Market Forecast: Housing Market Index, Housing Starts and Building Permits, and Existing Home Sales
Mortgage rates did not move significantly last week, continuing to hover around historic lows. The Federal Open Market Committee will meet on Tuesday and Wednesday of this week and is expected to cut interest rates. In housing news, the National Association of Home Builders (NAHB) housing market index is scheduled for release on Tuesday, followed by housing starts and building permits on Wednesday, and existing home sales on Thursday.
The NAHB housing market index is based on a survey of home builders around the country and their outlook on current sales conditions, sales expectations for the next six months, and buyer foot traffic. In August, builder confidence improved to a level of 66. Current sales conditions improved to a level of 73 and buyer foot traffic increased to a level of 50. Sales expectations for the next six months fell slightly to a level of 70. Although mortgage rates have dropped, builder activity does not match buyer demand. NAHB chief economist, Robert Dietz, explained despite today’s low mortgage rates, “we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns.”
Housing starts track ground broken on residential projects and building permits track permits issued. In July, housing starts declined 4.0% month-over-month to a seasonally adjusted annual rate of 1.91 million. Building activity may have been disrupted by bad weather, specifically Tropical Storm Barry hitting Louisiana in late July. Building permits increased, up 8.4% month-over-month to a seasonally adjusted annual rate of 1.336 million.
Existing home sales or resales make up approximately 90% of total real estate transactions. Existing home sales improved in July, up 2.5% month-over-month to a seasonally adjusted annual rate of 5.42 million units. Buyers were likely taking advantage of record-low mortgage rates.
With or without a rate cut this week, mortgage rates are expected to stay low. Lower mortgage rates combined with a robust labor market could mean a strong season for home buyers this fall. After years of a competitive housing market, many buyers are getting a break. Even homeowners that bought a home in the past few years, may benefit from a mortgage refinance.
Sources: CNBC, CNBC, CNBC, Econoday, Forbes, MarketWatch, Mortgage News Daily