Prices continue to rise, but more housing is on the way
by Ali Wolf
We now have a glimpse into spring selling season trends, and, for the most part, the housing market has been trending positively. Mortgage rates remain historically low at 4.58 percent, even after rising 63 basis points since the start of the year. Median new home price rose six percent more year-to-date this year compared to the same time last year.
The combination of rising mortgage rates and prices have negatively impacted affordability. Comparing 1Q17 to 1Q18, the monthly payment for the median priced new home is seven percent higher. That’s on top of an 11 percent growth from 1Q16 to 1Q17.
But, even with this rise in housing costs, home sales are resilient. Purchase mortgage applications, our preferred gauge of home sales, grew six percent year-to-date compared to the same time last year.
Price Appreciation Continues
Median existing home prices have recorded YOY gains for 73 consecutive months.
• The U.S. median price for a detached single-family home rose to $252,100. Current prices are six percent higher than last year and 13 percent above March 2016 levels.
• Detached and attached home prices are six percent higher in 1Q18 compared to 1Q17.
• Home prices in the West reported the largest gains, up eight percent YOY.
• The Midwest remains the most affordable region, with a median home price of $192,200.
More Supply Coming Down the Pike?
Total housing starts grew 11 percent year-over-year, led by the multifamily sector.
• Multifamily housing starts accelerated 24 percent compared to last year. While the margin of error is high for this data set, looking at the quarterly trend, we see an eight percent jump compared to 1Q17.
• Single-family housing starts increased a steady five percent YOY and are now 16 percent higher than the 748,000 in March 2016.
Treasury Yields Hit Three Percent Threshold
• Investors have long cautioned that a three percent yield is a threshold we should pay attention to.
• This is the first time since 2014 that 10-year bond yields have hit the three percent mark. Bond prices and yields are negatively correlated, so higher yields suggest there is optimism about the current state of the economy.
• 10-year Treasury yields are a moving target, and are currently range-bound between 2.8 percent and 3.0 percent. Short-term yields have also risen.
• Going forward, however, there are some implications for the broader debt markets. Rising bond yields generally impact mortgage rates, interest on auto loans, and other lending categories. They also can eat into corporate profits.