Upstate Housing Market Forecast is January 22

Upstate Housing Market Forecast is January 22

Dr. Robert Dietz

Get your tickets now!

2019 is almost upon us.  Start your year off right with a forecast of the industry for the year ahead.

The Details
  • When: January 22, 11:30 a.m.
  • Location: Greenville Convention Center
  • Keynote Speaker: Robert Dietz, Ph.D., Chief Economist, National Association of Home Builders

The event is hosted by the HBA of Greenville, Greater Greenville Association of Realtors, Upstate Mortgage Lenders Association, and the Greenville Chamber of Commerce.

Make a day of it! Prior to the luncheon be sure to register for the mornings education sessions….more information to come.

Exhibit Opportunity

Tell attendees about your business by setting up a vendor table at this event for $195 and showcase your product or services to the 300+ attendees.  You can sign up using this registration link or by calling the HBA of Greenville office at 864-254-0133.

Surging lumber prices threaten housing affordability

by Rob Dietz, Chief Economist, National Association of Home Builders

The most serious headwind facing housing markets today is the escalation of framing lumber prices—up 59% since the start of 2017. Recent NAHB surveys suggest the price for lumber has overtaken the availability of labor as the primary business challenge for home builders. Since the beginning of last year, rising lumber prices have added more than $7,000 to the price of a typical new home and more than $2,000 to the price of a typical apartment.

There are a number of reasons why lumber prices have jumped, including a rail car shortage in Canada, but the primary factor is the 21% effective tariff rate placed on Canadian softwood lumber. The ongoing concerns over trade wars represent a macroeconomic risk to the gains resulting from the recent tax legislation, and lumber is a prime example.

Nonetheless, builder confidence remains strong, despite total housing starts falling 3.7% in April. Though multifamily starts declined 11% last month, that market is up 10% year-to-date, outperforming our forecast. And single-family starts are 8% above their year-to-date totals from a year ago. However, recent data show a gain in average new-home size, which is an early indicator of weakness in the entry-level market due to rising input costs.

Young buyers want to live in the ‘burbs

The housing market is slowly gaining strength after the ravages of the Great Recession. Home prices are rising across the country, and both home sales and housing starts are up year-over-year. Home-builders are gradually gaining confidence, in part because of anticipated growth in the first-time homebuyer market.
That market has been severely depressed. From 2004 to 2014, the home ownership rate for those under age 35 fell from 43 percent to 36 percent, according to U.S. Census data. And economist Robert Dietz at the National Association of Home Builders said the proportion of single-family homes purchased by young buyers has fallen to 18 percent, from an historical average of approximately 30 percent.
But Dietz points to several recent indicators suggesting that more young people are now entering the market for first homes — or soon will be. He cites an increase in household formation, which has risen in the past three quarters, after falling during and after the recession. (Household formation is the establishment of new households — typically by young people moving out from their parents’ home or a roommate situation, or new families forming though marriage and domestic partnership.) The birth rate has started rising again as well.
Dietz said there is a popular stereotype of the so-called Millennial generation as averse to major financial and life-cycle milestones, like moving out on one’s own, starting a family, and buying a house. But in fact, he said, “consumer preference surveys have traditionally shown at least three-quarters of Millennials are interested in becoming homeowners eventually.”
He cited, among other sources, a recent survey of young people by Fannie Mae.
And the improving economy should finally put some wind at young peoples’ backs now. Jobs are more plentiful and secure now than several years ago, and interest rates remain low.
On the other hand, many young people carry a significant student debt burden, which may make it more difficult for them to take on additional debt and get a mortgage. Credit standards to obtain a mortgage are still very tight. And rents are climbing steeply in many markets, making it harder to save for a down payment.
Plus, in some of the hottest urban real estate markets — such as San Francisco, Denver, Seattle, and New York — first-time buyers face an “affordability crunch,” with rents and purchase prices simultaneously soaring in the most desirable neighborhoods.
An example is Portland, Oregon’s trendy Southeast Division Street, a busy urban strip lined with new apartment buildings, funky clothing stores, and a $4-per-scoop gourmet ice cream parlor where there’s often a line halfway down the block.
Inhabit Realty occupies a concrete-glass-and-steel office at street-level in one of the new mixed-use commercial buildings on the strip. Eric Hagstette is principal broker. “You have a local grocery store, you have shops, restaurants, parks, public transportation all at your fingertips,” said Hagstette.
“And that’s what’s driven our prices so high—because people want this lifestyle.” Hagstette said. “A new condominium home or townhome easily goes for $400/square-foot.” 
That works out to about $500,000 for a 1,500-square-foot 2-bedroom unit in a new building. Prices can be significantly higher for fully-upgraded and -renovated century-old craftsman homes on the neighborhood’s narrow, tree-lined streets.
This is not a real estate market that most young buyers — except perhaps the highest-paid tech and corporate workers — can easily buy into.
Fortunately, said economist Robert Dietz, most don’t want, or need, to. “In medium-sized and smaller metro areas, the traditional single-family home in the suburbs remains popular,” said Dietz.
The reason is partly affordability. The typical American starter home, likely in a suburb or small city, costs just $168,000, according to Fannie Mae.
“There has been an increase in college-educated young adults living in very dense urban neighborhoods — smart young things living in Brooklyn, in downtown San Francisco,” said housing analyst Jed Kolko at U.C. Berkeley’s Terner Center for Housing Innovation. “But it’s not true of that generation overall. Only about one third of 25-to-34-year-olds have a college degree. Today they are actually less likely to be living in urban neighborhoods, as opposed to suburban areas, than that same age group was in 2000.”
Josh Rief, who is 30 years old, recently took the home-buying plunge in the suburbs. He and his wife, Chelsia, purchased a five-bedroom, 2,800-square-foot house in a large housing development in Molalla, Oregon, about 40 miles from downtown Portland. There are farms and timberland all around.
Josh works at a local bank as a treasury analyst. Chelsia is a stay-at-home mom and also publishes a food blog part-time. They have three children, aged 11, 7, and 2. Chelsia said for more than a decade they rented — trying to save, living in cramped spaces.
“We were quickly growing too large for our other home,” she said. “We just felt like we needed to get the kids into a home that they could grow up in with more space, in a neighborhood where there would be kids their age.”
They paid $260,000 and got a mortgage just under 4 percent.
“We were just looking for a good, homey, secure spot,” said Josh. “We’d love to have a quirky little place in Portland with lots of character and history and everything else. But I’m not willing to pay an extra $300,000 for that right now. Right now, I just need space for my kids.”
And he’s found it — in the cookie-cutter suburbs far outside the hip urban hub. It’s likely to be a choice more young people make, as they graduate from their recessionary twenties into financial middle-age.
HBA Sponsors The Dollars and Sense of Development Patterns

HBA Sponsors The Dollars and Sense of Development Patterns

Robert Dietz, Ph.D.

Your Home Builders Association is the sponsor of a discussion and presentation on May 19 of efficient development patterns in the Upstate.

What: The Dollars and Sense of Development Patterns
When: May 19, 3 p.m. until 5 p.m.
Where:  The Crowne Plaza, 851 Congaree Road, Greenville

Click here to register.

Produced by Ten at the Top and Upstate Forever, and also sponsored by the Greater Greenville Association of Realtors, The Dollars and Sense of Development Patterns is the second of four events this year intended to facilitate a discussion of facilitating a vibrant, growing, and efficient Upstate.

The featured speaker is Joseph Minicozzi, AICP, principal of Urban 3, LLC, an Asheville-based real estate consultancy affiliated with Public Interest Projects.  Urban3 develops geospatial representations of economic productivity which is designed to change the way a community looks at the concept of urbanism and the value of well-designed cities.  Their case studies help drive planning strategies and tax policies related to urban development patterns.

NAHB Economist
Also speaking will be Robert Dietz, Ph.D., Vice President of Ecomomics at the National Association of Home Builders.  Dietz will present a report of market trends and the results of NAHB’s Consumer Preference Study, which focused this year on the preferences of millennials.

Dietz specializes in Tax and Market Analysis for NAHB, where his responsibilities include economic and legal analysis of tax and policy issues, as well as analysis of housing market data. Dr. Dietz has published academic research on the housing and tax issues in peer-reviewed journals. He has testified before the House Ways and Means Committee, the Senate Finance Committee, and the Senate Banking Subcommittee on Economic Policy on housing and tax issues. Prior to joining NAHB in 2005, Robert worked as an economist for the Congressional Joint Committee on Taxation, specializing in revenue estimation of legislative proposals involving housing, urban development, and other business tax issues. He is a native of Dayton, Ohio and earned a Ph.D. in Economics from the Ohio State University in 2003.

NAHB: To Rent or Buy is Not an Either/Or Decision

NAHB: To Rent or Buy is Not an Either/Or Decision

A recent article in U.S. News & World Report by NAHB economist Robert Dietz shows why housing policy should support both home owners and renters. View the summary below.

Though public opinion polling indicates that most renters want to become home owners, the economic fallout from the Great Recession has produced a surge in rental demand and sluggish demand for homeownership, particularly among first-time buyers. The result has been a declining homeownership rate (64.8% for the second quarter of 2014), even as other housing indicators have improved.

While achieving ownership has been delayed for many younger families, over the last few years it has become relatively more common to hear pundits argue that as a society we should pull back our support for homeownership. Such discussions typically involve income and other economic-based descriptions of home owners and renters as if these groups or people were distinct and fixed classes.

The Circle of Homeownership
These contrasts are misleading. The lifecycle of homeownership has important consequences when examining differences between home owners and renters. Using government data and taking several factors into consideration – age, marital status, income, children, space requirements and structure – it becomes clear that most people will be renters and home owners during different stages of their lives.

First, home owners as a group are typically older than renters. Census data shows that the number of renters exceeds home owners for age groups younger than 35 but that the homeownership rate increases with age, rising from 59% for those in the 35-to-44 age bracket and equaling or exceeding 70% for those aged 45 to 84 years.

This makes sense given the typical pattern of an individual leaving school, renting in order to accumulate savings, and then purchasing a first home.

Since home owners as a group tend to be older, they also have higher incomes. The data reveal that the median household income of renters was $31,888 in 2012, compared to $65,514 for home owners. A considerable part of this income difference is due to age.

And because homeowners tend to be older, they are also more likely to be married. According to the Census data, 60% of home owners are married couples, compared to only 27% of renters.

Married couples are also more likely to have children present in the home, and therefore need more room and space. Thus, it should come as no surprise that Census data reveals that 84% of the nation’s single-family homes are comprised of home owners while multifamily housing tends to be renter dominated.

One-Size Policy Does Not Fit All
All of these factors produce the local and regional variations in homeownership across the nation. For example, urban dominated New York has the lowest homeownership rate among states at 54% (and the District of Columbia is lower still at 42%), while states with older populations in the Northeast and Midwest have higher homeownership rates.

These data highlight that policy debates should not frame renters and home owners as distinct classes. Support for the development of rental housing is an important social goal to maintain safe, affordable and decent housing for those for whom renting is the best choice. And preserving our nation’s commitment to homeownership is needed given the well-documented social and private benefits that homeownership produces for families and communities.

It would be a mistake to weaken policy support for either form of housing, as the result would be diminished housing policy overall.

View the full U.S. News & World Report story.