Industry Wrap: Affordability the Magic Word for Sturdy Housing Growth
By Tim Ahern | February 11, 2016
Thursday’s Industry Wrap summarizes important news and events each week from around the housing finance industry. Material on external websites may be subject to publisher’s access policy.
Lagging Income Gains Squeezing Housing Affordability
Fannie Mae’s Home Purchase Sentiment Index™ slipped 1.7 points to 81.5 in January, reported National Mortgage News, reflecting downward movement in four of the six components of the index. Consumers saying it was a good time to buy declined by four percentage points on net, to 31 percent, continuing the downward trend of 2015, and the share of those reporting significantly higher income over 12 months earlier fell three percentage points, to 12 points, after climbing nine points in December. “Housing affordability is being constrained because the pace of growth in real income has not kept up with gains in real home prices as demand has grown faster than supply,” observes Doug Duncan, Fannie Mae’s chief economist. On the bright side, he adds, consumers have been increasingly upbeat about their ability to obtain a mortgage, “suggesting that credit tightness is not the main issue limiting housing market activity today.” Going forward, Duncan expects to see limited progress on the index until there is a pick-up in income growth and more lower-priced homes for sale. (Read story, view news release)
Thin Housing Supply Boosts Prices as Demand Heats Up
Led by San Francisco, Seattle and Los Angeles, some areas with tight housing inventories and strong demand are seeing home prices and sales reach new highs, according to CoreLogic economist Shu Chen. Nationally, the number of homes selling for the list price or higher has returned to the levels of early 2006, prior to the housing downturn, she says. In October 2015, the number of homes selling at list or above was 3.5 times the trough in January 2008, representing more than one-quarter of total sales. (Read blog)
January Jobs Report Points to Solid Labor Market
January’s slightly lower-than-expected creation of 151,000 jobs points to “a solid labor market,” according to Fannie Mae Chief Economist Doug Duncan. He notes that the unemployment rate fell below 5 percent for the first time in nearly eight years as the labor force participation rate edged up for the second consecutive month. “Despite the equity market crosscurrents,” he says, “it appears that labor market conditions remain healthy,” sharing his perspective with HousingWire. “The fed funds futures market apparently wrote off a March rate hike before this report. However, we feel today’s report offers little clue about near-term Fed actions, nor does it alter our expectation for only modest increases in mortgage rates during 2016, which is a positive for a housing market challenged by affordability constraints.” (Read story)
Picturesque Desert Home Takes Chill Out of Chicago Winters
It took more than hitting the nail on the head for an expansive hacienda-style home perched in the Scottsdale, AZ, desert to be recognized as the Home of the Year by the Best in American Living Awards (BALA). Just for a start, the builder needed almost 3,800 individual nailheads to install the faux hide in the coffered ceiling of the home’s office – a three-day job. Not surprisingly, the home represents many of the features residential designers expect to gain prominence in 2016. As reported in The Home Story (also a Fannie Mae publication), builders this year are keeping their eye on such trends as freestanding bathtubs, floorplans that encourage outdoor living, green and sustainable elements fitting into the natural surroundings, white and neutral colors, and repurposed wood. The last item on the list “has become a staple accent throughout many styles of residential design and is expected to grow especially popular this year when paired with white-painted surfaces,” according to BALA. The home’s owners, who divide their time between Arizona and Illinois, say they are ready to plant roots in the Southwest and welcome the chance to retreat from cold Chicago winter. (Read the article, see the home on National Association of Home Builders’ website)
Tim Ahern is a writer in Fannie Mae’s corporate communications department.