Housing Market: Housing Starts & Home Sales

Economic Forecasts

Multifamily Starts Tumble as Apartment Market Slows Down

Kiplinger's latest forecast on housing starts and home sales

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Housing starts fell in July as multifamily construction tumbled in the Northeast. Total housing starts fell 4% in July, to a seasonally adjusted rate of 1.191 million. Single-family starts rose 1.3%, while multifamily starts dropped 16.2%. Much of the weakness in multifamily starts was in the Northeast, where construction plunged 42.6%. The industry’s main obstacle to ramping up construction is that it has become more expensive for builders to break ground on new projects. Despite the slowdown in residential construction, starts will stay steady in the next few months because permits rebounded strongly in July.

New-home sales fell last month, but the long-term trend is still positive. Sales fell 12.8% from June but are up 4.1% from a year ago. Almost half of new homes sold were priced below $300,000 in July, highlighting that home builders have shifted their focus to building more-affordable homes. The median sales price fell 4.5% year over year in July to $312,800, as builders continued to add entry-level units and cut prices.

Low mortgage rates are giving existing-home sales a slight boost. These sales rose 2.5%, to a seasonally adjusted rate of 5.42 million. They have been struggling lately to gain momentum because prices have risen beyond many buyers’ means. Compared with a year earlier, sales are down 0.6%. After peaking at 4.87% in November, the average 30-year fixed mortgage rate has fallen more than one percentage point to 3.55% in August.

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

Listings didn’t keep up with sales last month, with the inventory-to-sales ratio for single-family homes declining to 4.1 months. On a year-over-year basis, total inventory was down 1.6%. Easing prices are helping homes to sell faster. The National Association of Realtors reported that 51% of homes sold in July were on the market for less than one month.

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Home-price growth continues to slow down because of low housing inventory. The S&P CoreLogic Case-Shiller National Home Price Index rose 3.1% in June from a year ago, down from 3.4% in the previous month. Home-price growth has declined on a year-over-year basis for 15 consecutive months. Double-digit price gains have vanished across the nation; just a few years ago, they were the norm in many coastal cities. Most metro areas covered in the index registered a price gain on a seasonally adjusted basis, with the exception of Miami, Seattle and New York, where prices actually fell.

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