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Economic Forecasts

Housing Market Keeps Its Momentum

GDP 1.4% growth for the year; a 2% pace in '17 More »
Jobs Hiring slowing to 150K-200K/month by end '16 More »
Interest rates 10-year T-notes at 1.4% by end '16 More »
Inflation 1.5% for '16, 2.5% in '17 More »
Business spending Flat in '16, after drop in '15 More »
Energy Crude oil trading from $40 to $45 per barrel in Sept. More »
Housing Prices up 5% on average in major metro areas More »
Retail sales 4% growth in '16, compared with 4.8% in '15 (excluding gas) More »
Trade deficit Widening 4% in '16, after a 6.2% increase in '15 More »

Favorable mortgage rates and healthy job growth will spur home buying and residential construction in coming months.

See Also: All Our Economic Outlooks

Existing-home sales have climbed over the past several months, reaching their highest annual pace since February 2007 in June. Total existing-home sales climbed 1.1% in June from a month earlier, to a seasonally adjusted annual rate of 5.57 million. After last month’s gain, sales are up 3% from June 2015. The share of first-time home buyers in June increased to 33% — the highest since mid-2012. The same fundamentals that boosted sales to first-time buyers last month should encourage more people to make the transition from renters to homeowners. Tight credit conditions, however, will remain a challenge for new buyers, since they tend to be highly dependent on credit availability.

Steady demand for homes is leading to concerns about the low inventory of new and existing homes on the market. A shortage of inventory, particularly in the lower price ranges, is keeping prices high and making homes less affordable in some of the country’s largest markets. The hottest markets in the U.S. continued to show double-digit price growth in May, with Portland, Ore., rising 12.5%, Seattle gaining 10.7%, and Denver climbing 9.5%. There seems to be a slowdown in previously hot markets, which could possibly indicate that they are entering a phase of normalcy after years of strong price appreciation. Some of these formerly hot markets, such as San Diego, San Francisco and Los Angeles, have seen more-modest price gains over last year. The S&P/Case-Shiller U.S. National Home Price Index rose 5% in May from a year ago, which is the same rate of increase as in April.


We see home builders ramping up construction activity in the second half of the year as they react to improving demand. Total housing starts rose 4.8% in June from a month earlier, to a seasonally adjusted annual rate of 1.189 million, reaching a four-month high. The increase was spread out across single-family and multifamily starts. June’s rise was driven by a jump in starts in the West and the Northeast.

See Also: Money-Smart Tactics to Prosper in This Hot Housing Market


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