This Week in Real Estate: May 21, 2018

Growth in single-family permits for the first quarter of 2018 was released This Week in Real Estate and on a year-over-year basis are up 6%, while Washington state is up 13.9% and Oregon is flat at negative 0.9%. Below are a few highlights from the third week of May that influence our business:

* Western and Some Southern States Lead Residential Permit Growth. 

Over the first quarter of 2018, the total number of single-family permits issued nationwide reached 199,861. On a year-over-year basis, this is a 6.0% increase over the March 2017 level of 188,593. The results from the SOC are similar, single-family permits over the third month of 2018 were 198,600 which is 5.3% ahead of its level over the same period of 2017, 188,600. Between March 2017 and March 2018, 26 states saw growth in single-family permits issued while 24 states and the District of Columbia registered a decline. Seventeen states, including California, recorded a growth above 6.0%. Idaho had the highest growth rate during this time at 42.3% while single-family permits in the District of Columbia declined by 69.1%, but from a small base, from 145 in 2017 to 34 in 2018. In the single-family sector, Texas led with 30,801 permits issued year-to-date in March 2018 and Florida came in second with 21,803 during this time. Meanwhile, the lowest number came from the District of Columbia with 34 permits. The 10 states issuing the highest number of single-family permits combined accounted for 63.0% of the single-family permits issued.

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* Appraisers and Homeowners Sync Up on Value

Appraisers and homeowners are syncing up on value, with appraisals in April just 0.33 percent below what homeowners predicted, according to the Quicken Loans National Home Price Perception Index (HPPI). The Quicken Loans National Home Value Index (HVI) shows appraised values rose 6.47 percent year-over-year. The findings indicate homeowners are less likely to get a rude awakening when going through mortgage process; it is the closest the national appraiser and owner opinions have been in more than three years. While they are more in line with what owners expected, home values are continuing their ascent over last year’s level. The HVI reported a healthy 6.47 percent year-over-year increase, despite the near-stagnant monthly change, with a 0.05 percent dip in home values since March. The HVI was pulled into the negative by the Northeast—the only region showing a decrease in home value, at a 1.24 percent decline. The Northeast was still the lowest when reviewing annual changes; however, all regions were positive, ranging from the Northeast’s 2.22 percent growth to the 9.44 percent jump in the West.  “The skyrocketing home values in the West is a trend with no end in sight,” Banfield says. “Until home-building pace picks up, in combination with more existing homes being listed for sale, affordability will continue to wane. The other regions of the country are showing annual price gains as well, but at a more moderate pace. Time will tell if the slightly higher interest rates in 2018 start to slow demand, or if the inventory shortage ends up being a larger contributor to price changes.”

* People Haven’t Been This Optimistic About Home Prices Since Just Before the Crash. 

House prices are soaring and, despite warnings from some analysts, most Americans believe they will continue to soar. A majority of U.S. adults (64%) continue to believe home prices in their local area will increase over the next year, a survey released this week by polling firm Gallup concluded. That’s up nine percentage points over the past two years and is the highest percentage since before the housing market crash and Great Recession in the mid-2000s. The level of optimism is edging closer to the 70% of adults in 2005 who said prices would continue rising. That, of course, was less than one year before the peak of the housing market bubble in early 2006, which was largely fueled by a wave of subprime lending. (Roughly one-quarter of respondents in both 2005 and 2018 said they believed house prices would remain the same.) Opinions vary between the West and East coasts, and renters and homeowners. Some 70% of homeowners see prices continuing to rise versus 59% of renters. Only 59% of Western residents see prices increasing, compared to a range of 65% to 68% in the other parts of the U.S.

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