Yeah, I know. It’s tough to get a read on the housing market these days, and Brad Hunter agrees.
I recently spoke to Hunter, chief economist and director of consulting at housing research firm Metrostudy, at the UF Bergstrom Center Real Estate Trends and Strategies Conference in Orlando. He acknowledged the confusion and said it doesn’t help with the government’s own report shows new home sales up 6.9% – plus or minus 17%.
But Metrostudy has been able to nail it down at bit better.
“What we’re seeing is that traffic is actually much stronger than it was at this time a year ago, and the sales paces per community are a little bit below what they were a year ago,” he said.
“But that’s okay because last year around this time was quite a strong period. We’re kind of seeing that things are on track for a season that is good but not great.”
I admitted that I’m a little worried about the effect of rising interest rates and a reduction in the Federal Reserve’s economic stimulus, but Hunter doesn’t foresee an immediate jump in rates and added that household formation is coming back. Young folks who had moved in with their parents are moving out again.
“That’s going to create more housing demand,” he said.
Okay, I said, but what about the shadow supply owned by institutional buyers?
Institutional and individual buyers have cleaned up much of the supply on the market, Hunter said. That led to price increases, in some cases, at a 20% annual rate in the first half of last year – only to fall flat in the second half with renewed taper talk by the Fed.
Now pricing is starting to recover, Hunter said, and some markets like South Florida are seeing a shortage of developed residential lots.
This year, Hunter said, look for a flattening of home price increases as production grows by 20%.
Click here to listen to the full interview with Brad Hunter of Metrostudy.