Blog posted On June 29, 2018
Mortgage rates did not move significantly this week, settling after a post-rate hike climb. New home sales increased substantially, signaling strong construction activity. The S&P CoreLogic Case-Shiller home price index continues to appreciate. The pending home sales index dropped off again.
New home sales, or the sale of newly constructed homes, jumped in May, up 6.7% month-over-month to a seasonally adjusted annual rate of 689,000. Gains were led by the South, with sales up 17.9% month-over-month, the highest level in over a decade, driven by a greater land availability and more affordable housing. Elsewhere, sales were down, the Northeast dropped 10.0% and the West dropped 8.7%. The Midwest was unchanged. After months of sustained home price appreciation, the median new house price declined by 3.3% annually to $313,000, the lowest price in the past year. Analysts expect the price drop to be temporary as the cost of construction increases proportionately with tariffs on building materials like lumber and steel. At the current pace, it would take approximately 5.3 months to exhaust all available new home inventory. From the report, almost two-thirds of the new homes sold last month were still under construction or not yet built.
The Case-Shiller home price index increased 0.3% month-over-month and 6.4% year-over-year in April. Although the index continues to appreciate, price growth has slowed somewhat. Seattle, San Francisco, and Las Vegas led the 20-city index with double-digit annual gains. Only one city saw a monthly decrease in home prices, New York City, possibly impacted by new tax law changes and an excess of available new apartments. This month’s more moderate increase may be a sign that home price appreciation has started to slow down as rates are expected to climb.
The pending home sales report declined again in May, down 0.5% month-over-month and 2.2% year-over-year. Regionally, the data was mixed. The Northeast, Midwest, and West each saw monthly increases but annual declines. The South had a month-over-month decline but was unchanged year-over-year. The shortage of homes for sale is continuing to influence summer sales. National Association of Realtors (NAR) chief economist, Lawrence Yun said in a statement, “Realtors in most of the country continue to describe their markets as highly competitive and fast moving, but without enough new and existing inventory for sale, activity has essentially stalled.”
The exceptionally strong new home sales report is a sign that home builders are starting to replenish for sale inventory. Lack of available homes for sale continues to be reported by home buyers as the top impediment to their home search. One way to stay competitive in today’s heated market is to partner with a loan officer that can ensure an expeditious closing. Transaction time is key to getting your offer accepted.