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Economic Forecasts

Inventories Tight as Housing Demand Grows

Kiplinger's latest forecast on housing starts and home sales


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Demand for housing, driven by gains in the labor market and better finances, is improving, but limited inventory is leading to home-price gains across the nation. Residential construction is moving at a steady pace but facing headwinds.

Builders are confident about the market’s short-term outlook. Total housing starts fell 2.6% in April to a seasonally adjusted annual rate of 1.17 million. Five consecutive months of fewer multifamily starts are responsible for April’s overall decline. However, single-family home construction has strengthened. Housing indicators point to healthy demand, implying that shortages of skilled labor and ready-to-build lots plus tighter credit for construction and land development are behind multifamily’s downturn. Average new-home sales have shown so far this year a pickup from the end of 2016, giving builders confidence that business will remain brisk.

See Also: A Housing Shortage Looms as Builders Can't Keep Up

Existing-home sales hit a bump in April, primarily because of availability. They declined 2.3% to a seasonally adjusted annual rate of 5.57 million, following solid growth in March. The number of homes listed for sale rose 7.2% in April, but is 9% below a year ago. Inventory has fallen year-over-year for 23 consecutive months. And properties stayed on the market for just 29 days in April, down from 34 in March.

Despite the tepid start to the spring buying season, steady job growth, brighter wage prospects and cheap mortgages should drive up housing demand. Mortgage rates have given up all their postelection gains. Interest on a 30-year fixed-rate mortgage averaged 3.94% for the week ending June 1.


Tight inventory will keep pressure on home prices. Tech hubs, such as Dallas, Denver, Portland and Seattle, led the nation in home-price appreciation. They also offered the most limited selection, driving the S&P CoreLogic Case-Shiller National Home Price Index up 5.8% in March.