Personal Saving Rate Falls to 3.2% in March

2024-04-26T12:21:12-05:00

The most recent data release from the Bureau of Economic Analysis (BEA) showed that personal income increased 0.5% in March, up from a 0.3% increase in the prior month. Gains in personal income are largely driven by increases in wages and salaries. As spending outpaced personal income growth, the March personal savings rate dipped to 3.2%. This is 0.4 percentage points lower than the February reading and down by nearly two percentage points from last year. As inflation has almost eliminated compensation gains, people are dipping into savings to support spending. This will ultimately lead to a slowing of consumer spending. Real disposable income, income remaining after adjusted for taxes and inflation, edged up 0.2% in March, up from a dip of 0.1% in February. On a year-over-year basis, real (inflation adjusted) disposable income rose 1.4%. The pace of real personal income growth slowed after reaching 5.3% year-over-year gain in June of 2023. Personal consumption expenditures (PCE) rose 0.8% in March after a 0.8% increase in February. Real spending, adjusted to remove inflation, increased 0.5% in March, with spending on goods rising 1.1% and spending on services up 0.2%. Discover more from Eye On Housing Subscribe to get the latest posts to your email.

Personal Saving Rate Falls to 3.2% in March2024-04-26T12:21:12-05:00

New Energy Codes Mandate a Blow to Housing Affordability

2024-04-26T11:14:47-05:00

In a move that will curb new construction and harm housing affordability nationwide, the U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Agriculture (USDA) have issued a final determination that will require all HUD- and USDA-financed new single-family construction housing to be built to the 2021 International Energy Conservation Code (IECC) and HUD-financed multifamily housing be built to 2021 IECC or ASHRAE 90.1-2019.

New Energy Codes Mandate a Blow to Housing Affordability2024-04-26T11:14:47-05:00

How Rising Costs Affect Home Affordability

2024-04-26T08:19:31-05:00

NAHB recently updated its 2024 priced out estimates, showing how higher prices and interest rates affect housing affordability. The new estimates show that affordability is a serious problem even before any further price or interest rate increases. Already in 2024, 103.5 million households are not able to afford a median priced new home ($495,750[1]). This is because their incomes are insufficient to qualify for the required mortgage under standard underwriting criteria.  If the median new home price goes up by $1,000, an additional 106,031 households would be priced out of the market. The underwriting criterion used to determine affordability is that the sum of mortgage payments, property taxes, homeowners and private mortgage insurance premiums (PITI) during the first year is no more than 28 percent of the household’s income. Key assumptions include a 10% down payment, a 30-year fixed rate mortgage at an interest rate of 6.5%, and an annual premium starting at 73 basis points for private mortgage insurance. The 2024 priced-out estimates for all states and the District of Columbia and over 300 metropolitan statistical areas are shown in the map below. This map shows detailed information, including the projected 2024 median new home price estimates and the minimum income to secure a mortgage, and the percentage of households unable to afford the new homes. It also shows how a $1,000 increase in price could impact the number of households. Vermont stands out as the state with the highest share of households unable to afford the median-priced new home before any price changes, with approximately 92% of its households falling short on the income needed for a mortgage to buy a median-priced new home. Connecticut and Hawaii follow closely, with 89% and 88.5% of households respectively, facing similar affordability challenges for new homes at the median prices. On the other hand, Virginia is the state with much better affordability, where the median new home price is $462,000, however, around 66% of households still find these new homes unaffordable. San Jose-Sunnyvale-Santa Clara metro area in California stands out due to its exceptionally high median new home price of $1,685,593, requiring a minimum household income of $487,773. This makes it the metro area with the highest percentage of households unable to afford the median-priced new homes. In contrast, the Washington, DC metro area presents a more accessible market, where around 37% households are capable of purchasing new median-priced homes. This indicates a relatively higher level of affordability compared to San Jose metro area. More details, including priced out estimates for every state and over 300 metropolitan areas, and a description of the underlying methodology, are available in the full study. [1] The 2024 US median new home price is estimated by projecting the 2022 preliminary median new home price using the NAHB forecast of the Case-Shiller Home Price Index. Discover more from Eye On Housing Subscribe to get the latest posts to your email.

How Rising Costs Affect Home Affordability2024-04-26T08:19:31-05:00

New Nationwide Codes Mandate a Major Blow to Housing Affordability

2024-04-25T13:20:14-05:00

NAHB Chairman Carl Harris today issued a statement after the Biden administration announced that the U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Agriculture (USDA) will insure mortgages for new homes only if they are built to the 2021 International Energy Conservation Code (IECC).

New Nationwide Codes Mandate a Major Blow to Housing Affordability2024-04-25T13:20:14-05:00

U.S. Economic Growth Slows in First Quarter

2024-04-25T11:15:29-05:00

Compared to the fourth quarter of 2023, the U.S. economy grew at a noticeably slower pace in the first quarter of 2024 due to an increase in the trade deficit and weaker inventory investment. But it was still on solid ground supported by consumers, the government, and the housing industry. Meanwhile, the data from the GDP report suggests that inflation accelerated. The GDP price index rose 3.1% for the first quarter, up from a 1.6% increase in the fourth quarter of 2023. The Personal Consumption Expenditures (PCE) Price Index, which measures inflation (or deflation) across various consumer expenses and reflects changes in consumer behavior, rose 3.4% in the first quarter. This is up from a 1.8% increase in the fourth quarter of 2024, the biggest gain in a year. According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) expanded at a modest 1.6% annual pace in the first quarter of 2024. This is slower than a 3.4% gain in the fourth quarter of 2023, and the lowest annual growth rate in the past seven quarters. This quarter’s growth was lower than NAHB’s forecast of a 2.0% increase. This quarter’s increase in real GDP reflected increases in consumer spending, residential fixed investment, nonresidential fixed investment, and state and local government spending. Consumer spending, the backbone of the U.S. economy, rose at an annual rate of 2.5% in the first quarter. It reflects an increase in services that were partly offset by a decrease in goods. While expenditures on services increased 4.0% at an annual rate, goods spending decreased 0.4% at an annual rate. The decrease in goods mainly reflects decreases in motor vehicles and parts (-9.0%) and gasoline and other energy goods (-10.9%). In the first quarter of 2024, residential fixed investment (RFI) made its largest contribution to GDP growth since the first quarter of 2021. It rose 13.9% in the first quarter, up from a 2.8% increase in the fourth quarter of 2023. This is the third straight gain after nine consecutive quarters of declines. Within residential fixed investment, single-family structures rose 18.1% at an annual rate, multifamily structures declined 7.4%, and improvements rose 0.9%. Additionally, nonresidential fixed investment increased 2.9% in the first quarter, following a 3.7% increase in the previous quarter. The increase in nonresidential fixed investment mainly reflected an increase in intellectual property products (+5.4%). The increase in state and local government spending primarily reflected an increase in compensation of state and local government employees. The U.S. trade deficit increased in the first quarter as imports increased more than exports. A wider trade deficit shaved 0.86 percentage points off GDP. Imports, which are a subtraction in the calculation of GDP, increased 7.2%, while exports rose 0.9%. Discover more from Eye On Housing Subscribe to get the latest posts to your email.

U.S. Economic Growth Slows in First Quarter2024-04-25T11:15:29-05:00

Housing Share of GDP Surpasses 16% for First Time Since 2022

2024-04-25T11:15:37-05:00

Housing’s share of the economy rose to 16.1% in the first quarter of 2024. The share remained below 16% for all of 2023 at 15.9% in each of the four quarters. This increase to above 16% marks the first-time housing’s share of GDP is above 16% since 2022. In the first quarter, the more cyclical home building and remodeling component – residential fixed investment (RFI) – increased to 4.0% of GDP, up from 3.9% in the fourth quarter. RFI added 52 basis points to the headline GDP growth rate in the first quarter of 2024, marking three consecutive quarters of positive contributions. Housing services added 17 basis points to GDP growth in the first quarter. Among household expenditures for services, housing services contributions were behind health care (0.59), financial services and insurance (0.37) and other services (0.18). Overall GDP increased at a 1.6% annual rate, following a 3.4% increase in the fourth quarter of 2023, and a 4.9% increase in the third quarter of 2023. Housing-related activities contribute to GDP in two basic ways: The first is through residential fixed investment (RFI). RFI is effectively the measure of home building, multifamily development, and remodeling contributions to GDP. It includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes and brokers’ fees. For the first quarter, RFI was 4.0% of the economy, recording a $1.1 trillion seasonally adjusted annual pace. RFI grew 13.9% at an annual rate in the first quarter, the highest rate seen since the fourth quarter of 2020 (30.1%). The second impact of housing on GDP is the measure of housing services, which includes gross rents (including utilities) paid by renters, and owners’ imputed rent (an estimate of how much it would cost to rent owner-occupied units), and utility payments. The inclusion of owners’ imputed rent is necessary from a national income accounting approach, because without this measure, increases in homeownership would result in declines in GDP. For the first quarter, housing services represented 12.1% of the economy or $3.4 trillion on a seasonally adjusted annual basis. Housing services grew 1.4% at an annual rate in the first quarter. Historically, RFI has averaged roughly 5% of GDP while housing services have averaged between 12% and 13%, for a combined 17% to 18% of GDP. These shares tend to vary over the business cycle. However, the housing share of GDP lagged during the post-Great Recession period due to underbuilding, particularly for the single-family sector. Discover more from Eye On Housing Subscribe to get the latest posts to your email.

Housing Share of GDP Surpasses 16% for First Time Since 20222024-04-25T11:15:37-05:00
Close Sliding Bar Area

About My Work

Phasellus non ante ac dui sagittis volutpat. Curabitur a quam nisl. Nam est elit, congue et quam id, laoreet consequat erat. Aenean porta placerat efficitur. Vestibulum et dictum massa, ac finibus turpis.

Recent Works

Recent Posts