Blog posted On September 21, 2018
Construction activity boomed in August, housing starts posted a significant increase. Building permits, however, declined. The National Association of Home Builders’ housing market index was unchanged but remains positive. Existing home sales were unchanged month-over-month but down year-over-year.
The NAHB housing market index was unchanged in September and maintained a positive reading of 67. Current sales conditions improved by one point to a level of 74, expectations for the next six months are up two points to a level of 74, and buyer foot traffic was unchanged at 49. Any reading above 50 is considered positive. Tariffs on building materials have strained home builders. NAHB chief economist Rob Dietz explained, “housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish.”
Housing starts track ground broken on residential projects and building permits track permits issued. Housing starts surged a substantial 9.2% month-over-month to a seasonally adjusted annual rate of 1.282 million units. Multi-family housing construction specifically drove this figure with a 29.3% increase. Single-family construction increased a more modest 1.9%. Building permits stumbled, down 5.7% month-over-month to a level of 1.229 million units.
Existing home sales or resales make up the largest share of real estate transactions. After a couple months of declines, existing home sales stabilized showing no change from July to August, maintaining a seasonally adjusted annual rate of 5.34 million. Year-over-year, sales are down 1.5%. The Northeast and Midwest each saw gains of 7.6% and 2.4% respectively. The South slipped slightly, down 0.4%, and the West fell 5.9%. For the first time in almost three years, existing home sales inventory saw an increase, up 2.7% year-over-year. Today’s home buyers have been competing in an increasingly tight market because of limited for sale inventory. August’s inventory increase may indicate some relief ahead.
Mortgage rates are trending upward, ahead of next week’s Federal Open Market Committee (FOMC) meeting. The market is pricing in a rate hike and mortgage rates will likely react. Home price appreciation, however, has started to decelerate and will likely continue to do so as builders replenish housing inventory. To stay competitive in today’s market, get preapproved for a mortgage before you start shopping. Find out what type of loan works best for your situation and how much you will need for a down payment ahead of time, and be more prepared when it’s time to make an offer.