December 2016 - Getting Serious About Diversity

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52 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ANALYTICS THE LATEST Demand Surges to Three-Year High Inventory remains tight as demand mounts. D emand for single-fam- ily housing reached its highest level since June 2013, having picked up momentum after Labor Day, according to Redfin's Housing Demand Index for September 2016. According to Redfin, buyer demand rose by 13.3 percent over the month in September up to a level of 105, its highest level in more than three years, after nearly 32 per - cent more potential buyers toured homes and nearly 27 percent more potential buyers made offers. A reading of higher than 100 for the Redfin Housing Demand Index indicates stronger or higher-than- expected demand, while a reading of lower than 100 indicates weak demand. For September 2015, the reading was 101. This data indicates that there is a healthy pool of buyers ready and willing to purchase a home as long as they find the right one, according to Redfin. "Buyer demand gained momen - tum after Labor Day when a pop of fresh listings hit the market," said Redfin Chief Economist Nela Richardson. New listings are up 3.3 percent compared to last year at this time. "More than any other factor, new listings pulled buyers into the market in September. The pace of this demand will only be sustained if the supply of homes for sale continues to improve." Despite the new listings that hit the market after Labor Day, Redfin agents still reported a need for more inventory in what has turned out to be a lengthy housing supply shortage. The National Association of Realtors (NAR) reported that in September, there were 2.19 million existing homes for sale, which was 6.8 percent lower than September 2015's inventory despite a slight monthly increase. "Inventory has been extremely tight all year and is unlikely to improve now that the sea - sonal decline in listings is about to kick in," NAR Chief Economist Lawrence Yun said. "Unfortunately, there won't be much relief from new home construction, which continues to be grossly inadequate in relation to demand." Market Headwinds Cannot Shake Builder Confidence Builder confidence remains high although lot and labor shortages caused it to tick slightly lower in latest report. T he National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released in October reported a decline of two points down to 63 from September to October, indicating that builder confidence in the single-family housing market is slightly lower than a month ago but remains at a solid level in spite of market headwinds such as lot and labor shortages. Despite the two-point decline in October, the HMI is at its second-highest level for any month in 2016. In September, the HMI shot up to an 11-month high of 65 from its August reading of 59 amid solid job growth, near record-low interest rates, and strong single-family housing demand. The HMI's three components—builder perceptions of current single-family home sales, sales expectations for the next six months, and prospective buyer traffic—are scored and then averaged; an index score over 50 indicates that more builders view conditions as good than poor. The headwinds currently facing the mar - ket should not slow the growth of single- family housing for the near term, NAHB Chief Economist Robert Dietz said. In fact, the component of the HMI measuring sales expectations in the next six months inched up by a point to an already elevated level of 72, indicating that builder confidence in sales remains high. "Builders in many markets continue to express concerns about shortages of lots and labor," Dietz said. "Mortgage rates remain low and the HMI index measuring future sales expectations has been over 70 for the past two months. These factors will sustain continued growth in the single- family market in the months ahead." Aside from the lot and labor shortages, key building materials such as ready-mix concrete and oriented strand board (OSB), remained near historically high levels in September, according to the latest Producer Price Index (PPI) released by the Bureau of Labor Statistics. The cost of OSB rose by 2.5 percent in September and is at its highest level in more than three years. The cost of ready-mix concrete dropped slightly in September but has climbed by 20 percent over the last five years. Whereas all three components of the HMI posted a gain of at least four points from August to September, the only com - ponent that increased from September to October was the sales expectations for the next six months. The components of the HMI that measure current sales conditions and buyer traffic both declined in October, by two points down to 69 and by one point down to 46, respectively.

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