US Housing Predictions, Fall of Home Building
The national mortgage rates have been steadily dropping over the last few months, dipping below 4% and staying there. Fannie Mae recently released their latest forecast for the remainder of the year. Contradictory to the Chairman of the Federal Reserve, Fannie Mae focused on the economy in the US. They predict the average rate for the last half of the year to be 3.7%, down from 3.9% they had anticipated just a month earlier. In comparison, the average rate in the first quarter was 4.4% and 4% in the second quarter.
As we’ve seen a few years ago, low mortgage rates signal an uptick in home price growth. However, home prices haven’t felt the relief of the rapid price growth and may still feel out of reach for some home buyers. A bright spot? There is more inventory on the market than that of two years ago. Yet, the newest inventory isn’t new construction homes.
US home building fell dramatically, hitting a two-year low. New permits for single family homes grew modestly, but multi-family home building isn’t happening. A stark reversal for those in the Greater Seattle area where we are seeing more multi-family homes being built than single family.
Why are the number of permits and new construction homes important? Home building is the largest portion of the housing market. The home building sector is hit hard by a shortage of land (something we’re all too familiar with) and labor. Some builders also mentioned difficulty building homes that are at an affordable price points to buyers. This is a sign of the trade wars affecting home builders. With the rising cost of material, that cost is then placed on the buyer.
Locally, we are seeing a slowing of permits and building compared to two years ago. However, there are several new multi-family homes near completion. We are still seeing an influx of new residents to Seattle and a greater job growth than the rest of the nation. In June, we saw 1536 homes for sale, an increase of 4.3% from May and a shocking 61.3% increase from last year.