Market Recap: Builder Confidence Improves, Housing Starts Fall, Existing Home Sales Decline
Mortgage rates held steady this week with no significant movement to report. The National Association of Home Builders’ (NAHB) housing market sentiment index improved, with builders optimistic about solid buyer demand. Housing starts fell and building permits slipped slightly. Existing home sales declined.
The NAHB housing market index improved in October to a level of 68. Current sales conditions increased to a level of 74 and expectations for the next six months hit 75. Buyer foot traffic, which has faltered in recent months, rebounded to a level of 53. Any reading above 50 is considered positive. In a statement, the NAHB commented, “Builders are motivated by solid housing demand, fueled by a growing economy and a generational low for unemployment.”
Housing starts fell unexpectedly in September, down 5.3% month-over-month to a seasonally adjusted annual rate of 1.201 million units. Building permits declined marginally, down 0.6% month-over-month to a seasonally adjusted annual rate of 1.241 million units. The drop was likely influenced by weather-related slowdowns due to Hurricane Florence. Southern states saw a 13.7% drop in home building activity, the steepest decline in three years.
Existing home sales or resales declined in September, down 3.4% month-over-month to a seasonally adjusted annual rate of 5.15 million units, hurt by lack of available homes for sale. At the current sales pace it would take only 4.4 months to exhaust all inventory. A balanced market typically has six months’ supply.
Construction activity tends to slow down in the fall and winter months, as colder weather halts construction projects. In recent years, particularly active hurricane seasons have also hurt home builders. Some real estate professionals contend that buying a home in the fall or winter months can work to the buyer’s advantage. With less homes on the market, sellers may be willing to drop prices or offer concessions like seller-paid closing costs. Last month Redfin reported that home sellers were dropping prices at the highest rate in the past eight years, especially in the West.
Sources: Bloomberg, CNBC, CNBC, CNBC, Econoday, MarketWatch, MarketWatch, MarketWatch, Mortgage News Daily