Tiny Houses May Become Large in New Homes

Tiny Houses May Become Large in New Homes:

A recent survey showed that 53% of new home buyers would entertain the idea of a tiny home (600 square feet or less) in the future with Gen Xers and Millennials more open to the idea compared to baby boomers and seniors.

This is just one of the gems found in a recent survey by the National Association of Home Builders.

The survey also revealed that 65% of homebuyers do not think conditions (inventory shortages and affordability) will improve in 2018, with 79% of prospective buyers surveyed being able to afford only half of the homes in their markets. A majority of homebuyers believe availability and affordability issues will not ease in 2018, they remain committed to their goal of purchasing a home

Rose Quint, assistant vice president of survey research for the NAHB, said the survey findings show that housing availability and affordability continue to be serious issues.

“These potential buyers see a problem with housing availability,” Quint said. “They know it’s a tough nut to crack, but they are not deterred. They are still planning to buy a house in the next 12 months.”

The NAHB said that although housing starts rose by 9% year over year in 2017, home production was still affected by the lack of affordable, buildable lots and the scarcity of labor. Characteristics of new homes were also essentially unchanged in 2017. NAHB said that home sizes averaged 2,627 square feet in 2017, remaining largely the same as the 2,622-square-feet average size in 2016.
Source: NAHB

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -62 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher for the week.

Overview:  We had a holiday-shortened week (Monday closed for MLK Day), that ended with a government shutdown.  In between, long bonds continued their downward decline as bond traders are still at just the very early stages of rotating funds out of their positions in bonds due to the expected economic boost from Tax Reform.

Taking it to the House: New Housing Starts in December missed the mark with 1.192M units (calculated on an annualized basis) vs est of 1.275M. The real housing market is SFR and that came in at 836K which is not bad but off the pace in November. Needs to be consistently above 1M for it to help with our massive inventory shortage. Building Permits were stronger than expected (1.302M vs est of 1.290M). SFR pemits gained 1.8% to 881K.

The NAHB Housing Market Index for January hit 72 vs est of 72. This continues a string of very strong readings, any reading above 50 is favorable.

Production: December Industrial Production was more than double the market expectations (0.9% vs est of 0.4%) and Capacity Utilization was very robust with a 77.9% reading. This was the highest reading in 3 years.

The Talking Fed: The Beige Book which collects data from the 12 Federal Reserve Districts – found that the economy continued to expand from late November, with the various Fed districts reporting “modest to moderate” gains while Dallas was the sole outlier, recording a “robust increase.”  Overall, the report showed a very tight labor market with many saying that they could not find skilled workers. But they also said that for the most part, businesses are seeing wages pick up at only a “modest” pace.

Consumer Sentiment: The preliminary January University of Michigan’s Consumer Sentiment Survey Index came in at 94.5 vs est of 97.0. But this number will be revised once more this month. What is interesting in the survey is that expectations of inflation rose in the one year and five year horizon.

What to Watch Out For This Week: