Housing & Construction September 2016

HOUSING STARTS RISE 2.1%
 
Housing starts rose 2.1% in July to a seasonally adjusted annual rate of 1.21 million units after rising to 1.19 million units in June. Single-family starts rose 0.5% to a seasonally adjusted annual rate of 770,000 in July from 778,000 units in June. Single-family starts are up 10.6% on a year-to-date basis. Multifamily starts rose 5% to a seasonally adjusted annual rate of 441,000 units from 411,000 in June. NAHB says new household formation is increasing the demand for multifamily housing. Regional starts were mixed. Starts rose 15.5% in the Northeast, 2.3% in the Midwest and 3.5% in the South. Starts fell 5.9% in the West.
 
BUILDING PERMITS FALL 0.1%
 
Building permits fell 0.1% in July to a seasonally adjusted annual rate of 1.15 million, little changed from June. Single-family permits fell 3.7% to a rate of 711,000 units. Multifamily permits rose 6.3% to a rate of 441,000 units. Regional permit issuance was mixed. Permits increased 10.5% in the Midwest and 2.6% in the South. Permit issuance fell 8.0% in the West and 10.2% in the Northeast. Permits have been above the one million level for thirteen consecutive months, the longest stretch in seven years.
 
NEW-HOME SALES RISE 12.4%
 
Sales of new single-family homes rose 12.4% in July to a seasonally adjusted annual rate of 654,000 units after rising to 592,000 units in June. It was the highest reading in nearly nine years. The inventory of new homes for sale fell to 233,000 from 244,000 in June, a 4.3-month supply at the current sales pace. In a normalized market, housing is generally at a six-month supply. Regional sales were mixed. Sales rose 40% in the Northeast, 18.1% in the South and 1.2% in the Midwest. Sales were unchanged in the West. 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 3.2%
 
Existing home sales fell 3.2% in July to a seasonally adjusted annual rate of 5.39 million after rising to 5.57 million in June. Sales were down 1.6% from July 2015, only the second time in 21 months that year-over-year sales have declined. Total housing inventory at the end of July rose 0.9% to 2.13 million existing homes available for sale, but was still 5.8% lower than in July 2015. Inventory has now declined year-over-year for 14 consecutive months. Unsold inventory is at a 4.7-month supply at the current sales pace, up from 4.5 months in June. Regional sales were mixed. Sales fell 13.2% in the Northeast, 5.2% in the Midwest and 1.8% in the South. Sales rose 2.5% in the West. Overall sales, which reflect closings, are down 1.6% from July 2015 but inventory is down 5.8% from what was a historically low level. Low levels of inventory remain a challenge and are considered one of the biggest obstacles to a robust housing recovery.
 
BUILDER CONFIDENCE RISES TO 60
 
Builder confidence rose two points to 60 in July from a downwardly revised reading of 58 in June. Two of the three components posted gains in August. The component gauging current sales conditions rose two points to 65 and the index charting sales expectations for the next six months rose one point to 67. However, the component measuring buyer traffic fell one point to 44. The three-month moving averages for regional HMI scores were mixed, with the South rising two points to 63 and the Northeast rising two points to 41. The West was unchanged at 69 while the Midwest dropped two points to 55. It was the seventeenth consecutive month the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) remained above 50.
 
MORTGAGE RATES FALL SLIGHTLY  
 
The 30-year mortgage rate fell slightly to 3.43% at the end of August after holding at 3.48% at the end of July, In August of last year 30-year rates averaged 3.84%. Mortgage rates have been below 3.5% for nine consecutive weeks. 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.  

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