Higher Lot Prices Boost New Home Prices
New homes could get more expensive in the coming months as a shortage of suitable lots are driving up builders’ costs.
In 27 leading markets, the average price of a finished lot ready for building was up 40 percent in the second quarter from a year ago, according to John Burns Real Estate Consulting.
Even steeper increases have hit some markets that have also seen strong gains in home values and demand. Year over year, finished lot values were up 87 percent in San Francisco and Oakland, 75 percent in Atlanta and 70 percent in Las Vegas.
The big jumps are “making up for lost ground” during the housing downturn when lot prices fell, says David Crowe, chief economist for the National Association of Home Builders.
The higher lot prices may foreshadow higher home prices months from now. Finished lot prices represent almost 22 percent of a new home’s price, Crowe says.
Builders expect future home prices will cover their higher lot costs.
What Happened to Rates Last Week:
Mortgage backed securities (MBS) lost – 78 basis points from last Friday’s close which caused 30 year fixed rates to move higher from the prior week.
MBS were under pressure all week (which drives mortgage rates upward) on three factors: First, we had some very strong economic news with ISM Manufacturing and Servicing, Auto Sales and a positive tone in the Fed’s Beige Book. Secondly, the bond market reduced some of its “fear factor” premium as news stories made it clear that a U.S. strike against Syria would not occur during the week. And lastly, bond traders were betting that Friday’s employment data would be stronger than expected.
All of the above caused mortgage rates to hit their highest levels in three years.
And then the much anticipated Non-Farm Payroll (NFP) data hit on Friday.
The market was expecting a reading in the range of 175K to 181K with “whisper numbers” above 190K. But NFP came in at 169K. Plus, July’s reading of 167K was revised downward to an absolutely terrible number of 104K.
This weaker than expected jobs data caused MBS to reverse course from the week-long sell off and regained some of their losses. This helped mortgage rates improve from earlier in the week but we still closed down for the week.
|Date||ET||Economic Release||Actual||Market Expects||Prior|
|9-Sep||3:00 PM||Consumer Credit||–||$13.0B||$13.8B|
|10-Sep||10:00 AM||JOLTS – Job Openings||–||NA||3.936M|
|11-Sep||7:00 AM||MBA Mortgage Index||–||NA||1.30%|
|11-Sep||10:00 AM||Wholesale Inventories||–||0.20%||-0.20%|
|11-Sep||10:30 AM||Crude Inventories||–||NA||-1.836M|
|12-Sep||8:30 AM||Initial Claims||–||327K||323K|
|12-Sep||8:30 AM||Continuing Claims||–||2975K||2951K|
|12-Sep||8:30 AM||Export Prices ex-ag.||–||NA||0.00%|
|12-Sep||8:30 AM||Import Prices ex-oil||–||NA||-0.40%|
|12-Sep||10:30 AM||Natural Gas Inventories||–||NA||58 bcf|
|12-Sep||2:00 PM||Treasury Budget||–||NA||-$190.5B|
|13-Sep||8:30 AM||Retail Sales||–||0.40%||0.20%|
|13-Sep||8:30 AM||Retail Sales ex-auto||–||0.30%||0.50%|
|13-Sep||8:30 AM||Core PPI||–||0.10%||0.10%|
|13-Sep||9:55 AM||Mich Sentiment||–||82||82.1|
|13-Sep||10:00 AM||Business Inventories||–||0.30%||0.00%|
I will be watching these reports closely for you and let you know if there are any big surprises:
It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.
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