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

Blog posted On October 15, 2018

There is a busy week of housing news ahead, with important data scheduled for release including the National Association of Home Builders’ (NAHB) housing market sentiment index, housing starts and building permits and existing home sales.  Builder sentiment was positive last month, unchanged from the previous month.  Housing starts jumped, but building permits tapered off.  Existing home sales were also unchanged. 

The NAHB housing market index surveys home builders on their perceptions of the current market, expectations for the next six months, and buyer foot traffic.  In September, the housing market index was unchanged at a level of 67.  Any reading above 50 is considered positive.  Current sales conditions and expectations for the next six months each improved to levels of 74.  Buyer foot traffic was unchanged at a level of 49.  Tariffs are still a concern for builders, who are finding that the higher cost of building materials is hurting housing affordability. 

Housing starts track ground broken on residential projects and building permits count permits issued.  Housing starts and building permits can be volatile from month to month but are used to predict future housing activity like new home sales.  In August, housing starts surged 9.2% month-over-month to a seasonally adjusted annual rate of 1.282 million units.  Building permits declined 5.7% month-over-month to a seasonally adjusted annual rate of 1.229 million. 

Existing home sales or resales track the sales of previously constructed homes.  Existing home sales account for the majority of real estate transactions, about 90%.  In August, existing home sales were unchanged at a seasonally adjusted annual rate of 5.34 million.  The Northeast and the Midwest saw increases, while the South and West saw declines.  National Association of Realtors (NAR) chief economist Lawrence Yun, stressed that although home prices are still rising, the pace of price appreciation has become more gradual. 

Mortgage rates are expected to continue rising, but home price appreciation has started to slow.  Heading into the fall and winter months, sellers may start to see a decline in buyer traffic and start lowering prices.  Some housing experts consider the end of the year the best time to buy a home because of the slowdown in buyer traffic.  If you are looking to buy a home this fall or winter, get preapproved for mortgage financing before you start shopping.  Mortgage preapproval shows the seller you have already started the financing process and can ensure a faster transaction once you make your offer.

Sources: CNBC, Econoday, MarketWatch, MarketWatch, MarketWatch, Mortgage News Daily