Mortgage Watch | June 3, 2019

Single family footprints go smaller, while industry hopes gain steam

It used to be said that housing was the straw that stirred the U.S. soup. Aside from the number of jobs it produced, it also simulated the economy in myriad ways, including prompting the purchase of consumer goods. While today’s housing industry may not be synonymous with the business cycle, but’s Andrea Riquier reports that the ups and downs in housing, which represents a big part of the economy, usually do offer hints about what’s going on more broadly.

“Economists closely watch housing market indicators like sales volumes and home prices — as well as how Americans are accessing the market and managing their obligations to mortgages, rental costs, taxes, and so on,” she says. But experts watch other trends as well. They look for signs of how the broader American economy is doing. Last week Rob Dietz, chief economist for the National Association of Home Builders, posted a research note about one in particular: how the size of newly-constructed single-family homes have been going down.

Dietz explains, “Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.”

While that is intuitive, the question looms: what about the specifics of what we’re seeing right now? The median size perked up at the beginning of this year, as the housing market shook off a difficult 2018, according to Riquier, but for the most part sizes have been on a downward path since mid-2015.

New-home size over the years, says Dietz. “Current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market levels off.

In an interview with MarketWatch, Dietz explained how existing-home sales have only eked out a gain in two of the last 12 months. But that “would say we’re past cycle peak but new construction should continue to trend up, which would suggest it still has legs left.”

Pent-up demand could help extend the housing cycle, Dietz thinks. “It may even help cushion the overall economy from a near-term downturn.” Dietz has no recession in his forecast for the foreseeable future.

Rates Currently Trending: Neutral

Mortgage rates are trending sideways so far today.  Last week the MBS market improved by +29bps.  This was enough to move rates or fees lower last week. We saw high rate volatility at the end of the week.


About the Author

Tim Morissette, also known in the community as Mr. Foothill Ranch, offers over 46 years of real estate experience which has given him an established reputation and unmatched market knowledge. He is joined by his wife, Michele and sons Matt and Jeff, 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 26 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, paper shredding and e-waste recycling event, an Easter egg hunt, & a Meet Santa Event.

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.