Current State of the 2018 Housing Market - Economic Insights

Current State of the 2018 Housing Market – Economic Insights

hello there welcome to our series on economic insights with Danielle Hale chief economist at I'm Audrey Whittington and today we might be talking about the most important topic of all what is the status of the current housing market so lay it on us here's the overview so the current housing market is one where there are a lot of buyers and there aren't very many homes for sale so that creates a great market for sellers in most parts of the country and a really challenging market for buyers we're seeing not quite as many first-time home buyers in the market because they're the ones who have the most difficulty they don't have a home that they own they don't have any equity so they can't participate in the fact that prices have been increasing for pretty much the last several years so renting rates are high right so whereas conversely we must be seeing high rental rates yeah so rents are pretty high and they've been growing pretty substantially there's been a lot of building and in the multifamily sector so it's possible that rents could slow in the future that's expected in some major markets which will be good for people who are renting right now and trying to save up for a down payment to get into the housing market but on the challenging side they might face rising rising home prices which they've been facing and rising mortgage rates both of those things make it a little bit more expensive to get into the housing market and if mortgage rates rise I know that's another one of our serious topics if mortgage rates rise then perhaps the supply will decrease a little bit we might see a nicer balance between buyers and sellers is that a fair statement yeah it could be that rising prices rising mortgage rates may just knock some people out of the market altogether that wouldn't be great for those people who get knocked out of the market but it does mean that there could be a little bit less competition in the market another way to solve that competition problem is to see new construction and it's something that we've seen but it hasn't kept pace with the number of people who are interested in getting into the housing market so builders can build more homes especially at the affordable level we've actually started to see inventory pickup and higher price ranges it's still lagging and Laurie for new ranges yep for a new home right so they're not building affordable new homes that doesn't really help us right another question for you about the current housing market is you know are there more different mortgage instruments that are coming to play so one thing I know is you know sort of having a history in lending is that a lot of products out there like VHA you know are geared really to new home buyers do those not affect the market so that's a good question they do affect the market and they can sometimes have slightly different interest rates and what you'll see from the most commonly quoted 30-year fixed-rate mortgage and for buyers who can qualify for some of those loans because sometimes they have very particular qualifications they can be a good option one thing that can be a potential drawback is that they sometimes are a little bit more onerous for sellers to work through and so it can sometimes put your offer at a slight disadvantage if you're in a competitive environment so when you know when you're putting in an offer we often find that offering with cash is gonna make you the most competitive strongest offer most people can't do that so that's fine if you can't do that you have different mortgage options available but some of the mortgage options that you choose might make your offer more or less competitive and a real estate agent can advise you they know the market and can help you make the right decision and it strikes me you'd want to work with a real estate agent in this kind of market especially absolutely to navigate the competitiveness for sure right so for the current housing market it sounds like generically it's pretty robust what indices do you look at to really besides the fact as a consumer I'm certainly going to be looking at the signs going up and down and how fast right but what are you looking at you know as a columnist yes the signs going up as one so at Realtor calm we tracked active inventory so it's basically a metric about those signs that are going up on the market we also look at home sales that's produced by the National Association of Realtors and that looks at how many homes is sold which is again another metric of what's going on both of those metrics include price data so we can see whether homes are getting more expensive or less expensive in today's market definitely more expensive we also look at some broader economic indicators so things like new construction to see how the housing pipeline is being fed and also the jobs report because when people have jobs they have income they can that money on things like stuff but also homes anywhere types of homes yes absolutely all right so it terms to the current housing in market it sounds like we're in a pretty good market and it sounds like it's also tied to other markets like you know how much people spend everywhere else right so in terms of the discretionary income yo can you kind of talk about that a little bit yeah so when thinking about housing it's a big chunk of spending and in fact that's spending on your your monthly cost of housing whether you're renting and paying that to a landlord or whether you're an owner and you're sort of paying that to yourself the monthly cost of living in your home that's tracked and that feeds into the GDP measure which is a measure of GDP stands for gross domestic product it's a measure of all of the economic activity you can think of it as all new production or all income and housing tends to be about 15% of overall economic activity so that's nothing to sneer at right and of course it's related to construction and Lee and you know wood lumber and labor etc so it's really important do you have any cause for concern as to where the current housing market is headed or do you think we're probably in a pretty good place for a while I'm certainly hoping you say we're going yeah so we've been in a good place for a long time so unemployment is near record lows or not record lows but long time lows so four percent the economy is doing very well and has been for the last little while so and this boom has been going on for quite some time but I think there's plenty of room for it to continue to grow we're still not back to what we would consider a normal level on new construction and there's still plenty of demand from young Millennials who haven't really been able to get into the housing market yet I think that that's gonna be positive tailwind for the housing market in the years ahead so we shouldn't so it sounds to me like what I'm taking away from this is we're in a great place and even if there's some adjustment in the market we shouldn't panic or assume that we're headed into a recession yeah no I think that's correct great well I can live with that so thanks for joining us in this video series on economic insights with Daniel Hale chief economist at and we hope you'll join us on some of the other ones you you