TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/1294972
50 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Home Sales Report Indicates Recovery Despite Recent Dip New home listings aren't bouncing back as quickly as listings of existing homes because "construction companies have to deal with lumber and labor shortages" amid the COVID-19 crisis. A recent Redfin report indicates the new- homes market is on its way to recovery, but August saw a bit of a bump in the road. Specifically, after experiencing a significant rebound in sales in July, new listings of newly built homes dropped 4% (year over year), dip- ping down to a seasonally adjusted rate of 74,000 during August. Sales of newly built homes ex- perienced an uptick of 8.3% (year over year), with a total of roughly 73,000. However, this was still a decrease from July's impressive 13.5% increase. Regarding new listings of al- ready existing homes, those grew 5.2%, according to Redfin's report. As for the sales of existing homes, those rose 10.5%, a rise in percent- age that surpassed new-home sales growth for the first time in half a decade (since 2015). The report revealed what most already knew, that the supply of newly built homes for sale is shrinking as the pandemic contin- ues to wreak havoc. Specifically, the month of August saw the number of newly built homes on the market sink 33.6% (year over year), down to 185,000. The number of existing homes on the market also took a dive, plummet- ing 38.3%, which marks the biggest dip in more than seven years (since 2013). Experts point to numerous factors as contributing to this shortage in housing, among which include a lumber shortage causing builders to scramble for supplies. Redfin Chief Economist Daryl Fairweather commented on some of these hurdles: "There's plenty of demand for new homes, but builders are facing a unique and costly set of hurdles as they attempt to satisfy that demand. Listings of new homes aren't bouncing back as quickly as list- ings of existing homes because, unlike individual homeowners, construction companies have to deal with lumber and labor shortages during the pandemic. They're also competing for labor and materials with folks who are renovating their houses dur- ing quarantine. The lack of new listings is keeping builders from reaching their full potential in terms of home-sales growth." Homeownership Affordability in Q3 Average wage earners will find it more financially difficult to purchase a home now than they would have last quarter. H omeownership became less affordable for aver- age wage earners during the third quarter, ac- cording to the latest U.S. Home Affordability Report published by ATTOM Data Solutions. The report benchmarks afford- ability for average wage earners by calculating the amount of income needed to make monthly house payments on a median- priced home, assuming a 20% down payment and a 28% maxi- mum "front-end" debt-to-income ratio; these costs also include property taxes and insurance in addition to mortgage payments. As a result, ATTOM determined the third quarter median home prices of single-family homes and condos were less affordable in 308 of the 487 counties analyzed for the report, up from 262 counties one year earlier. ATTOM also observed that an annual wage of more than $75,000 was needed in the third quarter to afford the typical home in 114, or 23%, of the 487 markets in the report. The largest counties where the median home price was not affordable for average wage earners in the third quarter, based on the 28% benchmark, included California's Los Angeles, San Diego, and Orange Counties, Arizona's Maricopa County, and Florida's Miami-Dade County. Complicating matters was the spike in median home prices in 252, or 52%, of the 487 coun- ties included in the report, a 10% increase from one year ago. The biggest year-over-year gains in median prices during the third quarter among the major popula- tion centers were found in Pennsylvania's Philadelphia County (up 20%), Ohio's Franklin County (up 16%), and California's Contra Costa County (up 15%). "In a year when nothing is normal, owning a single- family home has become less affordable to average wage earners across the U.S., despite conditions that would seem to point the op- posite way," said Todd Teta, Chief Product Officer with ATTOM Data Solutions. "Wages are up, and mortgage rates are down to rock- bottom levels, which should work in favor of home buyers. On top of that, the American economy has suffered greatly since the coronavi- rus pandemic began surging over the winter–a plight that normally would drop home demand and home prices." Teta added that low mortgage rates helped contribute to a new wave of buyers "chasing a reduced supply of homes. The result is price hikes have raced past the im- pact of wages and mortgage rates." "In a year when nothing is normal, owning a single- family home has become less affordable to average wage earners across the U.S., despite conditions that would seem to point the opposite way." —Todd Teta, Chief Product Officer, ATTOM Data Solutions