Housing Outlook Optimistic!
The housing market is in for a good year, barring a worst-case
scenario for the coronavirus. Affordability and limited inventories
remain hurdles, but overall, the market is coming into a better
Perhaps the biggest reason for optimism: Home construction is
picking up, building on last year’s gains. Housing starts are
benefiting from the unusually warm weather this winter. Builders
are more upbeat about the market now.
More starter homes are in the pipeline, as construction
companies finally feel more able to turn a profit on homes priced
from $200,000 to $400,000. Such houses make up 58% of new
homes, up from 44% in 2010 and just 36% in 2002. The size of a
new home is shrinking on average, a reversal of the trend that
dominated in the years after the housing bust, when builders
focused on putting up bigger, pricier houses.
The South will see the most new homes, as usual. More than
half of single-family houses are built there, not surprising, given
the migration of more Americans to thriving Southern metro
areas. But, builders are still held back in many areas by the lack
of buildable lots, rising costs for building materials and the dearth
of skilled labor.
Sales of existing homes ought to pick up, too, after coming in
flat in 2019. Inventories remain extremely tight and may fall
further, limiting the sales gain to 2.8%. But as prices start to rise
at a faster rate, just enough homeowners will be convinced to put
out a for-sale sign. Still, it’ll remain a seller’s market, given the
Lower mortgage rages are a double-edged sword for the
market. The rate for a 30-year fixed loan now averages 3.3%, and
is headed to 3% or lower after the slide in bond yields. For the
year, figure on rates averaging 3.25%. Would-be buyers who have
been kept out of the market by rising prices stand to benefit from
lower rates and the lower monthly payments they enable. But that
could lead homes prices to jump, since inventories remain so tight
especially in the hot markets of the South and West. It won’t get
any easier to qualify for a mortgage. Consumers with weak credit
are unlikely to get a loan. The median FICO score among
borrowers who take out a 30-year fixed loan is 41 points higher
than it was before the recession. After easing lending standards
following the housing crash, lenders are standing pat.
If you’re thinking of selling this year, note the features buyers
are seeking: new bathroom and kitchen fixtures and appliances,
especially in older homes. Patios or balconies for entertaining.
Ample storage space. Green upgrades to save energy or water, like
energy-efficient appliances and low-emissivity windows. Above
all, low maintenance needs. Today’s buyers don’t want fixeruppers.
Article Courtesy of the Michigan Association of Realtors.