Market Recap: Home Builders Positive Despite Drop in Housing Starts, Building Permits, and Mortgage Apps
Mortgage rates are down from last week, hovering year-long lows. The home builders’ sentiment index posted positive numbers in May after a decline in April. Housing starts and building permits each dropped, and both new purchase and refinance mortgage applications decreased.
The National Association of Home Builders (NAHB) sentiment index rebounded in May after April declines, up 2 points to a reading of 70. This is the second-highest post-Recession reading. Both six months sales expectations and current sales conditions saw gains, up to 79 and 76 respectively. However, buyer traffic dropped to 51, but remains above the neutral threshold of 50. NAHB Chairman Granger MacDonald commented that builders’ optimism is “solidifying” despite obstacles faced with higher materials cost and labor shortages.
Housing starts and building permits each scaled back this month. In April, housing starts dropped 2.6% to an annual rate of 1.17 million, just 0.7% higher than April of last year. Building permits are down 2.5% to a 1.23 million pace, but up 5.7% year-over-year. Single-family home construction constituted the majority of housing starts (835,000), a positive sign for homeownership since multi-family construction is typically used for renting.
The Mortgage Bankers Association (MBA) releases a weekly survey of mortgage applications to track new purchase and refinance activity. After hitting 8-year highs the previous week, mortgage applications turned around for the week ending 5/19. New purchase applications dropped 3.0% and refinance applications dropped 6.0% for a composite decrease of 4.1%.
This week’s mixed housing numbers are still generally positive. Despite a slowdown in housing starts and building permits and a turnaround in mortgage applications, most of the construction taking place is residential and home builders remain confident. Next week’s new and existing home sales reports will provide further insight on this spring’s housing activity.
Sources: Bloomberg, CNBC, MarketWatch, Mortgage News Daily