New Year momentum based on data, not opinion - North Atlanta Business Post
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Updated Nov 14 @ 1:05PM
 

New Year momentum based on data, not opinion

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The housing market seems to have gained a momentum as we turn the corner into 2017.

Whereas in years past, it seemed to be experts’ optimism that fueled momentum leading into the new year, this year the data is doing the talking.

According to RE/MAX of Georgia, there were 32 percent more closed transactions in the Metro Atlanta area this past November compared to November 2015. In that same period, the median price of those homes jumped 6 percent.

I am a mortgage banker and in my industry everyone likes to have a theory as to why homebuyers are doing what they are doing.

This summer, housing activity was relatively flat for what is normally the busiest time of the year. Many folks quipped that people were just waiting for the election to get over with.

I heard stories of how millennials were clogging things up delaying buying their starter homes because they were either strapped with too much student debt, or they just don’t care about buying houses. They were perfectly comfortable enjoying the freedom that renting affords.

Theories are just coming in as to why activity now is picking up during what is usually the slow time of year.

Housing inventory levels have stayed pretty low throughout the year, but they did seem to stop dropping.

Last year, inventory levels dropped steadily as the metro area added almost 90,000 jobs while about the same number of people move here. New construction could not keep up.

I have not seen those population numbers for 2016 yet, but there was a surge in permits issued for new home construction.

Among major metropolitan U.S. cities, the Atlanta Metro area ranked third in new housing permits issued through October of this year with 31,174, according to the U.S. Census Bureau. Of those, 19,804 were single-family units and 11,236 were five units or more.

In the same period for 2015, only 25,234 permits had been issued, and that was up from 21,787 in 2014.

Each of those years was a sharp increase compared to 2009 when permits bottomed out at only 5,393. But they were still nowhere near the pre-recession numbers in 2006 when 60,764 permits were issued.

While we did see a healthy increase in new permits issued this year, many wonder why there weren’t more. Builders give many reasons. Everyone agrees that skilled labor is hard to find. After construction came essentially to a halt in 2008, many workers either switched to other industries or moved back to their home countries.

Builders today are competing for skilled workers to build their projects and that slows the building process and drives up costs.

Many builders also say that increased regulations at the local levels have made permitting and building more cumbersome and expensive.

And I just read a report in the Wall Street Journal where some national builders are blaming those millennials for staying on the sidelines and not doing their share to stoke greater demand for lower-priced housing.

There is another theory as to why builders are focusing on the more upmarket buyers. Mortgage interest rates have risen sharply since the presidential election. The average 30-year conventional rate has risen a full 1 percent from around 3.5 percent to almost 4.5 percent, according to Mortgage News Daily.

If you bought a $350,000-house today, you would be paying almost $160 more a month than you would have if you bought the house just before the election.

The rise in rates has not dampened the spirits of homebuilders, though. According to another Wall Street Journal article, the National Association of Home Builders’ sentiment measure rose to its highest level since July of 2005.

The article says homebuilders believe that a President Trump will improve the economy and clear many of the regulatory hurdles that either stifle some construction projects or make them too costly.

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