Housing Outlook Optimistic!

    Housing Outlook Optimistic!

    Apr 29, 2020

    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

    balance.

    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

    strong demand.

    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.