Housing & Construction July 2017

OUSING STARTS FALL 5.5%
Housing starts fell 5.5% in May to a seasonally adjusted annual rate of 1.09 million units after dropping to 1.17 million units in April. It was the third consecutive monthly decline in starts. Single-family starts fell 3.9% to 794,000 units after dropping to 835,000 units in April. Multifamily starts fell 9.7% to 289,000 units after dropping to 337,000 units in April. Regional starts were mixed. Starts rose 1.3% in the West and were unchanged in the Northeast. Starts fell 9.2% in the Midwest and 8.8% in the South. Despite the decline, housing starts are up 3.2% from May 2016. Wells Fargo noted that the drop in both single-family starts and permits when homes are selling very quickly may point to growing worker shortages. The number of single-family homes authorized but not started rose 4.0% in May and is up 14.7% from May 2016.
 
BUILDING PERMITS FALL 4.9%
Building permits fell 4.9% in May to a seasonally adjusted annual rate of 1.17 million units after falling to 1.23 million units in April. Single-family permits fell 1.9% to 779,000 units and multifamily permits fell 10.4% to 389,000 units. Regional permit issuance was mixed. Permits rose 3.3% in the Northeast. Permits fell 9.4% in the Midwest, 0.3% in the South and 13.1% in the West.
 
NEW-HOME SALES RISE 2.9%
Sales of newly built, single-family homes rose 2.9% in May to a seasonally adjusted annual rate of 610,000 units. Sales were up more than 12% from May 2016. Sales for the three previous months were also revised up by a total of 34,000 homes, and April’s initially reported 11.4% drop was revised to a 7.9% decline. The inventory of new homes for sale remained at 268,000 in May, which is a 5.3-month supply at the current sales pace. Sales continue to be held back by shortages in inventory. Regional sales were mixed. New home sales rose 13.3% in the West and 6.2% in the South. Sales fell 10.8% in the Northeast and 25.7% in the Midwest. Wells Fargo noted that they do not expect new home sales to revisit the highs hit during the housing boom, and the market does not have a lot of upside potential because of the constraints on lot development, shortages of workers and credit constraints facing many first-time buyers. 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 1.1%
Existing home sales rose 1.1% in May to a seasonally adjusted annual rate of 5.62 million after falling to a downwardly revised 5.56 million in April. Sales were 2.7% above May 2016. Single-family home sales rose 1.0% in May to a seasonally adjusted annual rate of 4.98 million after dropping to 4.95 million in April. Sales were 2.7% above May 2016. Total housing inventory at the end of May rose 2.1% to 1.96 million existing homes available for sale but was still 8.4% lower than a year ago and has fallen year-over-year for 24 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, down from 4.7 months a year ago. Regional sales were mixed. Sales rose 6.8% in the Northeast, 2.2% in the South and 3.4% in the West. Sales fell 5.9% in the Midwest. Homes are selling very quickly, with the typical listing on the market for a record-low of 27 days, which is also boosting selling prices with the median home price a record $252,800, up 5.8% from May 2016.
 
BUILDER CONFIDENCE FALLS TO 67
Builder confidence fell two points to 67 in June from a downwardly revised 69 in May, according to the HMI (National Association of Home Builders/Wells Fargo Housing Market Index). Despite the decline, it was the highest June reading for the index since 2005. The last time the HMI reached this level, existing home sales were roughly double what they are today. All three HMI components posted losses in June but remained at healthy levels. The component gauging current sales conditions fell two points to 73, the index charting sales expectations in the next six months dropped two points to 76 and the component measuring buyer traffic fell two points to 49; it was the only component below 50, the level that indicates improving confidence. The housing market is strengthening, but builders remain frustrated over the ongoing shortage of skilled labor and buildable lots. The three-month moving averages for regional HMI scores all declined, with the Midwest and South falling one point each to 67 and 70, respectively. Scores in the Northeast and West both dropped two points to 46 and 76, respectively. Builders remain optimistic but face ongoing increases in building materials prices, hefty regulatory costs and shortages of both lots and labor, according to the NAHB.
 
MORTGAGE RATES DROP TO 3.88%
The 30-year mortgage rate fell to 3.88% at the end of June after falling to 3.95% at the end of May. The drop to the lowest rate of the year was prior to a late-month sell off in the bond market that drove up Treasury yields. Mortgage rates will likely increase if yields continue to rise. In June last year 30-year rates averaged 3.48%. Mortgage rates have been volatile, swinging along with yields on the 10-Year Treasury Bond.

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