Why new home sales are finally moderating

However, sales are up 20.8% year over year with low supply

Reports on housing data are headline-driven, and headlines are designed to cause folks to overreact in both positive and negative ways. We’ve seen our share of hyperbolic headlines in the housing reports this year, and for that reason, I have been compelled to reiterate my belief that the “too-hot” data will moderate to a more normalized trend. But, we hadn’t seen that moderation in any meaningful way until today’s new home sales data.

The new home sales marketplace has been showing abnormally fast growth for the last several months. This parabolic spike in recent new home sales from the lows in April to July’s highest levels has never happened in the data line.

But this kind of exponential growth is not sustainable. Exponential growth in any housing market data will eventually moderate. And that is what we see in the data for new home sales today, with negative revisions to previous reports.

From the Census Bureau: “Sales of new single-family houses in November 2020 were at a seasonally adjusted annual rate of 841,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11% (±9.5%) below the revised October rate of 945,000, but is 20.8% (±19.5%) above the November 2019 estimate of 696,000.”

Despite what you may hear to the contrary, this is not the beginning of the end.

Those who follow me on social media are aware of my admonitions against overreacting to this moderation. All housing data will moderate to a normalized trend, but the trend data is still good. I warned about the negative headlines that would inevitably follow the moderation in sales in this HousingWire article.

We don’t need to be concerned about the moderation in the new home sales data because inventory is still low.

From the Census Bureau: “The seasonally adjusted estimate of new houses for sale at the end of November was 286,000. This represents a supply of 4.1 months at the current sales rate.”

I’m sure you’ve heard the thesis that low inventory suppresses sales. First, there is no evidence for this, and second, this makes no sense. Home sales have gotten to pre-cycle highs with the inventory at pre-cycle lows. Builder confidence is primarily based on inventory.

When the monthly supply for new homes is below 4.3 months, builder confidence will be high, and they will continue to build with much enthusiasm. The evidence is here with the NAHB’s builder’s confidence index, which will moderate in time as well.

When monthly supply is 4.4 to 6.4 months, builders become cautious about oversupplying a market. However, construction should continue at a slow and steady pace.

When monthly supply gets to 6.5 months and above, builders tend to halt construction. We saw this happen when inventory rose in 2018 and 2020.

The best way to predict builder behavior is to look at the three-month average of sales and supply. The month-to-month data is too wild and is frequently revised toward trend. Significant revisions happen a lot when data gets too hectic in a positive and negative direction.

According to the Census Bureau, we currently have 4.1 months of supply, with a three-month average of 3.73 months. From the builder’s perspective, this would be considered excellent. The monthly supply of new homes is the most critical data line we have for the American housing market.

I used the monthly supply chart in the previous expansion to prove my thesis that housing would have its weakest recovery ever in the years 2008-2019. However, the years 2020-2024 would be different. We finally cracked under 4.3 months and are on our way to finally start a year at 1.5 million housing starts in 2022.

Spoiler alert: A big theme of my 2021 predictions (which will come out next week) is that the hot housing data of 2020 will moderate. But there is no need to go into panic mode. When mortgage rates rise it will impact the new home sales market the most, and we should get to 4.3 months plus supply. However, we aren’t there yet.

One final note: Purchase application data came out today. The data showed 26% year-over-year growth, making it 31 straight weeks of growth, averaging over 20%, compared to last year. All of this is make-up demand for the lost weeks due to COVID-19. I wrote about that with the recent existing-home sales report.

Have a Merry Christmas, everyone, especially my housing bubble boys. I know most of you don’t believe your own nonsense, but that is just how you troll.

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Habitat for Humanity sees success with aging in place program

By Didier Malagies • January 22, 2025

A dedicated aging in place (AIP) program offered by the Oswego County Habitat for Humanity (OCHFH) in New York says it is seeing success by incorporating family, community and local resources to ensure older homeowners can remain where they prefer. “It’s been projected that, over the next 20 years, households led by individuals in their 80s will become the fastest growing age group , which provides stability within their communities,” said Samuel Raponi, OCHFH executive director. Through the organization’s AIP program, Habitat collaborates with families, local organizations and other community members in an effort to provide homes that prioritize living for older adults, he said. “This ultimately enhances their quality of life. We employ two different assessments in each case to ensure that the homeowners’ needs are clearly understood,” he added. An initial assessment of the client’s living situation aims to assess each person’s daily living activities, which are scrutinized by a “health or human services professional,” the organization said. This includes how they manage regular tasks like cleaning, shopping, paying bills or interacting with their community. A second evaluation specifically assesses home repair needs, and how to make a dwelling more livable for the needs of an older person. “These assessments enable OCHFH to provide modifications to their homes tailored to each homeowner’s specific lifestyle,” Raponi added. “Among the kinds of modifications we make are installing lever door handles, ramps, railings, grab bars, walk-in showers with a low threshold, and raised toilets to make homes more accessible for older adults.” Other resources, including Meals on Wheels , may be seen as necessary to deploy depending on a person’s circumstances, and all combine into a living situation that is aimed at being more generally beneficial for someone seeking to age in their own home. AIP is actively seeking more collaborative partners in the health care sector, owing to unique challenges visited upon older people who may not be able to adequately address their health needs. “Low-income older adults face a higher risk of chronic diseases and disabilities due to limited access to primary care and a greater likelihood of living in substandard, deteriorating housing,” Raponi added. A recent study from Carewell suggested that many older adults see aging in place as a financial necessity considering the costs of other kinds of living arrangements older people may choose. Nearly half of respondents (47%) characterized aging in place as both a preference and a financial necessity in tandem.

Is it time to prequalify for a mortgage now

By Didier Malagies • January 20, 2025

1. Assess Your Financial Health Credit Score: Check your credit score (usually 620 or higher is required, though higher scores get better rates). Debt-to-Income Ratio (DTI): Calculate your monthly debt payments compared to your gross monthly income (lenders typically prefer a DTI below 43%). Savings: Ensure you have enough for a down payment (typically 3-20%) and closing costs. 2. Gather Financial Information Lenders will need the following: Proof of income (pay stubs, tax returns, W-2s/1099s). List of assets (savings, investments, retirement accounts). Details of current debts (credit card balances, student loans, etc.). 3. Choose a Lender Research different lenders, including banks, credit unions, and online lenders. Compare prequalification options (many allow online applications). 4. Complete the Prequalification Process Fill out the lender’s prequalification form (online, over the phone, or in person). Provide basic details about your income, debts, and assets. 5. Review Prequalification Results The lender will give you an estimate of the loan amount and potential interest rate. Remember, prequalification is not a guarantee of approval and doesn’t involve a hard credit inquiry. 6. Follow Up with Preapproval If you’re serious about buying, consider getting preapproved, which involves a more in-depth review and is stronger than prequalification. Tips: Use online calculators to estimate affordability before reaching out to lenders. Avoid large purchases or opening new lines of credit during the prequalification and preapproval process. Would you like details on specific lenders or tools to compare mortgage options? tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

USA Today: If Social Security falters, reverse mortgages could be worth a look

By Didier Malagies • January 13, 2025

Many retirees have said they rely largely — and sometimes entirely — on Social Security benefits as their primary income stream in retirement . But in instances where these payments may not be enough to make ends meet, other options should be considered — and in the right situation, a reverse mortgage could be one such option. That’s according to a column published this week by USA Today , which assessed reverse mortgages in tandem with options such as personal savings, a part-time job and other benefits programs. “A reverse mortgage is a possibility for seniors with substantial equity in their homes,” the column stated. “It essentially enables you to borrow against your equity, and you aren’t required to make any payments while you’re still alive as long as you live in the house.” The column is likely referencing the Home Equity Conversion Mortgage ( HECM ) program insured by the Federal Housing Administration (FHA). Loan proceeds are dependent on the amount of equity in the home and current interest rates, the column noted, and there are multiple disbursement options available, the column noted. The minimum age requirement of 62, a core tenet of the HECM program, was also mentioned. “There are closing costs and other fees, and you’ll still be responsible for maintaining the property and paying the property taxes and homeowners insurance,” the column noted. It characterized the loan as a “solid option” for those who have few other assets beyond their homes, adding that “it might not be the right move if you intend to pass the property on to your heirs someday. After you pass away or move out of the home, you or your estate will have to repay the loan. This will reduce how much your heirs receive.” Recent survey data from Clever Real Estate highlighted some realities of relying on Social Security benefits in retirement. Roughly one in five respondents in the 1,000-person survey said they rely exclusively on Social Security benefits as their sole income stream in retirement, with nearly 30% saying they believed they would be able to rely on them. Last year, data from Nationwide suggested that an increasing number of older investors believe that retiring at the age of 65 is no longer a realistic option . This is largely tied to higher levels of stress they’re feeling about the economy and the cost of living.