Market Forecast: Housing Market Index, Existing Home Sales, and Housing Starts and Building Permits
There is a full week of housing news ahead, with the National Association of Home Builders’ (NAHB) housing market sentiment index on Monday followed by housing starts and building permits on Wednesday and existing home sales on Thursday.
The NAHB housing market index is based on a survey of home builders’ opinions on the current housing market, expectations for the next six months, and buyer foot traffic. Any reading above 50 is considered positive. In August, the housing market index declined by one point to 67. Current sales conditions fell to a level of 73, expectations for the next six months dropped to 72, and buyer foot traffic declined to 49. NAHB Chief Economist Robert Dietz explained builders are facing affordability issues related to the cost of building materials, commenting, “these cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges.”
Housing starts track ground broken on residential construction projects and building permits track permits issued. Housing starts and building permits are used to predict future housing activity. In July, housing starts increased 0.9% month-over-month to a seasonally adjusted annual rate of 1.168 million and building permits jumped 1.5% month-over-month to a seasonally adjusted annual rate of 1.311 million. Although builders are facing affordability issues, home buyer demand continues to outpace available homes for sale, keeping builders busy.
Existing home sales or resales make up the majority of real estate transactions. Existing home sales declined in July, down 0.7% month-over-month to a seasonally adjusted annual rate of 5.34 million units, the fourth straight month of declines. Year-over-year, existing home sales are down 1.5%. Sales fell in the Northeast, South, and Midwest, only the West saw an increase. Based on July’s data, it would take 4.3 months to exhaust current supply, well below the six to seven month supply that is considered a healthy balance.
Although refinance activity has started to slow, home equity continues to top record highs. Homeowners seeking to access valuable home equity can do so through a cash-out refinance or home equity line of credit. Many homeowners use home equity to reinvest in their home and make improvements that increase their home’s value or make it more livable long-term. If you have any questions about your home equity, consider a consultation with a mortgage loan officer.
Sources: CNBC, Econoday, HousingWire, MarketWatch, MarketWatch, Mortgage News Daily