US Outlook Report: Is Housing Getting Back On Its Feet?
A spate of housing indicators released this week revealed some positive developments for the U.S. housing market that has been noticeably absent for much of this summer. Homebuilder confidence is rebounding faster than expected. The National Association of Homebuilders’ (NAHB) housing market index beat consensus expectations in August, increasing 2 points from July to 55, nearing levels seen late last year.
The buyer-traffic sub-index jumped 3 points this month to 42, the highest reading so far in 2014 and well above the lows seen this spring. Improving labor market conditions and low mortgage rates are finally making home buying more attractive. We should see further interest from prospective buyers once real wage growth improves.
Housing starts and permits jumped in July, especially for multi-family construction. Clearly, homebuilders find multi-family housing projects more profitable and easier to execute in the current marketplace. We bumped up our forecast for private housing starts this year to 1.015 million, a 9.1 percent increase from 2013, based on the current higher-than-expected reading and upwardly revised historical figures.
This week’s positive housing narrative was rounded out by greater-than-expected July existing home sales that marched up to a 10-month high of 5.15 million units.
Declining mortgage rates, however, have so far failed to launch a mortgage purchase or refinance applications recovery. Cash buyers still appear to be a key driver of housing demand.
Recovering homebuilder confidence, buyer-traffic, existing sales and starts point to a housing market expansion that is catching its second wind. The second half of 2014 should see a continuation of this trend as job and income prospects improve and interest rates remain historically low for prospective buyers.
To find out more about the evolving housing outlook. Check out this week’s US Outlook Report for August 22, 2014.
Tags: economy