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hey welcome back it's jason walter here two of the most important metrics to look at what do you want to get a glimpse into the future of our housing market in the months to come is to have a look at pending home sales as well as brand new home sales in the u.s this is because pending home sales of existing houses as well as new home sales are both defined as when a buyer signs a contract to purchase a house so in today's housing market update i'm gonna be sharing these brand new reports with you because they were just released a few days ago this will give us a glimpse into the future of our housing market i'm also going to be sharing the latest details regarding mortgage application numbers as well as mortgage rates because those have been increasing lately i have lots to cover in this video and i'm very excited to do that so before we dive into the video please hit the like button i greatly appreciate that the more comments shares and likes i get on a video the more that youtube shares it to others and in turn that helps support the channel and i greatly appreciate your support also if you haven't subscribed already please subscribe because i post videos about how this pandemic is affecting our real estate market and i really enjoy making these videos for you even though youtube is definitely not my full-time job okay let's first talk about pending home sales for existing houses meaning not brand new houses this is when a home seller accepts an offer from a home buyer last week the national association of realtors or nar released january's pending home sale numbers with mixed news the northeast midwest and west regions all experienced a decline last month but the south increased by 0.1 percent overall the pending home sale index in the u.s fell by 2.8 percent compared to december led by more than a seven percent decline in both the west and northeast despite a dip in pending home sales for january january's index hit 122.8 which is an all-time high for january and because i'm super nerdy and i follow these numbers far too often i also noticed that december's pending home sale index also reached a record high so now we have two straight months where we reached record highs for the pending home sale index for that given month in addition pending home sales increased 13 compared to one year ago with all regions showing sales gains in my opinion if we had more housing inventory or more houses available for sale we would have more home sales right now this is because housing inventory for existing homes fell to a record low in january because it plummeted 25.7 compared to a year ago and that was a record decline the problem of low inventory is very pronounced when you look at it over the past several years so this is from the federal reserve bank of st louis so in january 2017 there were over 1.2 million homes for sale in january 2020 before this pandemic even hit it was already the lowest in years with just over 1 million houses listed for sale compare that to january 2021 and it has fallen off a cliff with less than 600 houses for sale or about as half as many houses as last year let's have a look at the effect of listing prices in the united states this is the asking price of a home when it's listed for sale every year like clockwork listing prices bottom out in january and peak around may every single year but look what happened in 2020 they bottomed out in january but home prices didn't peak until september in other words four months later than the norm due to the extremely high demand from home buyers right now we need a large influx of houses available for sale to meet that demand and a large part of that should be coming from new home developments so let's have a look at permits pulled as well as housing starts for brand new home developments so we can have a clear picture of what's to come here's a look at permits pulled for brand new houses in the u.s so for the first half of 2020 they decreased dramatically but ever since may they have shot up through the roof to levels that we have not seen in over 10 years however let's have a look at housing starts which is the beginning phase of the construction of a brand new house so housing starts also shot up ever since may 2020 but the actually decreased when he compared january 2020 to january 2021. i was trying to figure out why housing starts have decreased compared to one year ago it really does not make much sense because we have such high buyer demand right so i did a lot of research regarding this so if you haven't hit the like button i greatly appreciate that and here's what i found according to the national association of homebuilders or the nhb housing production softened in january as rising lumber prices continue to affect the housing inventory overall housing starts decreased six percent from december to january 2021. however when looking at the latest housing construction numbers complements of the us census bureau housing starts for single family houses decreased twice as much as that because they were down 12.2 from the prior month so what in the world is going on right we have super high buyer demand right now in the us yet housing starts have been decreasing part of the reason why construction has been softening is from record high lumber prices which are adding more than 24 000 to the price of a brand new house since april lumber prices have skyrocketed more than 180 percent since last spring when a lumber futures contract was about 260 dollars now it's just under 900 in addition take a look at lumber prices over the last 20 years prices were around about 400 dollars in 2005 so about half of what they are right now the weakness of housing starts is also consistent with a recent survey which found that 89 of builders expect building material prices to be their top challenge in 2021 next to the time it takes to obtain building materials i have a friend here in sacramento and he's a professional home flipper and he told me the other day that it's taking months for him to get appliances for his kitchens so what he's doing right now is ordering them in bulk storing them in order to avoid any delays and here's another challenge for home builders in the us so according to the national association of home builders chairman he stated the following with the cost of building materials rising at a rapid pace the challenge for builders is to keep home prices at an affordable level for buyers in addition rising interest rates will also further erode affordability and i'll be going over interest rates here in just a little bit okay let's change gears slightly and talk about brand new home sales so a new home sale is defined as when a home builder accepts a deposit from a home buyer in today's housing market a brand new home sale often occurs even before the house has even started construction so a sale in a brand new development can take place when there's just a dirt lot and the house is not even going to be built for four to nine months from now i wanted to point this out because this is so different than a sale for existing home so for a sale for existing house that's when the sale is really finalized and the buyer can move it sales of brand new single-family houses increased 4.3 percent from december to january 2021 and 19.3 percent above january 2020 however the number of brand new houses for sale decreased 5.5 percent from january 2020 to january 2021. and on a side note you definitely pay a premium when buying a brand new house this is because the median price for a brand new home in the us was 346 400 in january 2021 however the median price for existing house in the us was 303 900 another leading indicator of our housing markets so we can get a glimpse into the future is to have a look at mortgage application numbers and according to the mortgage bankers association or the mba they reported that mortgage applications for new home purchases increased 18.9 compared to a year ago in addition compared to december 2020 applications increased by 17 joel kahn of the mba said that the low supply of existing houses on the market and changing household preferences towards newer and larger houses continue to spur buyer demand this makes sense because the vast majority of the brand new houses being built right now are in the suburbs where you typically get a larger house compared to the cities in addition one of the pros of buying a brand new house is that you can literally walk into a sales office of a new development place a deposit down for a house and you're in contract there's no bidding wars like you have for existing houses a couple of downsides of buying a brand new house obviously is the premium to pay to buy a brand new home but many home builders right now are sold out of the houses that are already built those were likely sold months ago instead as a home buyer for a brand new house you place a deposit down for a dirt lot and you have to wait four to nine months for it to be built in my opinion there are two major challenges with buying a brand new house that hasn't even been built yet so if you put a deposit down on a dirt lot then often the home builder can't even give you what the final sales price will be so imagine putting a deposit down on a brand new house and you don't even know what the final sales price is going to be and number two is that you don't know what your interest rate will be once the house is finally built right so if you have to wait six to nine months for the house to be built you can't lock in your rate now so you have to wait until much closer to when the house is built in order to find out what your interest rate will be therefore you're not going to know what your interest rate's going to be you're not going to know what the sales price is going to be therefore you're not going to know what your payment is going to be because of all this i made a video about the pros and cons of buying a brand new house and i'll leave a link up here for you in addition to give you a quick mortgage recap current mortgage interest rates are just under 3 this is obviously down significantly from last march when rates were about 3.65 however rates have increased the last two weeks jumping from 2.73 to 2.97 percent rates are still historically low so the all-time record low was set at the beginning of january of around 2.65 percent if you enjoyed watching this video please hit the like button i greatly appreciate that and also consider subscribing as well i post videos about how this pandemic is affecting our real estate market also don't forget to get your free stocks compliments of weeble i'll leave a link in the description below for that you can also follow me on instagram i'm sacramento realtor hope you have an awesome day i look forward to seeing you on the next video [Music] [Music] you