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Anytime Ivy Zelman, CEO of Zelman & Associates, appears in an interview (or webinar) to discuss the current housing market, we tune in.
So, of course, when Zelman joined two CNBC “Squawk Box” hosts for a conversation on the recent drop in rates, her comments became topic number one on Tuesday’s Hot Sheet.
If you tuned in, or you’re a Hot Sheet regular, you know the high regard in which Byron Lazine holds Zelman and her insights into the market.
She’s one of a handful of people who predicted what was going on during the lead-up to the Great Financial Crisis. She saw the housing bubble before everybody…She has some strong statements about the state of new construction right now and what opportunities buyers have in that sector. Byron Lazine
“IT’S A BUYER’S MARKET FOR NEW CONSTRUCTION”
The CNBC host leading the interview began with a question on home prices, asking Zelman, “Do you see any early signs of what direction that’s going to play out?”
Here’s how Zelman responded:
Well, at this point, I’d say that home prices aren’t likely to go higher. I think they’re going to continue to decelerate, although the drop in rates had a bit of a mixed result. It’s a little early to say. But remember, mortgage rates were over 7% late April and the first half of May, so it is about 50 basis points down, which certainly helps.
A good rule of thumb is that a 25 basis point decline in rates is about equivalent to a 3% decrease in price. But today, I still think that it’s a buyer’s market, and looking for opportunities for incentives from those that are buying new construction and mortgage rate buy-downs. Ivy Zelman - CEO of Zelman & Associates
In his review of Zelman’s statements, Byron added what he’s seeing in southern Florida right now, where sellers are having to come to terms with the reality that a price reduction is likely necessary to get their home sold within a brief timeframe.
Prices are not just stabilizing in some areas, they are going to start going down…you’re already seeing that in a couple of markets. You’ll see more of that over the next six months, and you’ll see more discussion start to ramp up around that. Byron Lazine
The CNBC host then asked Zelman to clarify whether she believes the current market favors buyers or sellers.
Well, buyer’s market for new construction in that there are great deals. For example, I talked to a builder late Friday to say, ‘Hey, did you see any benefit from the drop in rates?’ And they said, ‘No, but we were able to buy 3.99% commitments for mortgage rate buy-downs,’ which is definitely a good deal for a consumer.
So, in the new construction market, a 3.99% mortgage rate is pretty attractive and probably gets you back...
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