Mortgage Watch | June 5, 2018

New Homes Dominate Real Estate Market in Many Areas

If you are a homebuyer looking for a brand-spanking new house, you’re in luck in many parts of the country. The market is now flooded with the most brand-new, single-family houses to hit the market since the Great Recession, according to Realtor.com.

The number of these newly-built homes, 795,000, jumped 7.7% from 2016 to 2017, according to the U.S. Census Bureau report on the 2017 Characteristics of New Housing. Median square foot size was up a bit as well, to 2,426 from 2,422 the year before.

Chief NAR economist Danielle Hale says, “It’s good that there’s more construction, but there’s still plenty of room for more building,” who adds that builders seem to be catering almost exclusively to upper-end or move-up buyers. She stresses that there is still plenty of room for affordable homes to be built.

This recent crop of new, larger homes tend to be more expensive than older, existing residences. For example, the median price of a new home was $312,400 in April—compared with $257,900 for an existing home. That’s 21.1% more, no doubt due to high land, construction labor, and materials costs.

The overwhelming majority of these brand new homes have three or four bedrooms and 2.5 or 3 baths, and 2-car garages. About a quarter of them have full or partial basements (most notably in states where basements are expected in new homes).

It seems homebuilders are not leaving future maintenance of these (mostly suburban) new home neighborhoods up in the air; in many cases, they are putting homeowners’ associations in place from the start. About 487,000 of these new homes were to be governed by HOAs, adding fees on top of mortgage payments, boxing out many first-time homebuyers in the process.

Because of land costs, ”Construction is slowly shifting back from the core of metro areas to the outer suburbs. It’s because that’s where your normal buyers look for houses,” says Issi Romem, chief economist at BuildZoom, an online homebuilding and remodeling marketplace. “They’re going to be larger than the homes you’ll find in the center of town.”

 

Rates Currently Trending: Neutral

Mortgage rates are trending sideways this morning. Last week the MBS market worsened by -1bps. This was not enough to move rates higher last week. There was a great deal of mortgage rate volatility last week.

About the Author

Tim Morissette, also known in the community as Mr. Foothill Ranch, offers over 43 years of real estate experience which has given him an established reputation and unmatched market knowledge. He is joined by his wife, Michele and son Matt, as they continue to offer personal service with an emphasis on achieving his clients’ real estate goals.  This unique combination of traits has led to his proven track record of referral and repeat business. This can be witnessed by the trust of homeowners in Foothill Ranch where he has sold twice as many homes and represented three times more buyers than the next-leading real estate agent for the last 23 years.

As residents of Foothill Ranch since 1994, Tim and Michele are actively involved in the community by fundraising for Foothill Ranch Library, Make-a-Wish Foundation, Cancer Society, Homes for Habitat, Relay for Life, South County Outreach, and the local church and schools. Tim enjoys sponsoring community-wide garage sales, as well as sponsors Paper Shredding and E-Waste Recycling events twice a year.

Tim and Michele are dedicated to their family of four sons, daughter-in-laws, and grandchildren. As a family, they enjoy many outdoor activities which include camping, spearfishing, mountain climbing and exploring the miles of hiking and equestrian trails in Foothill Ranch and the Whiting Ranch Wilderness Park. Tim and his sons are also avid snowboarders and enjoy mountain biking and lobster diving. Family is a top priority in the Morissette household. They look forward to helping more families achieve their dreams of homeownership.