More Good News for Multifamily: Spring Home Sales are Slow

Here at PTAA, we’re often asked why the apartment industry has continued to thrive despite historically low (now rising) interest rates, a strong economy and rising rents, and our answer is, “Well, there are a lot of reasons.” Many of those reasons are highlighted in this article about a lethargic spring home sales season in the US:

Instead, home sales are lackluster. That is locking many young home buyers out of the market when a good job market should give them the opportunity to purchase a first home. First-time buyers made up 31% of sales in May, down from 33% both the prior month and a year earlier, according to the National Association of Realtors. Mr. Khater said that is a missed opportunity for many millennials, who might find it hard to catch up, as prices are growing faster than incomes.

Supply is tight in part because of a lack of new-home construction caused by regulatory barriers, lack of available land, and labor and material shortages. Existing homeowners also have been reluctant to put homes on the market…

The situation could grow more challenging for buyers in the months ahead if mortgage rates continue rising. The average interest rate on a 30-year fixed-rate mortgage in May was 4.59%, up more than half a point from 4.03% in January, according to Freddie Mac.

At the same time, the median sale price for an existing home in May was $264,800, up 4.9% from a year earlier and a new all-time high, according to NAR. Prices have risen 71% from the low in January 2012…

Rising mortgage rates and home prices also help deter existing homeowners, many of whom enjoy historically low rates, from selling because the cost of purchasing a larger home is a significant jump from their current monthly payment.

 

 

Multifamily Construction Numbers Better Than Expected in May

According to this article in the Wall Street Journal, new housing construction in the US rose to its highest level since 2007, and multifamily construction had a lot to do with it:

Nonetheless, housing construction appears on track to have a slightly better year than many economists had predicted, thanks in part to surprisingly strong multifamily growth.

Overall starts grew by 11% in the first five months of 2018 compared with the same period a year earlier. Multifamily starts rose 13.3% during that period, while single-family starts rose 9.8%.

But, there are challenges:

Still, builders face headwinds in the coming months. Rising lumber prices have added nearly $9,000 to the cost of a new home since January 2017, according to the National Association of Home Builders, which reported on Monday that builder confidence ticked down slightly in June.

How’s the Housing Market? Ask Your Car Dealer

This is interesting:

If you want to take the temperature of the housing industry, the best place to go could be a car dealership.

Yes, you read that right. There is a strong correlation between the real estate market and auto sales – particularly when it comes to the most iconic American vehicle of all, the pickup truck.

Analysts at TD Economics forecast that trucks will be the “standout” light vehicle for the next two years after sales jumped 12 percent in 2013. That’s because pickups are the workhorse of the construction industry: As home building activity picks up, construction companies hire more people. Workers then buy trucks to get the job done.

As for the weak housing market in 1Q14? Analysts blame the terrible winter and expect housing construction – and pickup truck sales – to ratchet up once spring blooms. With our luck that will be some time in June.