LGI Houses Chairman and CEO Eric Lipar informed CNBC on Friday he believes housing demand will stay sturdy even within the face of rising mortgage charges.
A day earlier, Freddie Mac reported the 30-year fixed-rate mortgage reached its highest degree since July after eclipsing 3%. And on Wednesday, the Mortgage Bankers Affiliation’s seasonally adjusted index confirmed complete mortgage utility quantity was primarily flat final week.
The housing market has been one of many shiny spots of the U.S. economic system through the coronavirus pandemic, sparked partially by elevated geographic flexibility and record-low borrowing prices. However a latest transfer larger in U.S. Treasury yields has led some to ponder the implications for residential actual property.
“Nonetheless actual robust demand that we’re seeing within the housing market,” Lipar stated in an interview on “Closing Bell.”
Texas-based LGI Houses has a presence in virtually 20 states, primarily within the southern and western elements of the U.S. Whereas the corporate focuses on first-time consumers, Lipar stated the power is being noticed throughout worth factors and geographies.
“I believe in historic perspective, charges are nonetheless very low,” added Lipar. “The charges we’re providing prospects, the mortgage charges, are roughly 50 foundation factors nonetheless decrease than they had been right now final yr, the pre-pandemic the place the market was nonetheless actually robust.” One foundation level equals 0.01%
Lipar, who has served because the homebuilder’s chief government since 2009, stated he thought the uptick in charges may in some methods speed up purchases.
“Though charges have elevated slightly bit, that … additionally offers the consumers the urgency to go forward and write a contract on a home as a result of we’re seeing costs proceed to go up and charges go up,” he defined.
Driving these costs larger has partly been the rise in lumber and labor prices as a result of the demand atmosphere has allowed LGI Houses to keep away from absorbing them, Lipar stated.
“Proper now, we imagine we’re going to have the ability to go these prices off to the buyer. The margins will stay in keeping with LGI, however actually a median gross sales worth that’s most likely going to proceed to go larger,” he stated.
Final yr, the corporate’s common sale worth was $253,000, Lipar stated. For 2021, LGI Houses expects that to fall between $260,000 and $270,000, in accordance with Lipar.
Shares of LGI Houses closed larger by 2.8% Friday to $125.14 apiece. The inventory is up virtually 41% previously 12 months.