Posted in National Housing Market | Posted on 04-16-2014 | Written by Brad Hunter
Metrostudy’s latest research shows that new home sales have tracked slightly lower than the same period last year, but things are turning UP in so far in April, at least for some builders. Shaking off the winter blues, consumers seem to be moving ahead with the purchase of new homes with more confidence. Builders in areas that were snowed-under a couple of months ago are now able to move forward with construction at a more normal pace as well.
The markets that didn’t get snow (Las Vegas, So Cal, etc.), suffered an unusually deep slump in sales this winter too, so weather wasn’t the main cause for the drop. Things seem to be picking up in those areas as well so far this month.
Demand is improving, particularly in the move-up segment of the market, but mortgage financing is still an issue.
In Las Vegas, the FHA loan limit has dropped 28% from $400k to $287.5k in 2014. As Greg Gross, our Las Vegas director says, new home base price is up 30% over last year (and incomes has certainly not risen that much). This has already had a negative impact on housing demand.
The West lost momentum from the FHA resets and QRM changes in January as they impact first move up. According to Steve Johnson, our So Cal director, the result has been “a learning curve for buyers” with transactions requiring more down payment or forcing the buyer to consider “less house,” or the resale market. The FHA limit was lowered from 500k to 335k in the Inland Markets, and the QRM debt-to-income ratio was lowered from 56% to 43%, both impacting demand.
Metrostudy’s expectation is that sales paces will get back to normal for the majority of builders over the next two months, but that some of them will end up “below plan” for the year, based upon their internal targets.
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