“Low interest rates are fueling demand from first-time buyers, move-up buyers and even those who lost homes to foreclosure or short sales several years ago,” John Burns, CEO of John Burns Real Estate Consulting told some 300 members of the Master Builders Association of King and Snohomish Counties as the keynote speaker at their spring general membership dinner.
With his colleague SVP Ken Perlman, Mr. Burns said the 30-year-fixed rate loan edged up only slightly to an average of 3.56% for the week ended Feb. 21 and that’s good news for home builders, developers, and home buyers.
John Burns Real Estate Consulting is a nationally recognized; housing focused independent research and consulting firm. Analysis provided by the firm helps builders, developers, investors, hedge funds and other clients identify housing market risks and opportunities.
According to Mr. Burns, home prices are rising nationwide because of a lack of adequate housing inventory in most major markets. “When you can’t find for sale signs in neighborhoods, you can expect increased home prices,” he said.
Even with rising prices, buying a home is the most affordable since 1988/89 because mortgage interest rates remain near the all-time low. Affordability is measured by the percentage of buyers with median incomes being able to make mortgage payments for a median priced home. “We monitor 105 metro areas in the U.S. on a monthly basis,” he said, “and every market in the U.S. is good right now for first time buyers and ‘move up’ buyers.”
Mr. Burns added that home values in the Snohomish, King and Pierce areas are up 7.7% from the same time last year and increasing rents make a median priced home mortgage payment approximately $200 more per month than renting. Mr. Perlman, who focuses on Puget Sound for the consulting firm, said steady job growth in the region and continued low mortgage interest rates should push home prices up about 9% per year going forward.
“Access to employment and good schools has made several regional areas in high demand. King County is active if you can find lots to build on; however, planned communities in Kirkland, Kent and Black Diamond are expected to help meet the growing demand for buildable lots,” Mr. Pearlman said.
Brian Ross, 2013 MBA President and CEO of YarrowBay Holdings and Oakpointe Development & Home Building, says data and market research drives home building decisions. That same logic applies to the decision to buy a home. “The family that buys a home instead of renting can lock in an affordable house payment that will stay the same for 30 years and not have their monthly payment be at the mercy of a landlord or rental market.”
A big problem according to Mr. Ross is the lack of available land for development and buildable lots. “There is a challenge with the dwindling number of buildable lots where people want to live so we are advocates for ongoing review of available and potential ‘buildable lots’ to create more buildable land options,” he said. “The MBA and builders in general have opened communication with local governments about how to construct affordable homes for the estimated 1.25M new residents in the next 25 years with the land shortages we’re facing now and in the future.”
As indicated by Mr. Burns, the demand for housing is increasing, cost of housing is increasing, available housing on the market is decreasing, land available for home building is scarce and in the end the housing recovery will take longer than it should with record low mortgage interest rates and job growth. It’s about lots of demand and limited supply.
ABOUT MBA: Founded in 1909, the Master Builders Association is a trade association comprised of nearly 3,000 companies involved in the residential and light commercial construction industry. It is the nation’s oldest and largest local home building association affiliated with the National Association of Home Builders.