Friday Market Recap: Existing Home Sales and Building Permits Post Gains, Home Builders’ Index and Housing Starts Show Declines

Blog posted On October 21, 2016

Mortgage rates have been on the rise this month climbing as much as a tenth of a percentage point according to some sources.  This week, however, we saw slight declines from Monday to Friday’s mortgage rates.  Economists are looking ahead to December’s FOMC meeting with this week’s reports pointing toward an end-of-year interest rate hike. 

The Home Builders’ Index fell two points this month from 65 to 63.  While readings above 50 still indicate good market conditions, prospective buyers have declined.  The National Association of Home Builders’ Chief Economist, Robert Dietz affirms, “the October reading represents a mild pullback from a jump in September and indicates that the housing market continues to make slow and steady gains.”  Job growth remains strong and mortgage rates are low, with these fundamentals in place, we expect next month’s index to stay steady.

Housing Starts fell 9%, breaking ground on the fewest new homes since March 2015.  However, Building Permits increased 6.3%, surpassing predicted growth of only 1.1%.  Trulia Chief Economist Ralph McLaughlin states, “while housing starts continue to inch up to their pre-recession average, they’re only about 75% back to normal […] though homebuilders continue their slow and steady charge, there is much room for growth headed into 2017.” 

Existing Home Sales are on the rise, posting a 3.2% increase since September, even with low inventory levels.  These numbers are influenced by first-time buyers, contributing to 34% of all existing home sales, the highest level in 4 years.  This is a solid rebound from the previous month’s decline. 

We received mixed housing market reports this week, but these metrics support a December rate hike.  This week, NY Fed President and voting member, Bill Dudley, said “I do expect to see an interest rate rise later this year […] If we raise federal funds a quarter of a point, that’s not really that big of a deal.  The idea that it’s this incredible fork in the road, I think people are exaggerating the significance.”

Sources: ABC News, MarketWatch, MarketWatch, MarketWatch, Wall Street Journal, BusinessInsider