Home Building Appears to Gain Momentum

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Total housing starts rose 3.2% in November to a seasonally adjusted rate of 1.365 million. Single-family starts rose 2.4%, while multifamily starts increased 4.9%. Starts for previous months were also revised higher. Builders remain confident in the single-family market, with the NAHB/Wells Fargo Housing Market Index rising to its highest level since 1998. Data on building permits continue to point to positive momentum for starts over the coming months. Permits rose 1.4% in November — the second consecutive month of healthy gains.

Sturdy housing demand is driving new-home sales higher. They rose 1.3% from October. Growth is fastest in the South and the West, where the population is growing the most. The two regions account for roughly 85% of new-home sales. The median sales price rose 7.2% year over year in November to $330,000. There were 323,000 new homes for sale in November, a 5.4-months’ supply at the current sales pace. Sales continue to outpace inventory growth, and the number of new homes listed for sale has trended down since January. With tight inventories pushing prices up, the share of new homes selling for less than $300,000 fell to 40% in November, from 48% a year earlier.

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

Lack of inventory is holding back existing-home sales. These sales fell 1.7% from the prior month, to a seasonally adjusted rate of 5.35 million. Compared with a year earlier, sales are up 2.7%. Existing-home sales have yet to regain momentum and are still down slightly from their 2017 peak. Demand is still strong enough to keep up a slow and steady pace of sales. Homes continue to sell fairly quickly, averaging 38 days on the market. With supply at record lows, sales will likely remain subdued. Listings failed to keep up with sales in November, with the inventory-to-sales ratio for single-family homes declining to 3.6 months. After rising for nearly all of 2018, inventories trended lower in 2019. On a year-over-year basis, total inventory was down 5.7% in November – the fifth consecutive month of decline.

Home-price growth continues to rise at a modest pace across the nation. The S&P CoreLogic Case-Shiller National Home Price Index rose 3.3% in October from a year ago, up from 3.2% in September. This is the fourth consecutive month of year-over-year increases, reversing the longer-term trend of decelerating price growth that began in March 2018 and ended in July 2019. Phoenix, Charlotte and Tampa reported the highest year-over-year gains.

Sources:

• National Association of Realtors: Existing-Home Sales
  
• Department of Commerce, New-Home Sales
  
• Department of Commerce, Housing Starts