Market Forecast: Housing Starts and Building Permits, Case-Shiller Home Price Index, and New Home Sales

Blog posted On March 25, 2019

The Federal Open Market Committee voted to leave the benchmark interest rate unchanged last week and signaled a pause on raising rates for the rest of the year.  Mortgage rates reacted by trending downward, following Federal Reserve Chair Jerome Powell’s statement.  After government shutdown-related delays, February’s housing starts and building permits and new home sales reports are all scheduled for release.  The S&P CoreLogic Case-Shiller home price index will come out on Tuesday.

Housing starts track ground broken on residential projects and building permits track permits issued.  Housing starts and building permits are used to predict future housing market activity and are especially important ahead of the spring buying and selling season.  In January, housing starts surged 18.6% month-over-month to a seasonally adjusted annual rate of 1.230 million units.  Building permits also increased, up 1.4% month-over-month to a seasonally adjusted annual rate of 1.345 million.  The figures exceeded economists’ forecasts and suggest a busy homebuilding season is ahead.

The Case-Shiller home price index tracks the changes in the values of homes involved in two or more sales transactions across 20 major metropolitan areas throughout the country.  Home price appreciation has slowed in recent months, as buying and selling activity has tapered off.  In December, the 20-city index increased 0.2% month-over-month and 4.2% year-over-year, the slowest rate of growth since November 2014.  Only five of the 20 metros saw month-over-month increases, three were unchanged, and twelve declined.  Las Vegas was the only metro to post double-digit annual gains, followed by Phoenix and Atlanta in the top three spots. 

New home sales or the sales of newly constructed homes, make up about 10% of total real estate transactions nationwide.  In January, new home sales declined 6.9% month-over-month to a seasonally adjusted annual rate of 607,000.  The decline could be attributed to the partial government shutdown as well as a stock market slump earlier this year. 

Following the Fed’s decision to pause rate hikes, average mortgage rates declined.  After hitting year-long highs in November and December, average mortgage rates started to fall.  Chief operating officer of Mortgage News Daily, Matthew Graham, commented, “this is about as big of a change as anyone expected.  IT means the Fed will be buying bonds more quickly, and bond buying results in lower rates, all other things being equal.” 

Sources: CNBC, CNBC, Econoday, MarketWatch, MarketWatch, Mortgage News Daily, Reuters