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Posted 08/17/2016

Home Builders May Offer Fewer Free Upgrades In 2017

NAHB: Housing Market Index 2000-2016

Home Builders Plan For More Home Demand

Home builders feel terrific about the future U.S. housing.

With today's mortgage rates ultra-low and U.S. rents rising, homebuilders are planning for another strong finish to the year for housing.

Market confidence among the nation's builders is at near decade-best levels.

As measured by the National Association of Homebuilders' Housing Market Index (HMI), homebuilder sentiment reads 60 out of 100, which is a "confident" figure.

Builders are excited for the rest of this year's housing market -- and for good reason.

The combination of the lowest mortgage rates in at least 3 years, the rising cost of rent, plus an abundance of loans for buyers with less than 20% down have changed today's math of "Should I rent or should I buy?".

More than 6 million homes are expected to sell in 2016, which would be the most in 11 years. Huge demand for homes is moving home prices up.

The best "deals" in new construction housing may be the ones you find today.

Click to see today's rates (Aug 27th, 2016)

Homebuilder Confidence Keeps Climbing

Once monthly, the National Association of Homebuilders (NAHB) surveys its members on current housing market conditions; and their outlook for the housing market's future.

The results are compiled into the Housing Market Index.

Informally, the report is called the "homebuilder sentiment survey" and it reflects homebuilder attitudes about the nation's single-family, new construction housing market.

The index is relevant because home builders tend to witness the psychological changes of "Main Street" long before they're revealed to economists.

There are a multitude of instances in which the NAHB Housing Market Index has hinted at what's next for U.S. housing before the actual home data revealed itself.

One prominent example occurred last decade and foreshadowed the 2007-2011 housing market downturn.

U.S. housing was expanding rapidly in the middle of last decade; and, home values were making new, all-time highs monthly. Mortgage money was loose, as was underwriting. Homeownership rates were near all-time highs.

Home builder confidence in housing, though, was waning. Confidence dropped 21%, as measured by the Housing Market Index.

The very next year, housing began its downturn. Builders had seen it coming. The index dropped to an all-time low of 6. Two years later, housing bottomed.

Today, with the housing market recovery well under way, builder sentiment reads 60.

In the NAHB Housing Market Index, 50 is the inflection point in the index between "good" conditions and "poor" ones; and July's reading marks the twenty-ninth straight month in which the HMI has logged north of 50.

This hasn't happened in 10 years.

Buoyed by low mortgage rates and big demand from buyers, home builders believe today's housing market is "good".

Buyers should expect fewer price concessions in 2016 and 2017, therefore, and fewer free upgrades on their newly-built homes.

Homes are selling well without such incentives.

Click to see today's rates (Aug 27th, 2016)

Will First-Time Home Buyers Get "Priced Out" By 2017?

The NAHB Housing Market Index is a composite survey. It's results are based on three distinct questions posed to homebuilder trade group members.

Each question polls a separate facet of a homebuilder's business.

The monthly readings, as reported by the homebuilder trade group :

  • Current home sales activity : Reading of 65 (+2 from one month ago)
  • Home sales activity for the next six months : Reading of 67 (+1 from one month ago)
  • Buyer foot traffic : Reading of 44 (-1 from one month ago)

The HMI's foot traffic reading may be most relevant. Foot traffic -- although lower -- remains strong historically and suggests that demand for homes is still quite high.

Buyers may not know specifically what a mortgage is, they do know that their rents are rising and that buying a home could be better than renting into 2017.

So long as the math buying over renting, builders will continue to have optimism for the future of U.S. housing.

What Are Today's Mortgage Rates?

To today's buyers, new construction homes can be appealing. New homes are often built with the latest amenities and technologies and, because of low interest rates, they're often affordable, too.

Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.

Click to see today's rates (Aug 27th, 2016)

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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