A slew of reports have been released over the past few days indicating mixed results in the housing industry. Reading some results, it would appear as though the worst is behind us nationally and that the U.S. housing market is slowly rebounding. Turn the page and the next report indicates that concerns still exist and the recovery may be stalling. Making sense of these reports is difficult when read one at a time, so we’ve summarized the latest information into one article for your here.
New home starts declined in December by 4.3% according to data released by the U.S Commerce Department. This follows an increase of 3.8% in November. The December results fell well below consensus estimates and is down 8.2% year-over-year. More telling, single-family starts fell 9.0% in December.
Mark Sprague, Director of Business Development at Mission Mortgage, explained the importance of housing starts in a blog posting last year. You can read his thoughts on the index by clicking here.
By contrast, Housing Permits in December rose an alarming 16.7% following a 1.4% decline in November. Not all permits will lead to starts, but starts cannot happen without permits so this level of increase is notable. Single-family permits rose 5.5% while multi-family permits jumped an enormous 53.5%. These numbers from the U.S. Commerce Department reflect increase optimism amongst builders that a market exists for their product.
It must be noted that new, stricter building requirements went into effect on January 1 for California, Pennsylvania and New York, which may have pushed permits up in December by builders who wished to submit their requests before the new laws impacted their businesses.
Housing Market Index
The National Association of Home Builders produces monthly survey results asking their members to rate the current economic conditions for the housing market. December’s results were flat from November coming in at 16. In fact, the index has been at 16 since October indicating that builders are maintaining a constant view of the market conditions.
Existing Home Sales
December saw a surge in existing home sales with a 12.3% jump from November. November had witnessed an increase of 5.6% over October, so trends are becoming clear in the resale market that activity is up. This should be great news for Realtors who focus on existing home sales, whether as listing agents or buyer representatives, as it shows activity is strong despite the seasonal effects of colder winter weather.
More significantly, national inventories dropped from 9.5 months supply in November to just 8.1 months supply in December. This highly significant decrease in inventory shows that the bloated supply of listings is working its way through the market. Equilibrium, where it is neither seen as a buyers’ market or a sellers’ market, is generally accepted as 6 months of inventory. So, while we are still in a buyers’ market overall, December made huge strides in bringing us closer to equilibrium.
Obviously, we are seeing conflicting data in our housing market. Clearly existing home sales, which account for a far greater percentage of all home sales, are seeing a rebound while new home construction is giving off more mixed signals. New construction is showing more strength in multi-family housing units, which is consistent with the current high occupancy rates for rental housing.
But the full story still cannot be told. Next week, we’ll see numbers released for New Home Sales and the Pending Home Sales Index, which measures existing homes that are under contract but not yet officially closed. The Pending Home Sales Index increased in both October and November making the next release very important in determining if we are in fact seeing a positive overall trend in the existing home market.
If you are in the market to purchase a home and have questions about when and where to buy, we highly recommend speaking with a qualified Realtor as well as an experienced Mortgage Loan Officer. Email us at firstname.lastname@example.org to speak with a mortgage professional and/or receive a recommendation for a good Realtor in the Austin area.