Housing Market: Housing Starts & Home Sales

Economic Forecasts

Lower Rates, Slower Price Growth Prop Up Housing Market

Kiplinger's latest forecast on housing starts and home sales

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GDP 2.6% growth in '19 More »
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Housing starts and building permits declined in March. Total housing starts fell 0.3% in March, declining in six of the past seven months. Milder weather across much of the country jump-started construction activity in January, but the return of seasonal weather weighed on starts in February and March. Single-family starts declined 0.4%, while multifamily starts were flat. Building permits, which are a bellwether for future residential construction, dropped 1.7% in March after a February decline.

New-home sales rose 4.5% in March amid easing prices and lower mortgage rates. Buyers were likely prompted by discounts and the drop in loan rates. Many areas still face shortages of skilled workers, which is slowing residential construction. Sales of lower-priced new homes continue to strengthen. During March, about half of the homes sold were priced below $300,000. Over the last couple of years, builders have made a concerted effort to erect smaller homes with less expensive materials.

Existing-home sales sputtered in March, but they will rebound in April and May. Sales declined 4.9% in March, to a seasonally adjusted rate of 5.21 million. Inventory is growing, but it’s still very low historically. Smaller price gains since early 2018 have prompted more owners to put their homes on the market. On a year-to-year basis, total inventory was up 2.8%. It would take 3.8 months to sell through it. Properties stayed on the market for 36 days in March, up from 30 days a year ago. Pending-home sales rose 3.8% to an eight-month high, signaling that lower rates are also affecting existing-home sales.

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

Home prices aren’t jumping as much as before, despite lower mortgage rates. The S&P CoreLogic Case-Shiller National Home Price Index rose 4% in February from a year ago, down from 4.3% in January. Houses haven’t been getting more expensive as quickly on a year-to-year basis for 11 consecutive months. Once-hot markets on the West Coast have cooled significantly.

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Mortgage applications are up sharply this year. The rate for the 30-year, fixed-rate mortgage has come down more than half a percentage point since peaking in November. That has juiced the market, just as rising rates last year slowed sales.

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