According to the National Association of Homebuilders, U.S. homebuilder sentiment has turned more positive.
This could play-out significantly in the current market, bringing some relief to the inventory-starved real estate market. The report from the National Association of Homebuilders sees a pickup in demand and positive expectations about further growth the rest of 2017.
A few other factors contributing to this more optimistic outlook are the sustaining sales of new U.S. homes staying ahead of last year’s pace as well as the 4.3% unemployment rate, which is at a 16-year low.
But it is not just the positive sentiment of homebuilders; it is also the homebuyers who are seeing some daylight.
Based upon a report by Black Knight Financial Services, homebuyers are putting ‘less and less skin in the game,’ when it comes to home buying and down payments. It looks like the improved job market and consumer sentiment is fueling consumer confidence.
Homebuyers are opting to put less money down when purchasing their homes, increasing their risk should the housing market falter yet again. Black Knight Financial Services reports that:
■ In the past 12 months, 1.5 million borrowers bought their homes with down payments of less than 10%, marking a seven-year high.
■ Today’s loans are less risky than those issued before the housing crash. They are mostly fixed-rate mortgages, as opposed to adjustable-rate mortgages.
“The increase is primarily a function of the overall growth in purchase lending, but, after nearly four consecutive years of declines, low down payment loans have ticked upward in market share over the past 18 months as well,” said Ben Graboske, executive vice president at Black Knight Data & Analytics.
On the bright side, the bulk of the growth has not been at the lowest down payment level; that is, 3% or less. It is more in the 5 to 9% down payment arena. In addition, the low down payment loans of today are nothing like the ones the precipitated the last housing crash.
This news, compounded by reports that mortgage rates have fallen to their lowest rates since the election, have buoyed sentiment.
According to the Mortgage Bankers Association, total mortgage application volume rose slightly by 0.1% from the prior week.
Yet as mortgage applications remained steady, U.S. home building unexpectedly fell in July as the construction of single- and multi-family homes declined, which could temper expectations of a rebound in housing market activity in the third quarter. This, of course, keeps the tight levels of inventory at a point that constricts the market.
Housing starts declined 4.8% to a seasonally adjusted annual rate of 1.16 million units, the Commerce Department. June’s sales pace was revised down to 1.21 million units from the previously reported 1.22 million units.