of home builders, the composite rating is an abnormally high 82. Present sales were down 3 points, can be found in at 87. However, this is partly offset by a 3-point increase in the number of houses anticipated to be sold over the next 6 months.
Traffic of prospective purchasers walking through homes was flat at 72. While this is lower than some of the other part ratings, it's still really high in comparison to where this metric has actually been over the past a number of years.
New Residential Building.
Let's start with completions because it's the number that has the most instant impact and it's the one excellent item in this report if you're a realty representative. Real estate building conclusions were up 2.9% to 1.362 million on a seasonally changed yearly basis. Single-family conclusions were up 2.8% to 1.042 million and there were 314,000 multifamily conclusions.
Real Estate starts came in at an annual rate of 1.421 million, which is down 10.3% from January. It's also 9.3% below last February. Single-family real estate starts were down 8.5% to 1.040 million. Multifamily starts were 372,000.
Lastly, allows for brand-new construction fell 10.8% to a seasonally adjusted yearly rate of 1.682 million. Nevertheless, this is 17% higher than last February. Single-family authorizations were down 10% at 1.143 million. Lastly, there were 495,000 multifamily licenses.
Existing Home Sales.
Fortunately in this report is that supply has actually increased, if only marginally. At the existing pace of sales, existing homes would sell out in 2 months as compared to 1.9 months in January.
The problem is that sales of existing houses were down 6.6% to come in at 6.22 million. The median home rate also rose 3.1% to $313,000, up 15.8% on the year.
Single-family sales were down 6.6% at 5.52 million every year, while condos can be found in down 6.7% at 700,000.
New Home Sales.
New house sales were down nearly 20% in February, coming in at an annual rate of 775,000. Sales are still up 8.2% compared to in 2015, but this is quite a drop off in yearly appreciation compared to the 50% levels that we saw earlier this year.
The average price of a new home came in at 349,000, which is down 1.1% in February. Supply likewise increased from 4.2 months to 4.8 months at the existing speed of sales. Sales were down across all regions, most especially in the Midwest.
In the last revision of the fourth quarter data, the U.S. economy grew at a rate of 4.3%. Personal consumption expenditures were up 2.3%. Of most interest to realty agents need to be the fact that residential investment increased by 36.6%.
Case-Shiller Home Price Index.
This particular house price index is based upon a 3-month average of all purchase transactions culminating in the month being reported for a study of 20 cities.
In January, the Case-Shiller index was up 1.2% on a seasonally changed basis. Rates were up 0.9% total and have risen 11.1% on the year before modification. This is the fastest rate of annual appreciation in 8 years.
FHFA House Price Index.
The FHFA Home Price Index is based upon traditional loans from Fannie Mae and Freddie Mac alone. It's also not a 3-month average.
Regardless of the different information sets, the two indexes reveal incredibly comparable numbers. In January, rates were up 1% and these have actually increased 12% on the year. That's a record returning to 1991.
Pending Home Sales Index.
The number of houses under contract for sale in February was down 10.6% to an index level of 110.3. This isn't a good sign for March existing home sales numbers.
This points to the result of higher home mortgage rates, but likewise staying COVID-19 limitations and a bad spate of winter weather. It'll be interesting to see where this number goes as home buying season heats up (actually).
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