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Posted On August 18, 2017
Mortgage rates dropped to a new post-election low, but did not translate into increased housing market activity. Housing starts and building permits each dropped, but the housing market index improved. Retail sales exceeded expectations.
In July, retail sales were strong, up 0.6% month-over-month, exceeding last month’s increase and this month’s predictions. The report indicates US households still have significant buying power. The gains were driven by online retailers, specifically Amazon and its Prime Day, and automotive sales, up 1.2% month-over-month. Even without gas and autos, retail sales are up 0.5% month-over-month.
After declining to an eight-month low, the National Association of Home Builders’ (NAHB) housing sentiment index improved, up to a level of 68 in August. Each segment improved, current conditions increased to 74, expectations for the next six months increased to 78, and buyer foot traffic is up to 49. Any reading above 50 is considered positive.
In July, housing starts dropped 4.8% month-over-month and 5.6% year-over-year to a seasonally adjusted annual pace of 1.16 million. Building permits also dropped, down 4.1% month-over-month to a seasonally adjusted annual pace of 1.22 million. This figure is however 4.1% higher year-over-year. These numbers can be volatile, but July’s readings indicated a stabilized housing market, especially with the emphasis on single-family home construction.
Home builders have suffered from shortages of labor and materials, and it has created problems with new home construction and housing inventory. This month’s housing market index shows that low mortgage rates are continuing to positively influence the market, and hiring for construction jobs has picked up.