Housing & Construction October 2016
HOUSING STARTS FALL 5.8%
Housing starts fell 5.8% In August to a seasonally adjusted annual rate of 1.14 million after rising to 1.21 million units in July. Single-family starts fell 6% to a seasonally adjusted annual rate of 722,000 units in August after rising to 770,000 in July. Single-family starts are up 9% on a year-to-date basis. Multifamily starts fell 5.4% to 420,000 units after rising to 441,000 units in July. Regional starts were mixed. Starts rose 7.6% in the Northeast, 5.6% in the Midwest and 1.8% in West. Starts fell 14.8% in the South. Economists blamed the drop in starts to flooding in Texas and Louisiana. Excluding the South, the nation’s largest home building market, starts were up 4.2%.
BUILDING PERMITS FALL 0.4%
Building permits fell 0.4% in August to a seasonally adjusted annual rate of 1.1 million after falling to 1.15 million in July and were down 2.3% from August 2015. Single-family permits rose 3.7% in August to a rate of 737,000 and multifamily permits dropped 7.2% to 402,000 units after rising to 441,000 units in July. Regional permit issuance was mixed. Permits increased 5.1% in the Northeast, 4.2% in the Midwest and 0.7% in the West. Permits fell 3.4% in the South. Permits have been above the one million level for fourteen consecutive months, the longest stretch in seven years.
NEW-HOME SALES FALL 7.6%
Sales of new single-family homes fell 7.6% in August to a seasonally adjusted annual rate of 609,000 units. Small revisions to the previous three months showed that sales were less than reported in May and June but rose more dramatically than the 12.4% reported in July. In total, revisions to the previous three months reduced the annual sales pace by 4,000 units. The inventory of new homes for sale was 235,000 in August, a 4.6-month supply at the current sales pace, down from 244,000 homes in July. Regional sales were mixed. Sales fell 34.3% in the Northeast, 12.3% in the South and 2.4% in the Midwest. Sales rose 8% in the West. New home sales in the South may have been impacted by heavy rains and flooding in Louisiana and other parts of the region. The new home market is being hamstrung by low levels of inventory; furthermore, much of the inventory in the pipeline is either under construction or not yet started. According to an analysis by Wells Fargo, only 56,000 completed new homes are available for sale across the country, a near historic low. 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 0.9%
Existing home sales fell 0.9% in August to a seasonally adjusted annual rate of 5.33 million after dropping to 5.39 million in July. Sales were up 0.8% from August 2015. Total housing inventory at the end of August fell 3.3% to 2.04 million existing homes, 10.1% below August 2015, and a 4.6-month supply at the current sales pace, down from a 4.7-month supply in July. Inventory has now declined year-over-year for 15 consecutive months. Regional sales were mixed. Sales rose 6.1% in the Northeast. Sales dropped 0.8% in the Midwest, 2.7% in the South and 1.6% in the West. Low levels of inventory remain very challenging and are helping to keep prices up, reducing affordability. The inventory problem is considered one of the biggest obstacles to a robust housing recovery.
BUILDER CONFIDENCE RISES TO 65
Builder confidence rose six points in September to 65 from a downwardly revised reading of 59 in August. All three HMI (National Association of Home Builders/Wells Fargo Housing Market Index) components moved higher in September, with current sales expectations rising six points to 71, sales expectations for the next six months rising five points to 71 and buyer traffic rising four points to 48. The three-month moving averages for HMI scores rose in three out of four regions. The Northeast and South each rose one point, to 42 and 64, respectively. The West rose four points to 73. The Midwest was unchanged at 55. It was the eighteenth consecutive month the HMI remained above 50.
MORTGAGE RATES FALL
The 30-year mortgage rate fell slightly to 3.42% at the end of September after falling to 3.43% at the end of August. In September of last year 30-year rates averaged 3.85%. Mortgage rates have been below 3.5% for ten consecutive weeks. Yields on 10-Year Treasury Notes, which affect mortgage rates, continued to fall after the Fed declined to raise interest rates in September. For the first time since 2012 mortgage originations are expected to top $2 trillion in 2016. Near-historic low mortgage interest rates are spurring a burst of refinance activity. Low rates are also supporting strong home sales, which are expected to reach their highest level since 2006. House price growth also remains strong and low levels of inventory across many markets will continue to put upward pressure on house prices for the foreseeable future, according to Freddie Mac. Their forecast calls for a $60 billion, or 11%, increase in third quarter mortgage originations relative to the second quarter, and for total originations to reach $2 trillion in 2016.
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