Construction of new homes increased 3.3 percent in November with the gain largely coming from single-family houses being built at the strongest pace in more than a decade.
The Commerce Department said Tuesday that builders broke ground on homes last month at a seasonally adjusted annual rate of 1.3 million units. The increase marks a key moment in the recovery from the Great Recession: Builders started work on single-family houses at the fastest pace since September 2007, which was just a few months before the start of that economic downturn.
Driving the rebound in home construction has been a shortage of existing properties being listed for sale.
Fewer people are putting their property on the market, despite healthy demand from buyers because the unemployment rate is at a 17 year-low and mortgage rates remain at attractive levels. New construction has filled some of this gap with starts on single-family houses rising 8.7 percent so far this year.
Still, not enough new homes are being built to totally end the supply squeeze. Over the past year, the number of sales listings for the much larger market for existing homes has fallen 6.4 percent.
The construction growth last month came from the South and West, while the Northeast and Midwest reported declines.
Builders are also backing away from the apartment rentals that until recently were a driving force behind the rebound in residential construction. Ground breakings for multi-family buildings such as apartment complexes have declined 8.5 percent year-to-date.
Building permits, an indicator of future construction, slipped 1.4 percent in October to 1.3 million. But the number of permits authorized so far this year has increased 5.8 percent.
Relatively low mortgage rates have helped would-be homebuyers, even as property prices have climbed faster than wages. The average rate on 30-year fixed-rate U.S. mortgages was 3.93 percent last week, slightly better than the 4.16 percent rate a year ago, according to mortgage Freddie Mac.
Aug. 21, 2017 – For-sale-by-owners (FSBOs) tend to sell their homes for lower prices than homes sold through traditional agents via the MLS, and in many cases below the average differential represented by the prevailing commission rate, according to a new study by Collateral Analytics. The study examined the price differences between homes sold through traditional agents versus those sold by FSBOs from 2016 to the first half of 2017.
Some homeowners attempting to avoid commission costs attempt to sell their home on their own – but that can backfire and turn into a much lower sales price, the study found.
Even successful FSBO sellers achieve prices "significantly below" those from similar properties sold more traditionally via Realtors®, the study found. A FSBO sale, on average, nets nearly a 6 percent lower price than an MLS sale for a similar property, the study found.
Overall, the authors found that the differential in selling prices between FSBOs and MLS sales is "remarkably close to average commission rates."
"Assuming that both buyers and sellers pay the commission, one might have expected something less than this average," the researchers note. "It appears that many sellers are avoiding commissions while netting home prices less than they would with an agent-represented MLS sale."
Source: "Saving Real Estate Commissions at Any Price," Collateral Analytics Research (Aug. 16, 2017)
After Dallas-area real estate pro Laura Barnett put a listing on the market three weeks ago, it quickly received 22 offers. But Barnett didn't take the highest bid. Instead, she took a cash offer because she wanted to ensure that there were no hang-ups along the way toward closing. Appraisals, she says, aren't keeping up with sales prices, and if the appraisal doesn't match the contracted price, buyers often can't get a mortgage and never make it to settlement.
"They're kind of putting a glass ceiling where we can't raise our prices any higher than we have comps to support it, so we're definitely going with more cash offers than we used to," Barnett, a real estate professional with RE/MAX DFW Associates, told CNBC.
Younger, first-time buyers are feeling the brunt of the competition because they tend to be more mortgage-dependent and use low downpayment loans, which have stricter underwriting standards.
As a result, a first-time buyer may submit the highest bid for a listing, but if the mortgage lender's appraisal comes in even a slight bit under the contract price, the mortgage financing – and the real estate transaction – can fall through.
"Anytime prices move up fast, the actual appraisal process – because they're looking back in history, not forward into the future" can lag behind, says Lawrence Yun, chief economist at the National Association of Realtors® (NAR).
"From the buyer's perspective," says Yun, "it's a tough situation where they want to rely on the value of the home, on the appraisal, yet they know that if they decide to back away, there are other buyers waiting to pounce."
Source: "This House Had 22 Offers. Here's Why the Owners Didn't Take the Highest," CNBC (July 24, 2017)