Housing & Construction August 2019
Housing Starts Fall 0.9%
Housing starts fell 0.9% in June to a seasonally adjusted annual rate of 1.25 million units after falling to 1.27 million units in May. Single-family starts rose 3.5% to 847,000 units after falling to 824,000 units in May and multifamily starts dropped 9.2% to 406,000 units. Regional starts were mixed. Combined single-family and multifamily starts rose 31.3% in the Northeast and 27.1% in the Midwest. Starts declined 9.2% in the South and 4.9% in the West.
Building Permits Fall 6.1%
Building permits fell 6.1% in June to a 1.22 million unit annualized rate. Single-family permits rose 0.4% to 813,000 units after dropping to a downwardly revised number in May. Multifamily permits fell 16.8% to 407,000 units after falling to 479,000 units in May. Regional permits were mixed. Year to date, permits rose 21.9% in the Northeast and fell 10.4% in the South, 7.9% in the West and 0.6% in the Midwest.
New-Home Sales Rise 7.0%
New-home sales rose 7.0% in June to a seasonally adjusted annual rate of 646,000 units from a downwardly revised reading in May. New home sales were up 2.2% from June 2018. The inventory of new homes for sale was 338,000, a 6.3-months’ supply at the current sales pace. The median sales price rose to $310,400 in June after falling to $308,200 in May. The median sales price in June 2018 was $310,500. Regional new home sales were mixed. Sales jumped 50.4% in the West, which was responsible for virtually all of the increase in sales. Sales inched up 0.3% in the South but tumbled 26.3% in the Midwest and 4.2% in the Northeast. Year to date regional sales were up 9.5% in the South and 19.4% in the West and down 50.0% in the Northeast and 17.6% in the Midwest. Wells Fargo commented that some of the drop in sales in the Northeast, where sales this year are 24.4% below year-ago levels, is due to the change in tax laws which limits the deductions for mortgage interest and state and local taxes. International home buying has also slowed. More than 80% of new home sales during the past two years have been in the South and the West, which also have accounted for the bulk of the nation's population growth. 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 Fall 1.7%
Existing home sales fell 1.7% in June to a seasonally adjusted annual rate of 5.27 million new homes after rising to 5.34 million homes in May. Sales were down 2.2% from June 2018. Regional sales were mixed. Sales were up 1.5% in the Northeast and 1.6% in the Midwest. Sales fell 3.4% in the South and 3.5% in the West. Total housing inventory at the end of June rose to 1.93 million from 1.91 million existing homes available for sale in May and was unchanged from June 2018. Unsold inventory is at a 4.4-month supply at the current sales pace, up from 4.3 months in May and 4.3 months in May 2018. The median existing home price for all housing types in April reached an all-time high of $285,700, up 4.3% from June 2018. June was the 88th consecutive month that home prices have increased.
Builder Confidence Rises to 65
Builder confidence rose one point to 65 in July after falling two points in June, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Builder confidence has been in the low- to mid-sixties for the past six months. Builders report demand has been solid, but development and construction costs continue to rise and labor remains in short supply and home prices continue to outpace consumer incomes. All the HMI indices inched higher in July. The index measuring current sales conditions rose one point to 72, the component gauging expectations in the next six months rose one point to 71 and the index measuring buyer traffic increased one point to 48. Looking at the three-month moving averages for regional HMI scores, the South rose one point to 68 and the West rose one point to 72. The Northeast remained unchanged at 60 and the Midwest fell one point to 56.
Mortgage Rates Stable at 3.75%
A 30-year fixed-rate mortgage (FRM) was 3.75% at the end of July, virtually stable from 3.73% at the end of June. Rates were 4.54% at the end of July 2018. Freddie Mac expects rates to average 4.5% this year and 4.8% next year. The drop in mortgage rates has caused a corresponding increase in applications for mortgages and refinancing.
Remodeling Market Index Rises to 55
The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) rose one point to 55 in the second quarter. The RMI has been consistently above 50, the level that indicates that more remodelers report market activity is higher compared to the prior quarter than report it is lower, since the second quarter of 2013. Current market conditions rose two points to 55. Among its three major components, major additions and alterations increased four points to 53 while minor additions and alterations and the home maintenance and repair component both held steady at 55 and 56, respectively. The future market indicators gained one point to 55. Calls for bids stayed at 54, amount of work committed for the next three months fell two points to 52, the backlog of remodeling jobs increased four points to 58 and appointments for proposals remained steady at 55 for the third quarter in a row. NAHB says that the remodeling market has slowed somewhat due to supply-side challenges and declines in existing home sales.
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