Even though we saw a slight decrease in April, home purchases are still going strong. The Mortgage Bankers Association’s (MBA) Weekly Application Survey shows that purchase activity rose 5.3% with an even higher year-over-year the week of May 29.

The ongoing economic and virus challenges didn’t stop housing demand which boasted a rise in home-buying activity compared to last year. A big part of the increase is the record low in mortgage rates. The Primary Mortgage Market Survey’s 30-year fixed-rate mortgage shows a decrease by 5 basis points which keeps the ongoing record low.

The survey shows that home purchase applications have been increasing for five consecutive weeks. In fact, the National Home Builders Association (NAHB) predicts that the housing industry will be a leading sector when it comes to the country’s economic recovery. Fannie Mae reports, “the refinance volume of applications is poised to reach a 17-year high as it forecasts mortgage rates to tumble further.”

The HMI, which indicates builders’ confidence, showed a sturdy gain in May. According to the current National Association of Home Builders/Wells Fargo Housing Market Index (HMI) when it comes to newly-built single-family homes builder confidence rose seven points to 37 last month. The HMI index also showed an increase in sales conditions to 42, a 46 for the component measuring sales expectations in the next six months and 21 for the measure charting traffic of prospective buyers.

Across the regions the HMI scores’ monthly average increased 7 points in the Midwest to 32, in the South, it rose eight points to 42 and in the West a 12 point increase to 44. The only region which saw a decrease was the Northeast which fell 2 points to 17.

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The National Home Builders Association (NAHB) has seen a new housing trend with the COVID-19 pandemic. The latest quarterly NAHB Home Building Geography Index (HBGI) found that residential construction is growing faster in lower density markets.

“We expect the virus could affect future housing preferences for those currently living in the hardest-hit, high-density environments like central cities and that housing demand will continue to increase in medium- and low-density communities,” said NAHB Chairman Dean Mon.

“The first quarter HBGI data reveals that construction growth expanded over the last year more quickly in low population density areas than high-density regions,” said NAHB Chief Economist Robert Dietz. “This trend will continue as households seek out single-family homes further from urban cores, particularly as telecommuting continues in greater numbers.”

The report reveals that proximity and affordability were two of the biggest catalyst in the shift. People are now second-guessing living in metropolitan areas after the public health crisis hit. During the COVID-19 pandemic, metro residents were more vulnerable because of the crowded living conditions, mass transit, insufficient health and public sector infrastructure. Builders are starting to look outside of metropolitan areas where the land is cheaper and there are more building opportunities.

“The HBGI data is consistent with the fact that housing costs are increasing fastest in large metro suburban counties and smaller metro areas with populations under 1 million where demand for housing is high but supply constraints are tight,” said NAHB Chief Economist Robert Dietz. “Supply-side issues that are hurting affordability and raising costs for builders include excessive regulations, labor shortages, rising material costs and a dearth of buildable lots in mid- to high population centers.”

All national economic geographies in the country showed a 9.1% growth increase in the suburbs over a one-year moving average. In the education and health services sector (EHS), 4% made up the total single construction and made up close to twice the growth rate in the multifamily construction over the past year. The HBGI also found that the education and health services sector was the top quartile of counties and totaled 25.7% above the total employment sectors.

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If all goes well youth sports will be allowed to begin the spring season on June 13. A full season will be played with end-of-season tournaments in August.

The decision to reopen will depend on Gov. John Bel Edward’s announcement regarding phase 2 according to St. Tammany Parish President Mike Cooper. Cooper also said the decision to reopen youth sports this summer will also be discussed among recreation districts, parks, coaches and parents.

“We want to see the kids on the fields in the next few weeks,” St. Tammany Recreation District No. 1 board member Rick Danielson said.

Although non-contact youth sports were allowed in Phase 1, St. Tammany did not allow any sports. The parish’s decision was based on the concerns there were not enough staffing to enforce the recommended safety guidelines.

“We don’t know all the effects on children,” Cooper said “Even young children are getting COVID-19 or other associated illnesses.”

The districts have now had time to come up with safety procedures and policies to follow while holding a season during COVID-19. The procedures will include removing bleachers, staggering schedules to reduce crowds during events, disinfecting dugouts between games, and reforming lines at the concession stands.

Among the St. Tammany districts to reopen will include Slidell Bantam Baseball Association, and St. Tammany Recreation District No. 1, which oversees the sprawling Pelican Park complex near Mandeville. Slidell Bantam Baseball Association usually has around 1,000 players ages 4 to 15 playing during the spring season and Pelican Park already had 504 boys and 206 girls signed up for the 2020 Spring season.

Not all St. Tammany districts agree. Tammany Parish Recreation District 7, which covers Pearl River, and St. Tammany Parish Recreation District No. 4, which covers Lacombe have canceled their spring season altogether.

Most parents are on board with the decision to play. Slidell Bantam Baseball Association’s board president Brad Smith says there has been a positive response to reopening.

“Parents want their kids to get out and do normal things and be back at the ballpark,” Smith said.

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As the pandemic stay-at-home orders are now being lifted around the United States, more and more people are looking to purchase a home. The mortgage rates have now dropped even more since the pandemic hit at the beginning of 2020.

The 10-year Treasury yield has consistently lead the mortgage rates but this has not been the case since the coronavirus has produced an economic downturn. The unpredictable economy has fueled unpredictable mortgage rates. On a good note, the parallel between mortgage rates and bond yields is improving.

“Financial volatility has notably decreased in recent weeks, resulting in steady improvements in the stock market, and more predictable — albeit modest — movements in bond markets,” Zillow ZG, 1.50% economist Matthew Speakman said. “The eased strains in financial markets have also resulted in mortgage rates remaining fairly flat in the last couple of weeks and are generally calmer following the turmoil experienced in the early days of the coronavirus outbreak.”

The end of May has shown “the lowest level since Freddie Mac began tracking this data starting in 1971.” Freddie Mac reported the week ending May 28 the average 30-year fixed-rate was 3.15%, a drop of nine basis points from the week before. This will make the third report in a row that has shown historical low-interest rates. The 15-year fixed-rate also dropped to 2.62% which was a drop in eight basis points.

Homebuyers are ready to buy and are looking to purchase a home in the next several months. According to the Mortgage Bankers Association, the amount of mortgage applications has been on the rise making the volume of purchase loans up 54% from early spring. This is a great time to purchase a home and sales should see a rebound from the pandemic.

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The Federal Reserve has stepped up to ensure the rates stay near historical lows. During the policy meeting held on April 29th, the central bank said they would keep buying mortgage-backed securities to allow credit to keep flowing.

Jerome Powell, the Federal Reserve’s chairman, says the Fed will keep purchasing the mortgage-backed securities for “the next year or so” with the unknown economic consequences from the COVID-19 pandemic. The Fed said in its most recent announcement that it foresees “considerable risks to the economic outlook over the medium term.”

The Fed has brought a lot of money to the table when it comes to mortgage-backed securities. In a comment, the Federal Reserve relayed this was necessary “to support smooth market functioning.” Before the Fed stepped in, mortgage rates fell during late February but took a turn up in March because of the market turmoil. The Federal Reserve has purchased more than half a trillion dollars’ worth of mortgage-backed securities since the middle of March. According to the Fed purchasing these mortgage-backed securities has given lenders the confidence that there will be enough money to keep funding mortgages to consumers. The mortgage rates will stay stable because the Federal Reserve is standing in as a reliable buyer.

Luckily there strategy is working. Currently, the average rate on a 30-year fixed-rate mortgage is 3.389%, a 15-year fixed-rate is at an average of 2.923% and the average for the 5/1 ARM is down to 3.117%. During Nerdwallet’s survey of mortgage rates, they found that the 30-year fixed-rate mortgage is 88 basis points lower than this time last year.

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The economy might be in questionable times right now, but home buyers across the country are having a positive outlook on their home search. According to the recent Housing Trends Report (HTR), ” the share of prospective home buyers expecting their house search to get easier in the months ahead rose to 25% in the first quarter of 2020, up from 16% and 22%, respectively, in the first quarters of 2018 and 2019.”  This has been the third consecutive year-over-year increase in the share of buyers that anticipate more housing inventory.

The Housing Trends Report (HTR) is created by the NAHB Economics team. Their goal is to measure prospective home buyers’ impressions regarding the availability and affordability of homes for sale in the current market. The report is done quarterly and asses the changes in a buyer’s perception over time.

The HTR breaks down its findings by generation. They found that Gen X buyers were among the highest that felt the housing availability will improve while the Boomers were the lowest. The breakdown by generation of buyers expecting their house search to get easier was Gen X at 27%, Millennials at 26%, Gen Z at 22% and Boomers on the bottom at 20%.

Across the country’s regions, the report finds that 20% to 27% feel that their home search will become easier during the following months. The West came in with the highest percentage at 27%, followed by the Northeast and South at 25% and the Midwest came in last at 20%.

Not only do share buyers believe that the numbers will improve but they are reporting that they actually see more houses out there that they like and can afford. The first quarter of 2020 reported 31% compared to the first quarter of 2019 at 30%.

The report shows the breakdown by generations and regions. The highest generation found was Millennials and the highest region was the West. The breakdown for generations came in at 34% Millennials, 32% Gen Z, 29% Gen X and 24% Boomers. For regions, the West was 33%, the South came in at 32%, the Northeast at 30% and the Midwest last at 25%.

This is good news for the moral of the current housing market. Now is a great time to purchase a new home.

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Home Energy Rating System (HERS) Index is the standard that is used in the industry to measure a home’s energy efficiency. This system is nationally recognized and is used across the country when inspecting and calculating a home’s energy performance. Homebuilders today are finding ways to make sure the homes they are building have low HERS scores.

HERS Index standard scores are determined using energy modeling software. The most common HERS Index score in 2019 was 58 (the standard ranged was between 45 and 80). When building a home, the lower the score, the more energy-efficient the home is. Here are some useful tools builders are using to make sure their new construction homes are energy efficient.

Builders are using specific heating equipment. In recent studies, ground source heat pumps had the lowest score ranges. Air source heat pumps had the best scores overall which ranged between -20 and 5. Traditional furnaces had high scores ranging from 25 to 70 and electric resistance heating scored the highest ranging 75 or higher.

Heating and cooling efficiency also plays a part. Seasonal Energy Ratios (SEERS), as well as the Annual Fuel Utilization Efficiency (AFUE), play a big part. Homes that scored lower on the HERS index from 25 to 40 had SEER ratings of 17-24. Homes with a SEER around 14 scored a high HERS index score of 45 and above. For an Annual Fuel Utilization Efficiency in the mid-80s, the HERS score ranged from 70 – 75. For a lower HERS score (below 55) the AFUE will need to be 90 and above.

Another tool to look at is the mechanical ventilation type. To achieve a HERS score of 40 and below, most homes must only have Energy Recovery Ventilators (ERVs) and Heat Recovery Ventilators (HRVs). Homes with HERS scores that range between 40 and 50 had exhaust only and those with HERS scores between 56 and 80 had air cyclers only.

Solar photovoltaics (PV) is a specific technology that changes sunlight into direct current electricity by using semiconductors. How it works is when the sun hits the semiconductor (within the PV cell) electrons are freed and the form an electric current.  Homes with PV had a HERS score of 30 and below. Homes without the solar photovoltaics had a Home Energy Rating System Index score of 40 and higher.

Homebuilders have vast resources when it comes to building an energy-efficient home. When a builder combines multiple efficient products with sound building science principles they will have a greater potential for building a great energy-efficient home.

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The country is still trying to get comfortable with the new norm. Life all around is ever-changing with the current pandemic. The real estate market is no different – agents, lenders and customers are connecting and transacting virtually. One thing that has remand constant in this uncertain day in age is purchasing a home.

The National Association of Realtors‘ current report stresses the full economic

impact of home sales, “The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”

To see how this works, we will breakdown the average economic impact of just one home sale in the United States. A home that sold for $84,724 will give the real estate industries $23,544 (27.8%), home purchase expenses $4,243 (5%), multiplier of house related expenditures $25,932 (15.1%) and new home construction $91,433 (53.3%).

As you can see when a home is purchased it makes a big impact on the economy. It is a win-win situation where you have a place to live, and you are initiating jobs and income for everyone involved in the transaction. In a nutshell, purchasing a home is making the home buyer an “economic driver.”

Even with the current times, there are many things you can do to keep your home search going. If you have decided to go ahead with your dream of owning a home you need to get pre-approved for a mortgage. Getting pre-approved not only helps you understand how much you can afford but also lets others know you are a serious buyer. Since there is a stay-at-home order, it is important to connect virtually with a Realtor or talk directly to a builder to build a new home or fully custom home. A Realtor is someone you can trust and knows the ever-changing dynamics in the current market. Builders have tons of resources including floorplan design, financing, pricing and selections recommendations, and all businesses involved in the closing of your new home.

Also, you can still do real estate research online.  Even before the pandemic, online searches for real estate were well over 90% with home buyers starting on the Internet to find a home to buy. Shop mortgage lenders and see if there are any down payment assistance programs that would work for you. You do not have to put your dream of owning your own home on hold, you can view do most of the preliminary footwork for finding and making an offer on a home for sale online. Virtual tours and online sites can help you navigate the housing market, and Ron Lee Homes is also here to help with a toolbox of virtual services for your home buying or home building needs.  Contact Us Today at 985-626-7619 or email Info@RonLeeHomes.com.

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The Federal Reserve will address the strains in the market for Treasury securities and agency mortgage-backed securities. The Fed wants to ensure a positive flow of credit to residents and businesses throughout the country.

During their announcement, they revealed they would “purchase at least $500 billion of Treasury securities and at least $200 billion of mortgage-backed securities.” The Feds also proposed an establishment of a Main Street Business Lending Program that will support lending to qualifying small and medium-sized businesses.

“The Fed’s action represents an open-ended and unlimited expansion of quantitative easing to control interest rates,” said NAHB Chief Economist Robert Dietz. “The central bank’s role of lender of last resort has been expanded to be buyer of last resort in order to support liquidity and the operation of financial markets. The Fed clearly intends to use its full powers to support the economy during an extremely disruptive phase.”

During this time, the central bank will take many steps to see this plan to fruition. They will establish new programs that will support the flow of credit to consumers, employers and businesses in the US. They will provide $300 billion in new financing and the Department of the Treasury will use the Exchange Stabilization Fund (ESF) to provide $30 billion.

There will be three facilities in total. They will create the Primary Market Corporate Credit Facility (PMCCF) which will support new bond and loan issuance. The Secondary Market Corporate Credit Facility (SMCCF) will supply liquidity for outstanding corporate bonds. The third will be called the Term Asset-Backed Securities Loan Facility (TALF) which will support the flow of credit to consumers and businesses. This third facility will issue ABS (asset-backed securities) that are supported by student loans, auto loans, credit card loans, SBA (Small Business Administration and other established assets.

“The Federal Reserve is committed to use its full range of tools to support the U.S. economy in this challenging time and thereby promote its maximum employment and price stability goals,” as stated in a press statement on the Federal Reserve website.

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The US Labor Department’s Jobs report for February showed the American labor market remained strong. Reflected in the report showed that 273,000 jobs were added by the US economy. The US Bureau of Labor Statistics said this was substantially more than us economists had foreseen. In fact, the numbers resulted in the largest monthly increase since May 2018 which put the unemployment rate back to the historic low of 3.5%.

Among the job gains per industry, the leading gains of new jobs were in health care and social assistance, food services and government. Within those industries, 7,000 people were hired for the April Census.

The Institute of Supply Management supplied data showing that the US manufacturing sector has been growing the past five months. The ISM report is just another factor indicating that the US economy is in a good place.

“With global growth stabilizing in recent months and domestic economic activity also starting to pick up, the ISM survey adds to the evidence that 2020 is likely to be a better year for US manufacturers,” wrote Capital Economics’ Senior US Economist Andrew Hunter in a note.

The year leading up to the February job survey paychecks rose by 3% with a 0.3% bump in February. The month’s report in addition to better-than-expected services PMI from the Institute for Supply Management was a plus for the US economy according to Michael Hanson, SVP of research at Fisher Investments.

This is just icing on top of the January report which beat expectations. The Labor Department’s Jobs report found that the US economy added 225,000 jobs with an unemployment rate of 3.6%. Job growth was seen in the construction, health care, transportation and warehousing industries. According to Capital Economics Chief US Economist Paul Ashworth, mild weather in January boost the construction and transportation sectors.

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