LGI Properties CEO expects housing demand to stay robust whilst mortgage charges tick up

LGI Properties Chairman and CEO Eric Lipar informed CNBC on Friday he believes housing demand will stay strong even within the face of rising mortgage charges.

A day earlier, Freddie Mac reported the 30-year fixed-rate mortgage reached its highest stage since July after eclipsing 3%. And on Wednesday, the Mortgage Bankers Affiliation’s seasonally adjusted index confirmed complete mortgage software quantity was basically flat final week.

The housing market has been one of many vivid 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 greater 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 Properties has a presence in nearly 20 states, primarily within the southern and western elements of the U.S. Whereas the corporate focuses on first-time consumers, Lipar stated the energy 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 clients, the mortgage charges, are roughly 50 foundation factors nonetheless decrease than they have been at the moment 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 govt since 2009, stated he thought the uptick in charges may in some methods speed up purchases.

“Although charges have elevated a bit of 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 greater has partly been the rise in lumber and labor prices as a result of the demand atmosphere has allowed LGI Properties to keep away from absorbing them, Lipar stated.

“Proper now, we consider we’re going to have the ability to go these prices off to the buyer. The margins will stay in line with LGI, however definitely taking a look at a median gross sales worth that’s in all probability going to proceed to go greater,” he stated.

Final yr, the corporate’s common sale worth was $253,000, Lipar stated. For 2021, LGI Properties expects that to fall between $260,000 and $270,000, in response to Lipar.

Shares of LGI Properties closed greater by 2.8% Friday to $125.14 apiece. The inventory is up nearly 41% previously 12 months.

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