This Week in Real Estate: January 23, 2017


Favorable year-over-year increase in single-family construction starts were reported This Week in Real Estate while the National Association of Home Builders expects a 10 percent growth in single-family construction in 2017. Below are a few highlights from the third week of January that influence our business:

* Builder Confidence Holds Firm in January. Builder confidence in the market for newly-built single-family homes remained on firm ground in January, down two points to a level of 67 from a downwardly revised December reading of 69 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The solid reading is consistent with building expectations heading into the new year. NAHB expects 10 percent growth in single-family construction in 2017, adding to the gains of 2016. However, ongoing industry concerns include rising mortgage interest rates as well as a lack of lots and access to labor. The HMI rose sharply in December as the election results raised hopes among builders that a new Congress and administration will help create a better business climate for small businesses, particularly with respect to improving regulatory costs, which increased more than 29% over the last five years. Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 52 and the Midwest posted a three-point gain to 64. The South and West each held steady at 67 and 79, respectively.

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* Single-Family Housing Starts Up 9% in 2016. For 2016 as a whole, single-family construction improved 9.3% over the 2015 level of starts. And as measured on a three-month moving average, single-family starts are at a post-cycle high. This increase is consistent with the recent growth in the NAHB/Wells Fargo measure of single-family builder confidence. Single-family permits also point to more growth in 2017. Single-family permits grew 4.7% in December, reaching an annual rate of 817,000, the fastest pace in the current cycle. Total starts were up 11.3% in December, rising to a 1.226 million seasonally adjusted annual rate. Focusing on housing’s economic impact, in December 57% of homes under construction were multi-family (604,000). This multifamily count is 8% higher than a year ago. There were 450,000 single-family units under construction, a gain of 7% from this time in 2015. This is the highest count of single-family units under construction since 2008.

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* Ellie Mae: Closing Rates in December Hit Highest Point For The Year. Closing rates for all loans in December hit their highest point of 2016, according to Ellie Mae’s Origination Insight Report. Closing rates for all loans increased to 73.2% in December. While refinance closing rates increased from 68.7% in November to 69.6%, purchase closing rates increased from 76.1% in November to 77% in December. As more loans closed, the market also shifted slightly away from refinances and towards purchase loans. With the increase in interest rates, the total number of refi originations shrank to 46% in December, down from 47% the previous month. But the purchase origination market remained strong, increasing from 54% of all closed loans. “As rates began to increase we saw purchases tick back up in December, signaling the start of a trend we expect to continue into 2017,” Ellie Mae president and CEO Jonathan Corr said. The time to close a loan continued to increase in December, increasing from 49 days in November to December’s 50 days. Time to close a refinance increased to 52 days while time to close a purchase loan increased to 48 days, both an increase of one day from the previous month. Average FICO scores slipped to 726 from 728 in November. Conventional purchase FICO scores held steady at 753 for the third month in a row while conventional refis decreased from 743 in November to 739 in December. FHA purchase FICOs also stayed the same at 686 and refinance FICO scores increased one point to 655 in December.

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Have a productive week,

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