Why The Housing Market Is Ready To Boom

 

 

In the run-up to the financial crisis, the number of homes built within the US surged to over 2 million and it has taken some time for this ‘overbuild’ to work its way out of the system. According to additional Newgate research, the average build over the past seven years has been just 850,000 per annum. This below average annual build is fair considering the housing overbuild prior to the global financial crisis. However, now data from the US Census now shows that this ‘overbuild’ has been almost completely eliminated and the market has moved into a shortage of 700,000 houses.

 

But why hasn’t the additional demand emerged for new units if the housing market is technically in shortage? Newgate proposes that ‘weak household formation’ is to blame for a lack of demand:

“We argue that these alternative living arrangements are temporary. The natural human desire for independence and to start a family – combined with supportive economic conditions – should see household formation recover.”

“If we assume household formation increases back to more normal levels, we would expect an increase in demand for one million new houses. This is in addition to the natural annual demand for housing of 1.5 to 2.0 million houses per annum.

 

http://www.valuewalk.com/2017/02/housing-starts-surge

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US home builder confidence hits highest level since 2005

US homebuilders’ confidence soared this month to the highest level in 11 years, reflecting heightened expectations of better sales now and well into 2017. The National Association of Home Builders/Wells Fargo builder sentiment index released Thursday jumped seven points to 70. The last time the reading was at this level was July 2005, during the high-flying days of the last U.S. housing boom. Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 the past four months after hovering in the high 50s much of this year. Builders’ view of sales now and over the next six months rose sharply, as did a gauge of traffic by prospective buyers. The sharp increase in the latest builder survey is consistent with recent gains for the stock market and improving U.S. consumer confidence, said Robert Dietz, the NAHB’s chief economist.

 

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Consumer sentiment surges to 98 in early December based on surprise Presidential election

Consumer confidence surged in early December to 98.0, or just one-tenth of an Index point below the 2015 peak-which was the highest level since the start of 2004. The surge was largely due to consumers’ initial reactions to Trump’s surprise victory.

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Wholesale inventories fell 0.4 percent in October while sales surged

 

U.S. wholesale inventories fell 0.4 percent October amid a surge in sales, supporting views that inventory investment would provide a modest boost to economic growth in the fourth quarter.

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Raleigh Wake HBA Installation

2016 Installation and Hall of Fame

Platinum Sponsor

PHWS, Inc.

PHWS is honored to be a sponsor at the Installation and Hall of Fame, next Thursday night at the North Carolina Museum of Art.
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Buyers may be about to flood the biggest part of the housing market

New homes being constructed

New homebuyers may be about to flood the US market for existing homes to lock in the lowest mortgage rates they can. In the past two weeks — since Donald Trump was elected president — mortgage rates jumped alongside other interest rates. This happened as investors raised their expectations for economic growth and inflation, placing their bets on Trump’s plans to spend heavily on infrastructure and cut taxes. The Bankrate.com 30-year national average rate was up from 3.5 percent on Election Day to 3.95 percent on Tuesday, the highest level since December 2015. This is still historically low. “In the short-term, some prospective buyers may rush to lock in their rate and buy now, while others — especially those in higher-priced markets — may be forced to delay as a larger monthly payment outstretches their budget,” Lawrence Yun, the chief economist at the National Association of Realtors, said in a data release on Tuesday. The NAR released its monthly report on existing-home sales, which showed that sales rose at the highest annualized pace in a decade during October. Sales increased by 2 percent at a seasonally adjusted annual rate of 5.60 million, beating economists’ consensus forecast.

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15 Things Realtors Want Builders to Know

From dirty model homes to pushy salespeople, here are the top blunders that real estate agents see builders make.

 

 

3. Staging
Realtors say that no matter the style or size the model home, it should always be staged. It’s one of the most important steps to selling a home, says New York Realtor David.

“I’ve taken on expired listings of vacant model homes… once staged, buyers can picture themselves living in them and usually they sell in record time,” she says.

But many agents caution builders and their designers not to take staging too far because overdecorated models can look cluttered and confuse customers about what is standard and what is an upgrade. “Sometimes they are set up with lots of bells and whistles that don’t come standard, says Coldwell Banker agent Missy Stagers of San Antonio, Texas. “Make sure to clearly notate what is an upgrade.”

Models need to strike a middle ground between overdesigned and plain vanilla, says David. “It is hard for clients to walk into a fully loaded model home and picture it at the base level,” she says. “While I realize builders need to showcase their ‘best stuff,’ it would be great if there was a way to have a model with every upgrade, and also one available to see with just the basic offerings.”

Stagers has a good idea: “Offer some nice things in the basic package so everything is not an upgrade,” she says.

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PHWS is excited to be the sponsor at the HBA Networking Night this Thursday.

“PHWS is excited to be the sponsor at the HBA Networking Night this Thursday. All Raleigh Wake members should come out for a great evening of bowling and games. Hope to see you there!”

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Wade Jurney Has No Plans to Slow Down

Deal with Century Communities is a good match, WJH CEO says.

Being that Jurney is always looking to do more with respect to his company, he says that his employees and those closest to him sometimes ask him to slow down. But that’s just not his style. “I’m very impatient and I’ve got an aggressive personality when it comes to going into new markets and getting market share in our segment,” he says.

Rob and Dale are similar, Jurney says, and won’t advise him to slow down like some of his employees. During one of their initial meetings, it was said that Jurney’s model would work well in Texas. “Don’t give me much encouragement,” he quips after the deal is announced, “because I’ll be on a plane to Austin, Texas next week.”

With the financial backing of a public builder, Jurney says WJH will enter new markets faster than it could have on its own. He’s eyeing additional southeastern markets like Jacksonville, Orlando, and Tampa, Fla., and Greenville and Columbia, S.C. WJH will also look to compliment some of Century’s markets since the two companies sell homes at vastly different price points, for the most part.

“What we bring to the table and what they bring to the table is going to enhance what we’re already doing,” Jurney says.

He’s excited to see what the future holds for WJH. “I look forward to going out there and giving these guys (competitors) a run for their money on more of a national level,” he says.

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HOME DEPOT CO-FOUNDER: It’s the government’s fault Americans can’t keep up with housing prices

 

Bernie Marcus, Contributor

post1Housing in the United States is increasingly unaffordable for many Americans.

According to the most recent report from the Federal Housing Finance Agency, the housing price index recently surpassed the inflated levels of the pre-Great Recession period.

With housing affordability a major issue around the country, the supply of homes should increase to meet expanding demand and drive down the prices.

However, the number of newly completed single family homes in 2015 was 648,000.

That is roughly one million fewer than the pre-Great Recession peak.

So if prices are high and the demand is present, why is there a reduction in the number of homes being built? The answer is overly-burdensome regulations.

The National Association of Home Builders estimates that 24 percent of a single family home cost is due to government regulation—14 percent during lot development and 10 percent during construction.

The average cost of building a single family home in 2016 is $348,900. That means almost $85,000 goes toward complying with government regulations.

No wonder Americans are having a difficult time keeping up with housing prices. The additional costs of excessive regulations is an unnecessary burden that keeps owning a home out of the reach for an estimated 14 million Americans.

post2

Bernie Marcus. Fox Business

When overly-burdensome regulations are levied onto homebuilders and contractors, the number of homes built will be reduced. From a builder’s standpoint, more regulations just mean more hoops to jump through during the construction process. And the more hoops there are, the more time and money it takes to complete the project.

Contractors, who are already working with tight budgets, have no choice but to reduce their output. So time constraints and reduced monetary incentives lead to fewer homes being built.

The supply of homes is directly correlated to the price. So when increased government regulations drive down the supply of homes while demand remains stagnant, the market corrects itself, and prices increase.

The regulatory hoops that homebuilders must jump through are numerous and confusing. For example, even before pounding in the first nail into a home in San Francisco there are three different regulatory standards the structure must pass: San Francisco municipal codes, “San Francisco’s General Plan,” and neighborhood standards.

Just to keep track of compliance checkpoints adds a significant burden to the homebuilder, not to mention the actual cost of complying. Building codes elsewhere aren’t much more encouraging. Minute details in floor structure design, for example, depend on the specific type of wood being used. Heaven forbid a builder mistakenly uses “spruce-pine-fur” instead of “southern-pine.”

post-3 Inside a Home Depot store. Kevork Djansezian/Getty Images

It could be the difference between a beautiful new home or a big waste of time and money. The low supply of new housing is coming at a time when it is easier to get a hold of building materials than ever before.

The modernization of supply chains and development of large distribution centers—like the one I founded, The Home Depot—have helped to achieve that. Because of this, new homes have the potential to be built cheaply and efficiently.

But excessive government regulation has limited the potential.

The good news is there are reforms that could be implemented to help reach that potential. One example is limiting land use regulations. Land use rules come in a variety of forms—everything from mandating the minimum lot size to creating boundaries for urban housing developments.

These laws attempt to control population density. But in turn they increase the price of housing by limiting the supply.

Some sensible regulation is needed in the housing industry, but excessive mandates only burden main street America—contractors and home buyers alike. They reduce the supply of homes, which leads to the unaffordable housing problem we have today.

Bernie Marcus is the co-founder and retired Chairman of The Home Depot and co-founder of the Job Creators Network.

This is an editorial. The opinions and conclusions expressed above are those of the author.

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