Housing & Construction July 2016
HOUSING STARTS FALL 0.3%
Housing starts fell 0.3% in May to a seasonally adjusted annual rate of 1.16 million after rising to 1.17 million units in April. Single-family starts rose 0.3% to 764,000 units, little changed from April. Single-family starts are up about 10% from May 2015. Multifamily starts dropped 1.2% to 400,000 units from a downwardly revised reading in April. Regional starts were mixed. Starts rose 14.4% in the West and 1.5% in the South. Starts fell 33.3% in the Northeast and 2.5% in the Midwest. Builders continue to be plagued by a shortage of lots and skilled labor. Wells Fargo expects starts to gain momentum throughout the year, ending 2016 up 11% to 1.2 million units and reaching 1.25 million units in 2017.
BUILDING PERMITS RISE 0.7%
Building permits rose 0.7% in May to a seasonally adjusted annual rate of 1.14 million after rising to 1.12 million in April. Single-family permits fell 2% to a rate of 726,000 units. Multifamily permits rose 5.9% to 412,000 units. Regional permit issuance was mixed. Permits increased 15.3% in the West. Meanwhile, the South, Northeast and Midwest posted respective losses of 1.4%, 7.8% and 9.2%. Permits have been above the one million level for twelve consecutive months, the longest stretch in seven years.
NEW-HOME SALES FALL 6.0%
Sales of new single-family homes fell 6.0% in May from a downwardly revised April reading to a seasonally adjusted annual rate of 551,000 units. The inventory of new homes for sale rose slightly to 244,000 homes in May, a 5.3-month supply at the current sales pace, up from a 4.5-month supply in April. In a normalized market, housing is generally at a six-month supply. Regional sales were mixed. Sales rose 12.9% in the Midwest. Sales fell 0.9% in the South, 15.6% in the West and 33.3% in the Northeast. NAHB says at the current annual pace of sales, new home sales are still up relative to the first few months of this year as well as compared to last year, and the market continues to make overall gains despite volatility. Sales of new homes are tabulated when contracts are signed and are considered a more timely barometer of the housing market than purchases of previously-owned homes, which are calculated when a contract closes.
EXISTING HOME SALES RISE 4.7%
Existing home sales rose 4.7% in May to a seasonally adjusted annual rate of 5.53 million units after rising to 5.45 million in April. Sales were 4.5% higher than in May 2015, and at the highest annual pace since February 2007. Total housing inventory at the end of May rose 1.4% to 2.15 million homes. Because sales rose even faster, inventory remained at a 4.7-month supply. Tight inventories mean that homes are selling quickly, with the typical home staying on the market just 32 days. Regional sales were mixed. Sales fell 6.5% in the Midwest. Sales rose 4.1% in the Northeast, 4.6% in the South and 5.4% in the West.
BUILDER CONFIDENCE RISES TO 60
Builder confidence rose two points to 60 in May after being unchanged for the previous two months. It was the fifteenth consecutive month the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) remained above 50. The component measuring sales expectations for the next six months rose five points to 70. The component gauging current sales conditions rose one point to 64 and the component charting buyer traffic rose three points to 47. The three-month moving averages for regional HMI scores were mixed. The South rose two points to 61 and the West rose one point to 68. The Northeast dropped two points to 39 and the Midwest fell one point to 57.
MORTGAGE RATES DROP TO 3.48%
In the wake of the Brexit vote, the yield on the 10-year U.S. Treasury bond plummeted 24 basis points. The 30-year mortgage rate declined as well, falling to 3.48%, the lowest level rates have been since May 2013 and only 17 basis points above the all-time low recorded in November 2012. This extremely low mortgage rate should support solid home sales and refinancing volume this summer. In June of last year 30-year rates averaged 4.08%.
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