REAL ESTATE NEWS...US construction spending hits highest level in 10 years

By Martin Crutsinger

WASHINGTON (AP) -- U.S. builders boosted spending on construction projects for a second straight month in November, pushing activity to the highest level in more than a decade.

Construction spending rose 0.9 percent in November after a 0.6 percent increase in October, the Commerce Department reported Tuesday. The increase reflected solid gains in home construction, nonresidential building and government construction activity.

The gains in all three categories pushed total construction to a seasonally adjusted annual rate of $1.18 trillion, the highest point since April 2006 when a housing boom fueled building.

Economists believe construction will continue to show gains in 2017, reflecting a strong job market with unemployment at the lowest point in nine years.

Financial markets sent stock prices to record highs following the election of Donald Trump, reflecting in part enthusiasm over his vows to increase spending on projects to repair and replace the country's aging infrastructure.

For November, the 1 percent rise in residential construction reflected a 1.8 percent rise in single-family construction which offset a 2.7 percent drop in the smaller and more volatile apartment construction sector.

The 1 percent rise in nonresidential construction followed a 1.6 percent decline in October. The gains in November were led by 7 percent jump in hotel and motel construction.

The 0.8 percent advance in government projects reflected a 3.1 percent rise in spending at the federal level and a 0.6 percent increase in construction by state and local governments.

President Barack Obama sought for a number of years to get Congress to approve higher infrastructure spending, but he was blocked by opposition from Republicans who complained that the projects would increase budget deficits. Democrats in Congress have already expressed support for Trump's proposals to boost construction spending. His ideas, however, may still face opposition from Republicans worried about high deficits.

REAL ESTATE TOPICS...California's housing affordability problems 'as bad as they've ever been in the state's history,' housing director says

By Liam Dillon

California’s housing affordability challenges remain daunting and continue to increase, according to a draft report from the state’s Department of Housing and Community Development released Tuesday.

The report found:

• Housing production over the last decade fell more than 100,000 new homes short of demand and continues to lag, leading to surging prices at all income levels.
• The state’s homeownership rates are at their lowest since the 1940s.
• One-third of the state’s renters spend more than half their income on housing costs.
• California has 12% of the nation’s population, but 22% of the country’s homeless population.

“What the report tries to get at is that the facts on the ground for a typical California family are really as bad as they’ve ever been in the state’s history,” said Ben Metcalf, director of the Department of Housing and Community Development.

The report includes a range of potential solutions, including streamlining local and state land-use and environmental rules and boosting funding for low-income housing.

“If there is good news in all this, these are, in some cases, problems that we have created through local and state policies,” Metcalf said. “And because these are challenges that have been created through policies, we know we can fix them.”

The state has not passed major housing legislation in recent years, most notably failing to reach a deal on Gov. Jerry Brown’s proposal to limit some local review of housing projects and spend $400 million on low-income housing subsidies. This year has already seen a series of housing proposals, including plans for billions in new spending as well as faster permitting for cities that have low housing production.

REAL ESTATE TRENDS...Newest Housing Decor Trends for 2017

By Jim Weiker

Say goodbye to shiplap siding and hello to green furniture.

And will 2017 finally be the year homeowners welcome something other than stainless steel into their kitchens?

To find out, The Dispatch spoke with design experts about what trends and fashions will be heading into central Ohio homes in the new year.

Green

Pantone, which bills itself as "the world-renowned authority on color," has identified "greenery" as 2017's color of the year. The "life-affirming shade" is a slightly muted bright nature tone.

"We've been watching green gain momentum in the last few seasons," said Sue Wadden, director of color marketing for Cleveland-based Sherwin Williams, whose 2017 color forecasts includes several shades of green.

Furniture, fabric, paint and wallpaper manufacturers responded with an array of products boldly decked out in green.

Experts say green illustrates a bolder use of color in general in homes, and a move away from the grays that have dominated interiors for the past several years.

Smart tech

Designers are mixed over the future of elaborate "smart-home" technology, which for some homeowners is more trouble than useful. (How many people will rely on an app to check their refrigerator temperature?)

Nonetheless, homeowners should expect to see more easy-to-use technology this year, such as smart door locks and smart light bulbs. Monica Miller, a designer with the J.S. Brown & Co. remodeling firm in Columbus, especially likes the Phillips Hue bulbs, which allow homeowners to adjust light through a smart phone without a lot of complicated wiring.

"Not only do you have the programability — we've had that for awhile — but with LEDs, you can change the color in the lamp," she said.

Marble

This classic countertop material took a backseat to granite and then quartz because it is vulnerable to staining, chipping and fading. But designers, drawn by marble's rich natural tones and timeless style, are returning to the material, especially for backsplashes and secondary countertops that don't get heavy use.

And for those still worried about marble's durability, a growing number of quartz companies are making a convincing faux marble.

"The look of marble is here to stay, whether you choose to go natural or with something like quartz," said Kerrie Kelly, the home-design expert for Zillow Digs.

Waterfall

Countertops are falling over the edge. Instead of ending an inch over the cabinets, countertop materials are increasingly being used for the sides of the kitchen island as well, in what is called a "waterfall" design. For decorators, the trend illustrates the growing desire for contemporary lines.

"Cleaner cabinet styles, simpler doors and less molding are in," Miller said.

Beyond stainless

Several appliance companies are rolling out alternatives to stainless steel in anticipation of that material's dominance finally giving way.

KitchenAid, Samsung and LG have introduced "black stainless steel," Jenn-Air sells "black floating glass" and GE offers "slate," all of them darker variations of stainless. In addition, several high-end European lines offer appliances in bold, bright shades.

And finally, classic white may be on the way back.

"People still love white-on-white kitchens," said Susan Matrka, owner of Susan Matrka Interiors in Columbus. "The icy white appliances pair up really well with white cabinets."

Velvet

Comfort is helping to push leather to the side on upholstered furniture. The soft weave of velvet in particular is expected to continue gaining ground this year, often in patterns.

"We're seeing velvet used in different ways," Kelly said. "People are looking for comfort and softness instead of the industrial look of leather."

Bold floors

Wood is expected to continue dominating under foot, but designers expect bolder floor treatments, especially in kitchens, to make a comeback this year.

"We're seeing things like texture, color and dimension — bold patterns used as a statement floor or statement wall," said Heather Johnson, director of marketing for the Hamilton Parker Co. in Columbus. "Outside of the bold, bright colors, we're talking about things that have actual patterns printed on the tile."

First-floor bars

Bars are coming out of the lower-level rec room onto the main floors of homes, reflecting the broader trend of illustrating that homes are becoming entertainment zones.

"The built-in bar plays off that livable design concept," Kelly said. "With built-in shelving, it makes hosting a lot of fun."

REAL ESTATE TOPICS...Millennials, Mortgage Rates And Other Big 2017 Housing Market Factors

BY Lydia O'Neal

With mortgage rates and home prices rising, the housing market has become more hostile to home buyers in 2016. But in the next year, major factors that influence the housing market stand to change both for the better and the worse. Read on for what people looking to settle down into a new home can expect in 2017.

Mortgage rates will soar.

Mortgage rates have been on the rise for nine weeks straight, with 30-year fixed rates reaching 4.32 percent Thursday, up from 3.47 percent at the end of October. The increase is a result of the Federal Reserve’s decision to hike its interest rate target in mid-December and the surge in U.S. Treasury yields over the past several months—both of which mortgage rates follow closely.

The rise in mortgage rates should continue through 2017, as Fed Chair Janet Yellen signaled plans to hike the federal funds rate target another three times next year as the central bank eases away from the near-zero rates it’s maintained since the recession, a move intended to help stimulate home buying after the crisis.

But prices likely won’t.

According to the S&P CoreLogic Case-Shiller National Home Price Index, average U.S. home values have toppled pre-recession levels. The index reached 185.06 in October, climbing from a low point of 134.01 in February 2012. The housing market research site Zillow’s Home Value Index indicates a similar trend, with average prices rising to $193,000 as of December from a nadir of $151,000 in February 2012.

But this trend is expected to slow in 2017. The Zillow index, which recorded 6.5 percent growth in home values over the course of 2016, predicted that growth rate would drop by more than half, to 3.2 percent, in 2017, sending the average home price to $198,000 by the end of next year. A study by home market information site Realtor.com forecasted a similar slow in the rise of home prices next year, to 3.9 percent from 4.9 percent.

Millennials will take over.

The Realtor.com study also estimated that millennials would make up a third of home buyers next year. A Zillow report indicated that half of home buyers are under the age of 36, nearly as many are first-time buyers and millennials “are the most likely to have plans to move in the next year.”

This trend would mark a turnaround from the past few years, during which living with parents surpassed all other housing arrangements among 18- to 34-year-olds for the first time in the modern era.

Getting a bigger mortgage will be easier.

In line with the rise in home prices over the past couple of years, the Federal Housing Administration announced Dec. 1 its decision to raise the cap on its loans in “most counties across the country” next year to $636,150 from $625,500 in 2016. (See if your county got an FHA loan ceiling increase here.)

FHA loans are popular among first-time buyers and people with lower credit scores, as they offer relatively miniscule down payments and cover mortgage insurance, protecting the lender from borrower default. Adjusting the price ceiling on these loans gives these new homebuyers—namely, the influx of millennials—a bit of leeway.

Demand stands to outweigh supply.

Part of the reason for rising prices has been a shortage in home inventories available to buyers, especially first-time buyers looking for starter homes. According to home market information site Trulia, the number of available homes dropped 9.1 percent over the past year, while the number of starter homes on the market fell 12.1 percent—the steepest decline in three years. As National Association of Realtors Chief Economist Lawrence Yun wrote in a Dec. 13 post on NAR’s site, the need to meet demand from the influx of young buyers will fall on the shoulders of construction companies.

“What is needed is for homebuilders to boost construction and for investors who bought for the purpose of renting to unload those rental properties onto the market soon,” Yun wrote, adding that, since landlords enjoy such high incomes from renting, they’re unlikely to sell to permanent residents. “The only way to bring additional supply, therefore, is for homebuilders to get really busy.”

REAL ESTATE NEWS...Housing outlook brightens despite higher rates

By Paul Davidson

The housing market is expected to pick up moderately next year on steady job and income growth and an easing supply crunch, but rising mortgage rates are likely to temper the gains, economists say.

The "X" factor is President-elect Donald Trump. Some of his proposed policies could juice home sales and starts more than anticipated while others may constrain the market.

“We think 2017 is going to be another solid year” for housing, says Ralph McLaughlin, chief economist of real estate research firm Trulia. “But homebuyers will continue to face headwinds.”

Existing home sales are projected to increase 2% to a post-recession high of about 5.5 million in 2017, says Lawrence Yun, chief economist of the National Association of Realtors. But that’s less than this year’s 3.3% gain and below the 5.75 million considered normal in light of population growth.

Among the chief stumbling blocks is the rise in mortgage rates. Since late October, the average 30-year rate has climbed from 3.47% to 4.32%, boosting the monthly payment on a $200,000 mortgage by $97. Yun estimates the rate will increase to about 4.6% by the end of 2017, adding an another $34 to that monthly mortgage check.

Rates are rising in anticipation of higher inflation under Trump’s fiscal stimulus plan and faster interest rate hikes by the Federal Reserve.

McLaughlin notes that with rents soaring in recent years, owning a home is still a far better deal than renting in most of the country. But as mortgage rates edge higher, Yun says some low- and moderate-income buyers will no longer qualify for a loan.

“People at the margins (will be) priced out,” he says. He estimates the increase in rates over the next year will mean 400,000 fewer home sales than if borrowing costs were flat.

Kendall Walker, a real estate agent at Redfin in Northern Virginia, says she hasn’t yet seen customers ditch their house hunts because of higher rates. But she adds, “We’ve had some buyers come down in price” to offset the bigger mortgage burden, reducing the size of their dream homes by as much as 30%.

Fortunately, Yun says, steady job and pay gains will result in an overall pickup in home sales in 2017. Many economists expect current average annual earnings growth of 2.5% to approach 3% by the end of next year as the low, 4.6% unemployment rate forces employers to bid up for workers.

Another positive development is the prospect of somewhat more ample supplies. There was a four-month inventory of homes nationally in November, according to the Realtors group, well below a healthy six-month stockpile. That has crimped sales and pushed up prices, which have risen 5% to 6% the past couple of years.

One reason for the meager inventory: the housing crash left many homeowners owing more on their mortgages than their homes were worth. Some have hesitated to unload their units until they realize bigger equity gains, McLaughlin says. Also, many investors snapped up cheap homes during the crisis and rented them out, leaving fewer on the market.

But as a result of rising prices, the share of homeowners who are “seriously underwater” fell to 10.8% in the third quarter from 29% in 2012, according to ATTOM Data Solutions and RealtyTrac. Higher home values also have prodded more investors to sell their units, a trend McLaughlin expects to continue.

Meanwhile, home builders are expected to respond to the tight supplies by putting up more houses. Housing starts are estimated to increase 10% from 1.18 million this year to about 1.3 million in 2017, according to a survey of 53 economists by Blue Chip economic Indicators. That’s not too far from the 1.5 million deemed normal and well above the roughly 400,000 bottom in 2010. Yun says single-family home construction will drive the gains.

As the fresh supplies hit the market, he predicts the current four-month inventory of existing homes will increase to five months by midyear, helping moderate annual home price gains from 5.5% this year to about 4% in 2017.

That would still outpace wage growth for many Millennial first-time homebuyers, a group that also will be particularly squeezed by higher mortgage rates. Yet Yun says many Millennials are likely itching to move out of their parents’ homes and settle down after postponing marriage and families for several years. He predicts the share of homes bought by first-time buyers will rise from 32% in November to 35% next year – still below a normal 40%.

Trump’s policies are a wild card. His tax cuts could put more money in buyers’ pockets and goose demand, Goldman Sachs says. And his proposal to lift some financial regulations could make it easier for some consumers to obtain mortgages, McLaughlin says.

But his proposed restrictions on immigration may curtail population growth and dampen housing demand while exacerbating a construction worker shortage that’s already constraining housing starts, Goldman and McLaughlin say.