Housing Springs Back in March
Despite some concerns about spring home sales, Collingwood’s Tim Rood told Dirk Van on Westwood One Radio’s “First Light” program that the housing market, “Seems to be moving in the right direction.” He said that, “we were concerned coming in to this spring buying season that we were at a bit of an inflection point or tipping point. As we saw things continue to kind of lament and slow down than there was a great risk that we would fall back and have kind of an echo housing drop but it looks like we are still moving forward.”
Rood told Van that, “We see a lot of strength particularly in the multifamily side, which just means that a lot of folks are choosing to rent versus buy, and that might have a lot to do with the fact that there’s not a lot of single family inventory and you can’t buy what’s not for sale. I would say we are still digging our way out and moving in the right direction upwards.”
Existing home sales numbers released today by the National Association of Realtors show a 6.1% increase in March. Further, mortgage applications are up 2.3%, according to the Mortgage Bankers Association.
When asked what might be driving the increase in demand for home sales Rood said, “Home ownership is really an emotional decision. For years we have gotten away with a lot of refinance activity which is a purely mathematical decision, there’s not a lot of emotion to it.” Rood says that confidence is really what drives home buying. He mentions that, “We all know that anxious people don’t buy homes, confident ones do.” He also notes that millennials are starting to move out of their parents’ basements and create new households. “They are renting at first”, he says, “But we all know you can’t raise a family in a 600 square foot apartment. So as the millennials age it’s reasonable to expect that they are going to pick up some of that inventory that the baby boomers and retirees will be freeing up in the suburbs.”
What about the weather? Is that driving the uptick? “Weather is going to help,” Rood says, “It was a brutal winter particularly in the Midwest and North East.” More importantly, however, Rood believes that the job market is the true driver of housing demand. He says, “The jobs picture I think is something that probably drives more confidence and more energy around the housing market than most anything else.” He continues, “you’ll never get rates low enough, you’ll never get credit loose enough to compel someone to buy if they are not supremely confident in their financial situations and job prospects so that’s probably the biggest proxy for health of the housing market.”