According to HousingWire, housing starts are inching back up across the country, and a big fall in the price of lumber in recent weeks has housing economists projecting an uptick in activity from homebuilders. Housing starts increased 3.6% in May to a rate of 1.57 million, according to the most recent study from the U.S. Census Bureau. That’s more than 50% above the May 2020 rate — when the COVID-19 pandemic was at its height in the country — of 1.05 million.
The total number of homes under construction increased 1.2% — the 12th consecutive monthly increase and its highest level since 2007. Permits for new construction by homebuilders dropped 3%, largely because lumber and building material costs kept prices high. With lumber prices finally coming down, June figures will be worth keeping an eye on.
“Permits for new construction are typically a forward-looking indicator of new starts, and the homebuilding industry continues to grapple with increasing materials costs and delayed deliveries from suppliers,” said Joel Kan, Mortgage Bankers Association assistant vice president of economic and industry forecasting.
Added Doug Duncan, Fannie Mae‘s chief economist: “With a strong backlog of homes sold-but-not-yet-started, we expect some upward movement in single-family starts in the coming months as delayed and put-off projects are initiated.”
The past two months, in particular, have forced homebuilders to alter their approach when it comes to beginning new projects. In many cases, homebuilders have limited the sales of custom homes and capped volume so as to not burn through their existing inventory of materials. Others, still, are even delaying listing homes for sale until later in the building process, said Matthew Speakman, Zillow economist.
“This is all in an effort to account for input prices that have soared in the last year,” Speakman said. “But, thankfully, some relief may be on the way. While it remains elevated compared to last year, the price of lumber has come down significantly in recent weeks, offering some builders hope that the worst of the price pressures may be passing.”
A drop in lumber prices would be an enormous boon for the housing industry as a whole: a recent NAHB report detailed how lumber prices have tripled over the past 12 months, alone causing the price of the average new single-family home to increase by $35,872.
How to handle a bidding war in this housing market
Welcome to the era of the real estate bidding war. Bidding wars are the natural outcome of a red-hot housing market. With economic growth and wages rebounding smartly from our pandemic year, COVID-19 pushing many families towards more spacious homes in the suburbs, huge investors getting into residential real estate and interest rates still relatively low, housing has found itself as a very attractive asset class.
Upping your bidding game might require more due diligence on how your local market has been faring; knowing how long homes are staying on the market, and what they are tending to go for, and selecting the right terms to nudge sellers to pick your offer over others.
According to Reuters, here are some tips from the experts:
- Do not fall in love
“Don’t get emotionally attached to any home, and start imagining your lives there,” says Ryan Serhant, head of brokerage Serhant, star of Bravo’s “Million Dollar Listing New York,” and author of “Big Money Energy”. “It’s hard to do, but if you don’t get a particular home, try not to be devastated about it.”
- Run the numbers
The obvious temptation in any bidding war is to offer the moon. But if that locks you into long-term debt that you cannot truly afford, then that’s no solution. Instead, revise expectations about what your budget will get you: “Look for homes with list prices below your max budget, to provide some breathing room to make an above-list offer,” advises Zillow’s Handy.
- Be realistic
In a more typical housing market, there are any number of terms where you can haggle with the seller – from the timing of the closing date, to contingencies, to needed repairs. But in the current market sellers hold most of the leverage. That’s the situation Colantoni faced, when the sellers wanted to rent their place back for a while until their new home was ready.
- Have an agent in your corner
Especially in this hyper-competitive environment, it helps to tap the resources of an agent. They have relationships with other brokers, knowledge of properties that may not be officially on the market yet and can steer you to the price point that will actually get you the property.
Renting vs. buying: what’s the difference?
Renting versus buying a home isn’t just a matter of ownership. As reported by BankRate, there are different costs associated with renting vs. buying, and they depend heavily on where you live and the local housing market.
Buying a house can build equity. Homebuyers can capitalize on the equity their home accumulates over time. That means if the home’s value goes up, you’ll cash in on the higher value when you sell. Plus, with a fixed-rate mortgage, you won’t have to worry about rising rents.
For renters, most rental properties require a security deposit and the first and final month’s rent payments when you sign a lease. For homebuyers, one of the biggest costs of homeownership is your monthly mortgage payment, which includes the loan’s principal and interest. Your payments can go up or down over time if your loan is variable-rate or your property taxes or homeowners insurance premiums change.
The answer to the rent vs. buy a home debate isn’t as black and white as you might expect. Here are five questions to ask when considering renting vs. buying:
- What can you afford?
- How long do you plan to stay in the home?
- Do you want stability or flexibility?
- Can you afford to be responsible for home repairs/maintenance?
- What are your financial, career and family goals?
If you’re moving to an unfamiliar city, have an unstable job situation or don’t know what neighborhood will feel like home, renting for a period of time can be a great option. Another consideration: Can you afford a home that will fit your lifestyle in the next few years, or will a tight budget limit your options? For many people, renting or buying comes down to what they can afford at the moment.
While no one has a crystal ball, it’s important to evaluate your current life situation and how much it’s likely to change in the immediate future, as well. If you’re still unsure, it may be helpful to talk with a real estate agent to help you think through the decision to rent vs. buy a home.
Weekly Mortgage Rate Update
Mortgage rates continue to drift down as markets concur with the view that inflation increases are temporary. While mortgage rates are low, purchase demand has weakened over the last couple of months, primarily due to affordability constraints stemming from high home prices. With inventory tight, the slowdown in demand has yet to impact prices, meaning the summer will likely remain a strong seller’s market.
The Freddie Mac weekly survey shows the average rate for a 30-year fixed mortgage is 2.93%, which is 0.03 points lower than last week, and down 0.20 points from this time last year.