Dive Brief:
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Houston-based LGI Homes announced it achieved monthly record closings in December, with 467 homes closed amid robust demand in the entry-level sector of the market.
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The company also reported record-setting quarterly closings of 1,139 homes in the fourth quarter of 2016, up 22.3% from a previous record of 3,404 home closings in 2015.
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LGI has predicted that it will close 4,700 homes this year, compared to 4,163 home closings last year, if economic conditions — including interest rates — and mortgage availability continue in a similar pattern to that in the fourth quarter.
Dive Insight:
The record monthly and quarterly closings by LGI come as conditions in the entry-level segment continue to improve for first-time buyers looking to enter the homeownership market. LGI focuses on the entry-level sector, with its average home sales price around $197,450.
A slight easing in home price growth in many areas of the country — along with a pick-up in new home construction and existing home sales — is helping entry-level buyers gain a foothold in the market.
An October report from Redfin noted that modest price growth in September helped entry-level buyers looking to purchase a property, while real-estate listing website Realtor.com reported that individuals aged 25 to 34 accounted for one-third of homebuyers in September.
Jonathan Smoke, chief economist for Realtor.com, has said that he expects that first-time buyers will continue to return to the market in greater numbers this year as employment opportunities grow, wage levels improve and more affordable inventory hits the market.
Demand for homes continues to pick up steam, a trend that comes as the U.S. is expected to add 25 million households by 2035, according to a new working paper from The Harvard Joint Center for Housing Studies. Millennials and minorities are expected to drive that growth in the next few decades.
However, growth in the first-time buyer segment could be hampered slightly this year as concerns grow over the possibility of further mortgage rate increases, which could price some potential buyers out of the market.
