Market Recap: Rates Hold Steady, Housing Activity Slows
The Federal Open Market Committee (FOMC) voted to leave rates unchanged at its September meeting, last Tuesday and Wednesday. Housing activity has slowed across the board, with almost every report showing declines. The housing market index dropped, housing starts and existing home sales declined, but building permits increased.
The National Association of Home Builders’ (NAHB) housing market index dropped 3 points in September to a level of 64, the largest six-month drop since November 2015. Despite the decline, any reading above the neutral threshold of 50 is positive. Each segment of the index declined, perception of current sales conditions dropped to a level of 70, expectations for the next six months dropped to 74, and buyer foot traffic dropped to 47. Builders’ optimism is waning as the pressure of rebuilding after Hurricane Harvey and Irma may increase the cost of construction supplies.
Housing starts track residential construction projects where ground has broken and building permits track permits issued. In August, housing starts fell 0.8% month-over-month to a level of 1.18 million. However, building permits improved, up 5.7% month-over-month to a rate of 1.3 million. The most significant trend from this month’s report was the shift to single-family homes from large apartment and condo complexes. During economic recovery, builders will favor property types that are more likely to be rented. This shift toward single-family housing is a positive economic sign.
Existing home sales or resales make up the majority of real estate transactions. In August, existing home sales dropped 1.7% to a seasonally adjusted annual rate of 5.35 million. This marks the fourth decline in the last five months, resales did increase in May. National Association of Realtors chief economist Lawrence Yun explained, “sales have been unable to break out because there are simply not enough homes for sale.”
Sources: Bloomberg, Forbes, MarketWatch, Mortgage News Daily, Reuters