Market Recap: Strong Gains in New Home Sales, Case-Shiller Home Price Index, and Pending Home Sales
Mortgage rates trended slightly upward this week. Several strong housing reports were released. New home sales surged to a 10-year high in October, as post-hurricane recovery appears to be progressing. The Case-Shiller home price index continued to appreciate. Pending home sales were also strong, up 3.5% month-over-month.
The sales of newly constructed homes rose significantly in October, up 6.2% month-over-month to a seasonally adjusted annualized rate of 685,000. The figure greatly exceeded expectations, as forecasters had expected sales to drop, especially heading into the slower housing season. This is the third increase in three months. Due to the increase in construction activity, it would now take 4.9 months to exhaust housing inventory, closer to the healthy balance of a six-month supply.
The S&P CoreLogic Case-Shiller home price index is based on the average value of homes involved in two or more sales transactions across twenty metropolitan areas around the country. In September, the index was up 0.5% month-over-month and 6.2% year-over-year, rising at the fastest pace since June 2014. In addition to Seattle, Portland, and San Francisco, Dallas, Denver, and Las Vegas are also leading gains, all cities had annual appreciation surpassing 7%.
The pending home sales index measures the changes in homes that are under contract but not yet sold. In October, the index rebounded, up 3.5% month-over-month driven by gains in the South. This surge in demand is likely due to post-hurricane housing activity. According to CNBC, “Realtors in Houston have remarked at how quickly the market bounced back following the devastating effects of Hurricane Harvey.”
Existing home inventory has decreased every month for 29 straight months. However, National Association of Realtors chief economist Lawrence Yun predicts total 2017 home sales will reach 5.52 million up 1.3% from 2016’s numbers. Even with this year’s two rate hikes, and a third expected in December, mortgage rates remain at historic lows.
Sources: Bloomberg, CNBC, CNBC, MarketWatch, Mortgage News Daily