Mortgage Rates and Memorial Day: HomeLight’s May 2019 Real Estate News Recap

April showers bring May flowers… and another round of HomeLight’s Real Estate News Recap!

This month has been jam-packed with holidays and housing news. Did you send your mom edible arrangements? Clean your room on National Clean Your Room Day (we didn’t, but there’s always next year, am I right)? While you were out boating and barbecuing, Memorial Day home sales were the talk of the town and mortgage rates dropped yet again.

Like we do every month, we’ve scoured the internet for the latest stories in real estate to make sure you’re informed about what’s happening with the housing market. With the summer home sale season upon us, let’s dive right into the rest of the real estate stories for May.

1. Not just a day for mattress sales

According to HomeLight data, Memorial Day outperforms every other holiday, including the Fourth of July and even Labor Day, with regard to real estate activity. This May holiday kicks off the summer home sale season with increasing listing competition and high buyer demand that will continue to swell into the summer months.

+ HomeLight, Why Memorial Day Weekend Is a Major Deadline for Home Sellers:  

“In 2018, 15,564 homes were marked across the country as being sold (or closing on) Memorial Day, up from 15,211 the year prior. Compare that to 8,504 homes sold on the Fourth of July, and 11,520 homes sold on Labor Day 2018. In comparison, the following (non-holiday) Monday in June 2018 had 10,545 sales recorded.”

+ Market Watch, Why It’s A Smart Move to List Your Home On Memorial Day Weekend:

“Memorial Day Weekend is the busiest summer holiday for real-estate activity, a recent study from real-estate company HomeLight found. ‘A lot of home buyers are hitting open houses instead of the beach,’ said Holden Lewis, housing expert at personal-finance website NerdWallet.

+ HomeLight’s Take: Memorial Day Weekend was a major deadline for listing your house on the cusp of a seasonal market upswing. But if you missed the boat, then work with a top local real estate agent to get your house on the market ASAP while parents look to get settled into a new home before the school bells ring again in August.

2. Freddie’s Crystal Ball

Mortgage rates dropped at the start of May, with the 30-year fixed mortgage falling to 4.06%.

+ Freddie Mac, A Steadily Growing Housing Market:

“After increasing throughout April, mortgage rates declined at the start of May. The combined positive impact of low mortgage rates, a strong labor market, low unemployment, and modest wage growth supports our forecast for a steadily growing housing market in 2019.

“We expect stronger home sales and housing starts in the coming months. This will bring full-year housing starts and sales in 2019 back to around the same level we saw in 2018. House price appreciation in the first quarter of 2019 was slightly higher than previously anticipated. This has led us to revise up our 2019 annual forecast for home price growth to 3.6%. On the other hand, we expect house price growth to moderate to 2.6% in 2020.”

+ HomeLight’s Take:

Lower-than-expected interest rates mean that buyer demand in 2018 is stronger than analysts originally predicted, but as inventory rises and price gains chill, you’ll still have to take care to set the right asking price for your house and present it in the best light to attract an offer.

3. Taxation without representation

This month, Trump cut trade negotiations with China and announced that he will raise tariff rates on more than $200B worth of imported goods. What does this mean for real estate?

Well, things are going to get a lot more expensive and home construction is top of the list.

+ The Real Deal, U.S.-China Trade War Escalation Leaves Real Estate In The Dark:

“David Schwartz of Slate Property Group said the two countries’ actions have already driven up prices, to the point where his firm is now looking to buy more products domestically, or at least from countries other than China that aren’t subject to the tariffs.

“These higher costs will ultimately hit the consumer via pricier rents and condos, Schwartz said. The increased jobs that may come from builders buying more materials domestically could be offset by higher construction costs that shrink projects.”

+ HousingWire, NAHB Chief Economist: Tariff Tweets Could Be Signaling Pricier U.S. Homes:

“‘Additional tariffs on a country like China, where we get many of our construction products, are an additional tax on homes,’ Robert Dietz, chief economist at the National Association of Home Builders, said in an interview. ‘This comes at a critical time because we currently are at a 10-year low for housing affordability.’”

+ MarketWatch, Trump’s trade war with China is the last thing an already unsteady U.S. housing market needs right now:

Additionally, Dietz adds that the 25% projected rate will represent “a $2.5 billion annual tax increase for the housing sector in terms of materials used for construction.”

+ CNBC, Higher Chinese Tariffs Just Made Your Home Renovation Much More Expensive:

“From tile to countertops, laminates to lighting, all the fancy finishings—about 450 of them, worth approximately $10 billion a year in expenditures nationwide—are on the list that just went from 10% tariffs to 25%. The additional costs therefore rose from $1 billion to $2.5 billion, according to an analysis by the National Association of Home Builders.

“The increase is on goods shipped starting last Friday, so the hikes will not hit U.S. shores likely until the start of June. Still, the tariffs are already hurting the remodeling business.”

4. New home sales are slowing down

The reports are in and the numbers show that new-home sales had a slight decline in April due to a rise in prices for new construction, but are still up year-over-year thanks to low interest rates and builder price incentives.

+ NAHB, New Home Sales Post Solid Numbers in April:

“Contracts for new, single-family home sales declined to a 673,000 seasonally adjusted annual rate according to estimates from the joint release of HUD and the Census Bureau. However, this decline was off a strong 723,000 sale pace in March, making that month’s sales rate the best since the Great Recession. Furthermore, the April rate was the third strongest of this cycle.”

Concurrently, “inventory continued to fall in April, declining to 332,000 homes for sale after peaking at 347,000 in January…[and] inventory of homes under construction has decreased. Such homes have fallen from 211,000 in January to 188,000 in April.”

+ Bloomberg, U.S. New-Home Sales Drop From 11-Year High as Prices Rise:

“Sales of new U.S. homes cooled in April from an 11-year high amid a surge in prices, adding to signs of softness in housing at the start of the quarter.

“Roughly the entire sales decline came in homes priced below $300,000, suggesting a shortage of affordable properties is hampering buyers and the effects of this year’s drop in mortgage rates are waning. Such difficulties indicate residential investment may continue to be a drag on the economy despite steady job and wage gains.”

5. McMansions? Not quite there yet.

After the end of the first quarter in 2019, new single-family home sizes have on average increased from 2,355 square feet to 2,584. But on a macro-level, this is only a slight increase, and year-to-year, home sizes are actually decreasing. These ups and downs in home sizes can tell us quite a bit about how the rest of the economy will fare.

+ NAHB, New Single-Family Home Size: First Quarter 2019 Data:

“The post-recession increase in single-family home size was consistent with the historical pattern coming out of recessions. Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.

“This pattern was exacerbated during the current business cycle due to market weakness among first-time homebuyers and supply-side constraints in the building market. But current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market levels off.”

+ Market Watch, Size Matters: Tracking the Economy Through New-home Square Footage:

Dietz explains, “Typical new home size falls prior to and during a recession as home buyers tighten budgets, and then sizes rise as high-end homebuyers, who face fewer credit constraints, return to the housing market in relatively greater proportions.

“Current declines in size indicate that this part of the cycle has ended, and size will trend lower as builders add more entry-level homes into inventory and the custom market levels off.”

6. Lawn care is planet care?

Call it old-fashioned, but Americans still want that lush, green lawn at the front of their homes. In fact, the 2018 NAR Remodeling Impact Report on Outdoor features finds that standard lawn care and landscape maintenance are still the top features that attract buyers.

+ Curbed, In Age of Climate Change, Can Our Lawns Be More Than Landscaping?:

That’s ‘cause: “Americans still judge one another by their lawns, ‘ascribing the moral failings of outside the house with what happens inside the house,’ says Professor Paul Robbins from the University of Madison.

“‘Shame used to be leveled against people who didn’t take care of their lawns enough,’ he says. ‘Now, what’s happening is that has become inverted, at least in some places. If you take too good care of your lawn, you’re wasting water.’”

But, what if the typical American lawn actually becomes a way to prevent the consequences of climate change?

Dr. Carly Ziter, who studies carbon-capturing potential of lawns at Concordia University, discovered that “the typical American lawn can capture carbon better than the land found in an untouched ecosystem.

“Soil in residential lawns can also store high amounts of carbon, and planting a certain percentage of native plants does make a difference in supporting biodiversity. Lawns can be an ally in fighting climate change, and, along with trees, can help cool cities and reduce the urban heat island effect.”