New home lot supply drops to cycle lows
Let’s talk about how the proposed tax reform plans may impact homeownership. Bear in mind this analysis just skims the surface of the legislation. The initial drafts from both the House and Senate intend on doubling the standard deduction, which means individuals will now automatically get $12,000 and married couples will get $24,000. The bump in the standard deduction largely makes the popular mortgage interest deduction irrelevant, as the incentive to itemize taxes is lowered. There are also plans to either limit or remove the ability to deduct state and local taxes. We shouldn’t discount the fact that doubling the standard deduction does put more money back in the hands of consumers, but it does hurt one of the main selling points of homeownership.
– Ali Wolf, Manager of Housing Economics at Meyers Research
Homeownership rate rose from 63.7% to 63.9% in the third quarter. The Midwest outpaced the national average at 69.1%, while the West lagged at 58.9%; historically, the West has had a lower rate than the rest of the country due to affordability constraints. Keeping with the positive momentum we’ve been telling you about Millennials, the homeownership rate for those under 35 grew for the third consecutive quarter to 35.6%.
The Case-Shiller Home Price Index for August increased 6.0% YOY. This marks 64 straight months of year-over-year growth. The Case-Shiller 20-City Composite Index increased by 5.9% over the same period. The continued growth indicates solid expansion for the housing market. However, home price appreciation is outpacing both inflation and wages, which stretches affordability.
The average 30-year fixed mortgage rate flattened to 3.94%. The rate was 3.65% last year. The Fed raised short-term interest rates twice this year and are planning a third for next month. Many experts believed those hikes would drive up mortgage rates, but the lower bond yield is keeping rates suppressed. Mortgage rates are still below 4.0%, which is favorable for housing demand.
Ali Wolf, Manager of Housing Economics
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