Housing Supply Tight for First Time Home Buyers:

In roughly half of the top 100 cities in Trulia's analysis, first-time buyers with 33 percent of the local median income could afford to buy the median-priced starter home.

Some eight years after its worst collapse since the Great Depression, the housing market has recovered in much of the country, with prices approaching peak levels set a decade ago.

But the supply of affordable houses available for first-time buyers remains tight, leaving many on the sidelines.That shortage is worsening, according to real estate site Trulia.

Researchers there say the number of affordable homes on the market for the average first-time homebuyers this year took its biggest year-over-year drop in three years, falling 12.1 percent. The good news for younger home shoppers is that wages have begun rising after a long, flat spell following the Great Recession.

Though incomes are up, home prices have been rising even faster in many cities. That's pricing out more households looking to get started as homeowners.

To afford the median-priced starter home, first-time buyers, on average, now have to pay some 39 percent of their monthly income — up 2 percent in three years. But mortgage lenders have held the line on strict credit and income standards when they approve a mortgage. As a result, there's a squeeze on the supply of starter homes.

Households moving up to a larger home have it a lot easier, Trulia found. A buyer of a so-called "trade-up" home needs just 25.5 percent of their monthly income. Buyers at the upper end need just 14 percent of monthly income to afford a premium home, according to Trulia's data. 

Smart Home Technologies Becoming More Important to Buyers:

As smart homes become more popular among consumers, buyers and sellers are showing greater interest in those homes and smart-home technologies.

A recent survey of home buyers by the National Association of Realtors showed that in terms of smart home devices, 37 percent of Realtors said clients find smart locks to be very important, followed by lights at 29 percent and thermostats at 26 percent. Forty-three percent said clients were neutral about the importance of voice control features and 38 percent for smart appliances and doorbells.

When it comes to the importance of smart home functions to their clients, 80 percent of Realtors see security as very or somewhat important. Nearly half of Realtors view privacy as a very important smart home function to their clients, while 30 percent see it as somewhat important. Four in ten Realtors see both cost savings and energy savings to be very important to their clients and 38 percent see comfort to be a very important smart home function.

According to the report, slightly more than half of Realtors' clients were not familiar with what's available for smart home technology. Nearly 40 percent of Realtors discussed security and privacy issues with their clients followed by technology cost at 31 percent and interoperability at 6 percent.

Of the many types of smart home technologies available, 42 percent of Realtors said clients were most interested in smart home devices, followed by whole home technology (22 percent) and smart home technology for specific rooms (13 percent); 41 percent of clients were not interested in any of these technologies. 

Ben Carson to be new head of HUD:

President-elect Trump has officially nominated Dr. Ben Carson to head up the Department of Housing and Urban Development.

“I am thrilled to nominate Dr. Ben Carson as our next Secretary of the U.S. Department of Housing and Urban Development,” Trump said in a statement released today. “Ben Carson has a brilliant mind and is passionate about strengthening communities and families within those communities.”

The selection is considered to be very interesting as Dr. Carson (who grew up in Detroit) does not share the classical views of prior HUD secretaries.  Last year, Carson publicly criticized an Obama policy requiring that cities publicly report racial bias in their housing patterns, the Post reported.

“These government engineered attempts to legislate racial equality create consequences that often make matters worse,” Carson wrote in the Washington Times. “There are reasonable ways to use housing policy to enhance the opportunities available to lower-income citizens, but based on the history of failed socialist experiments in this country, entrusting the government to get it right can prove downright dangerous.”

Separately, Trump selected Steve Mnuchin, the former Goldman Sachs executive tapped for the Treasury job.  He said that one of the things at the top of the Trump administration’s agenda will be “getting Fannie and Freddie out of government ownership.”

The news sent Fannie and Freddie stocks skyrocketing to 45% above their opening price, to levels not seen since June of 2014. Both stocks closed near $4.40.

With these two appointees, the housing market is in store for many policy and structural changes in the coming years. 

2017 Projections Show Tight Housing Market:

It has already started, the wave of projections for 2017.  And as we are seeing more and more start to hit, they have a common theme: 2017 will continue to be a very tight market.

The latest prognosis comes from Money magazine which reported that nationally, home prices are expected to keep rising, albeit more slowly— 3.5% in 2017, vs. 4.5% in 2016, per Moody’s Analytics projections.

In 2016, small homes have seen much sharper price growth than larger ones, and urban areas have appreciated faster than metro outskirts— and both trends are expected to continue in 2017 and brace yourself: Inventory has tumbled among less expensive homes, which means your money may not buy as much as you expect.

If you’re looking to trade up to a larger home, you’re in the housing market’s sweet spot, and the first part of 2017 should be a particularly good time to strike. Over the five years between 2011 and 2016, the average price on a two-bedroom house climbed 59% nationwide, while four-bedroom houses rose a more modest 41%, according to an analysis by Attom Data Solutions. Inventory has also risen at the higher end of the market, climbing almost 8% for homes in the $500,000 to $750,000 range.

But if you’re hoping to cash out and scale back—or if you’re a first-timer looking for a starter home—you face a tight market with low supply and greater competition from rival buyers.

Housing Starts Hit 9 Year High:

The Commerce Department showed that U.S. new-home construction jumped to a nine-year high in October driven by a strong pickup for single-family housing.

Residential starts surged 25.5 percent to a 1.32 million annualized rate, the fastest since August 2007 and exceeding the highest market projections. The increase from September was the biggest since July 1982. Multifamily-home building was also up, by a whopping 68.8 percent.

The figures indicate the housing market has been making great progress due to increased hiring and healthier finances that have been driving demand.

Single-family house construction rose 10.7 percent to an 869,000 rate, the highest since October 2007.

Permits, a proxy for future construction, increased 0.3 percent to a 1.23 million annualized rate. They were projected to fall to a 1.19 million pace, according to the survey median.

The National Association of Home Builders/Wells Fargo index of home builder sentiment in November held near the highest level of the year, figures showed on Wednesday. Readings greater than 50 mean more respondents reported market conditions as good. A measure of prospective buyer traffic rose.

Homeowners are Twice as "House Rich" as They Were 5 Years Ago:

America's housing market is heating up again, fortifying the finances of current homeowners and frustrating potential first-time buyers.

After hitting bottom in 2012, home prices took off dramatically before leveling off a bit in mid-2014. In the last two months, though, they turned higher again. The amount of equity homeowners now have — the value outside their mortgage debt — has doubled in the last five years, according to CoreLogic.

The latest read on September home prices showed a 6.3 percent annual gain, a touch bigger than August and a clear sign that prices are heating up again after cooling through much of spring and summer.

"Home-equity wealth has doubled during the last five years to $13 trillion, largely because of the recovery in home prices," said Frank Nothaft, chief economist for CoreLogic. "Nationwide during the past year, the average gain in housing wealth was about $11,000 per homeowner, but with wide geographic variation."

Homeowners today show more wealth on paper, but they are not extracting it at nearly the rate they did during the last housing boom. Near-record-low mortgage rates have certainly prompted thousands of borrowers to refinance and lower their monthly payments, but a very small share have extracted cash in these refinances and home equity lines of credit (HELOC).

So homeowners get richer, and those trying to become homeowners have to face not just higher prices, but a severe lack of homes for sale, especially at the entry level. There is clearly demand, just not enough supply.

Housing Market Trends

We were certainly traveling on happy trails last week following two upward trending housing market reports. New Home Sales in September went up 3.1%, just shy of a 600,000 unit annual rate. Compared to a year ago, sales are up 29.8%. If that doesn't make you happy, consider this. After experiencing a summer lull in August, new home sales in September posted their fastest sales pace since 2008, excluding July's excellent numbers. The biggest obstacle to higher sales remains low inventories. As those slid in September, it shows builders are falling behind demand, so there's lots of room to increase construction activity.

The other happy housing report? The Pending Home Sales index of contracts signed on existing homes was up 1.5% in September following its August dip. Combining readings from recent months indicates existing home sales in coming months should continue the gains made in September. The index is 2.4% ahead of September last year, its 25th month in a row of year-over-year increases. The national Case-Shiller home price index was up 0.6% in August and up 5.3% versus a year ago. The FHFA index of prices for homes bought with conforming mortgages gained 0.7% in August and 6.4% over a year ago. Should make more homeowners happy enough to list their properties.