Market Forecast: Housing Starts and Building Permits, Case-Shiller Home Price Index, and Pending Home Sales

Blog posted On February 25, 2019

Average mortgage rates trended downward last week, reaching 12-month lows in some cases.  After getting delayed due to the partial government shutdown, the December housing starts and building permits report will come out this week.  Other important upcoming housing reports include the S&P CoreLogic Case-Shiller home price index and the National Association of Realtors (NAR) pending home sales index.  The new home sales report, originally scheduled for release on Tuesday of this week, will be delayed. 

Housing starts track ground broken on residential projects and building permits track permits issued.  After two months of delays, due to the extended partial government shutdown, the December housing starts and building permits report will be released this Tuesday.  The most recent data, from November, showed a 3.2% month-over-month increase in housing starts and a 5.0% month-over-month increase in building permits.  The activity in housing starts was driven by an increase in multi-family construction.  From Reuters, “the housing market is being constrained by higher mortgage rates as well as land and labor shortages, which have led to tight inventories.”  However, as mortgage rates level out amidst the Federal Open Market Committee’s more dovish stance toward rate hikes, home buyers may start to see some rate relief.

The Case-Shiller home price index tracks changes in the value of homes involved in two or more sales transactions across twenty major metropolitan areas throughout the United States.  In November, the 20-city index increased 0.3% month-over-month and 4.7% year-over-tear.  After several years of heated housing markets, home price appreciation has started to ease in many parts of the country. 

The pending home sales index tracks changes in the number of homes that are under contract but not yet closed.  Typically, it takes four to six weeks for a contract to close.  Pending home sales are used to predict future housing market activity.  In December, the pending home sales index declined 2.2% month-over-month.  Following the lasting impact of the partial government shutdown, the figure may drop even more.  NAR chief economist Lawrence Yun commented in January, “seventy-five percent of Realtors reported that they haven’t yet felt the impact of the government closure.”

Although the government has reopened, and another shutdown was prevented earlier this month, some economic indicators have still been delayed.  Early reports from 2019 indicate that the housing market is off to a strong start. 

Sources: CNBC, CNBC, Econoday, MarketWatch, Mortgage News Daily, the Wall Street Journal