The Mortgage Corner
Total existing-home sales[1] – completed transactions that include single-family homes, townhomes, condominiums and co-ops – improved 4.8% from October to a seasonally adjusted annual rate of 4.15 million in November. Year-over-year, sales bounced 6.1% (up from 3.91 million in November 2023).
The huge jump in existing-home sales on just a brief drop in mortgage rates illustrates the enormous pent-up demand for rental or owner-occupied housing. And Realtors believe it will continue.
“Home sales momentum is building,” said NAR Chief Economist Lawrence Yun. “More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6% and 7%.”
New home sales have surged as well. It may mean that builders also see an uptick in demand. Builder sentiment held steady to end the year as high home prices and mortgage rates battled renewed hope about a better regulatory business climate in 2025, reports the National Association of Home Builders (NAHB).
Builders expressed increased optimism for higher sales expectations in the next months. Sales of new single-family houses in November 2024 were at a seasonally adjusted annual rate of 664,000, up 5.9 percent above the revised October rate of 627,000 and is 8.7 percent (±19.3 percent)* above the November 2023 estimate of 611,000.
“While builders are expressing concerns that high interest rates, elevated construction costs and a lack of buildable lots continue to act as headwinds, they are also anticipating future regulatory relief in the aftermath of the election,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “This is reflected in the fact that future sales expectations have increased to a nearly three-year high.”
There is at least one elephant in the room, however. What will inflation do with Trump’s tariff and deportation threats? Consumers are already beginning to worry, per the Conference Board’s latest confidence survey.
“The recent rebound in consumer confidence was not sustained in December as the Index dropped back to the middle of the range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “While weaker consumer assessments of the present situation and expectations contributed to the decline, the expectations component saw the sharpest drop. … Compared to last month, consumers in December were substantially less optimistic about future business conditions and incomes. Moreover, pessimism about future employment prospects returned after cautious optimism prevailed in October and November.”
So who or what will win this battle of expectations? The builders want less regulations in the hope that it can speed up the pace of construction, while tariffs have boosted construction material prices as much as 50 percent during Trump’s last term from such as his Canadian tariffs.
The Fed’s Jerome Powell has signaled that Trump’s threat to tax almost all imports will raise prices, while countries so taxed will retaliate with their own tariffs as happened during Trump’s last administration.
So builders should be careful of what they ask for. This won’t help interest rates, mortgage rates in particular, which are extremely sensitive to inflation.
Harlan Green © 2024
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
No comments:
Post a Comment