Don’t count the “bubble” burst just yet.
While some recent evidence (both anecdotal and otherwise) suggests rising prices are beginning to curtail demand in the flaming-hot US housing market, it may be too early to call the top.
New home sales in January rose 4.3% to a 923,000 annual rate. That was far better than consensus expected. The market was looking for 856,000. The range, from more than five-dozen economists, was 750,000 to 940,000.
Prices were sharply higher versus 2020. The median new home price ($346,400) rose more than 5% from January of last year, even as prices dropped from December. The average selling price was nearly $409,000.
More than a fifth of new homes sold last month cost more than a half-million dollars. That was a 16% jump from the prior month.
Data out earlier this week showed property values rose more than 10% in December from the previous year.
The jump in the S&P CoreLogic Case-Shiller index was another “since 2014” moment.
Meanwhile, weekly mortgage applications dropped 11%, in part due to Texas effects, if you will. “The severe winter weather in Texas affected many households and lenders, causing more than a 40% drop in both purchase and refinance applications in the state last week,” Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, remarked on Wednesday.
As for the rest of the country, activity is generally strong, even as the MBA noted that “mortgage rates have increased in six of the last eight weeks.” Borrowing costs plunged last year amid the Fed’s pandemic response, helping to keep the market affordable even as prices surged.
In the color accompanying the weekly mortgage apps data, the MBA said the average loan size of purchase applications rose to $418,000. That is, of course, in part due to low inventory, and it’s also a record.
Toll Brothers (which enjoyed last year’s boom in high-end properties) said Tuesday that net signed contract value was $2.51 billion in the first quarter. That was up 68% YoY. Contracted homes rose 59%.
CEO Douglas Yearley, who late last year called the US housing market “the strongest I have seen in my 30 years at [the company],” still sounded confident. “The housing market remains very strong, driven by a tight supply of new and existing homes for sale, favorable demographic trends, low mortgage rates, and a heightened appreciation for home ownership, especially among our customers,” he said Tuesday.
The company’s guidance shows it expects deliveries of between 10,000 and 10,400 homes this year with an average price of between $790,000 and $810,000.