Market Recap: Housing Market Index Pulls Back, Housing Starts and Building Permits Jump, Existing Home Sales Increase
Mortgage rates are historically low, and likely to remain low into the end of the year. The National Association of Home Builders’ (NAHB) housing market index dropped one point in November, but the reading is still positive. Both housing starts and building permits increased. Existing home sales turned around.
The NAHB housing market index fell by one point to a level of 70 in November. Any reading above 50 is considered positive. Current sales conditions declined to a level of 76 while sales expectations for the next six months improved to a level of 77. Buyer foot traffic dipped to a level of 53. Home-builder sentiment improved in all regions, except the South. Overall, this month’s reading is positive.
Housing starts and building permits each improved in October, possibly triggered by lower mortgage rates and more buyer activity. Housing starts increased 3.8% month-over-month and 8.5% year-over-year to a seasonally adjusted annual rate of 1.325 million. Building permits are also up 5% month-over-month and 14.1% year-over-year to a seasonally adjusted annual rate of 1.461 million. This month’s data marks the fastest pace of building permit issuances since 2007. Builders are picking up the pace of construction because buyers are hitting the markets in droves. Lower mortgage rates have made buying a home more affordable in many metros.
Existing home sales or resales turned around in October, rising 1.9% month-over-month. Annually, sales are up 4.6%. Although a lack of inventory is hurting buyers in some metros, lower mortgage rates have triggered home buying activity. National Association of Realtors (NAR) chief economist Lawrence Yun explained the surge in activity may lead to higher home prices. He stated, “the buyers are coming back, but the lack of inventory is pushing up prices, in my view, way too fast.”
Fall and Winter typically experience a seasonal slowdown, but with 3 rate cuts this year we are looking at a busy housing market. Positive builder sentiment, plus an uptick in housing starts and building permits suggests builders are working to replenish housing inventory. Many regions are still facing inventory constraints and buyers are competing over many of the same available homes for sale. If you’re buying in a competitive market, get preapproved before you start shopping. That way, you’re ready to make an offer and you’ve already started the mortgage financing process.
Sources: Econoday, MarketWatch, MarketWatch, MarketWatch, Mortgage News Daily, The Wall Street Journal