No Momentum for Single-family Construction

• GDP
• Unemployment
• Interest Rates
• Inflation
• Business Spending
• Energy
• Housing
• Retail Sales
• Trade Deficit

Housing starts and building permits fell in May. Total housing starts declined 0.9% to a seasonally adjusted rate of 1.269 million. Single-family starts fell 6.4%, while multifamily starts increased 10.9%. Single-family starts are running below the levels seen during the same period last year as builders pull back because of a slowdown in demand for new homes, which started late last year. Residential construction continues to have trouble building momentum, but lower prices for construction materials may help builders this year. Material prices should be lower in 2019, helping builders to counter the rising costs of skilled labor.

New-home sales slid in May but are still rising at a steady pace. They fell 7.8% and are now 3.7% below a year ago. Lower-priced new homes continue to fly off the market. Almost half of the homes sold in May cost less than $300,000, highlighting home builders’ shift away from the high-end market. New-home sales will likely continue rising at a steady pace as the tight existing-home market pushes some buyers toward new construction.

Existing-home sales continue to gradually improve, thanks to lower mortgage rates. They rose 2.5% in May to a seasonally adjusted rate of 5.34 million. Existing sales are struggling because of declining affordability. It seems, however, that affordability won’t decline further this year because of a combination of the Federal Reserve’s pause on short-term interest hikes and slowing home-price growth. After peaking at 4.87% in November, rates have fallen 88 basis points to 3.99% in May. Another tailwind for sales of existing homes is that more folks are putting their homes on the market. On a year-to-year basis, total inventory was up 2.7% in May. Although inventory is still relatively tight, more listings should help sales.

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

Home-price growth continues to slow down, despite lower mortgage rates. The S&P CoreLogic Case-Shiller National Home Price Index rose 3.5% in April from a year ago, down from 3.7% in March. Home-price growth has declined on a year-to-year basis for 13 consecutive months. Double-digit price gains have vanished across the nation. The largest annual gain in the nation was 7.1% in Las Vegas.

Sources:

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