Market Forecast: Low Rates, Housing Market Index, Existing Home Sales and Starts and Permits

Blog posted On April 17, 2017

Last week, Freddie Mac reported mortgage rates dipped to new 2017 lows.  The lower rates bode well for the spring home buying season, typically the busiest of the year.  This week, the National Association of Home Builders (NAHB) will release the housing market index on Monday.  On Tuesday, housing starts and building permits come out and on Wednesday there will be the existing home sales report.

The NAHB housing market index surveys builders about current market conditions and their expectations.  The final reading is a weighted average of home builder sentiment on present sales of new homes, sales of new homes expected in the next six months, and traffic of prospective buyers in new homes.  Any reading above the neutral threshold of 50 is considered positive.  In March, the home builders index read 71, a record-setting high. 

Housing starts and building permits can be used to predict new home sales in the coming months.  Housing starts register initiated residential construction projects and building permits tracks permits issued.  In February, residential construction returned mixed numbers with housing starts up 3% and building permits down 6.2%. 

Existing home sales constitute the majority of real estate transactions.  This is the most predictive gauge of housing market demand.  In March, existing home sales dropped 3.7% month-over-month, but increased 5.4% year-over-year.  Typically, spring is one of the busiest home buying seasons, so existing home sales may turn around. 

Home builders’ outlook has been positive and earlier this month construction spending increased.  With low mortgage rates, spring is shaping up to be an active housing season.  

Sources: HousingWire, MarketWatch, Bloomberg, Mortgage News Daily