Housing managed to get its second wind as it entered the final quarter of the year. Most industry indicators — with the exception of new home sales — showed notable month-to-month performance. Year-to-date figures continue on an upward trend, boding well for an overall positive finish to a year of fluctuating demand.
Contrary to a concern that pre-election jitters might cause prospective buyers to delay making a home purchase, sales of existing homes rose 2% in October. It was the second straight month of growth and the highest annualized peak in a decade, according to the National Association of Realtors.
NAR Chief Economist Lawrence Yun attributed the increase in sales to a temporary boost in available properties that fed pent-up demand from would-be buyers who were shut out of the market during the summer months. The bump in sales helped to push the home ownership rate up slightly in the third quarter, by about half a percentage point — to 63.5%, per U.S. Census data — back to where it was a year ago following a near-50-year low point in the second quarter.
The availability of existing home inventory eased demand for new homes. The Census Bureau and Department of Housing and Urban Development (HUD) announced sales of new single-family homes declined in October 1.9% (in number of units) below September’s figure, which was revised downward. Nonetheless, year-to-date new home sales were nearly 18 % higher than they were in October 2015.
The government had even better news for builders the previous week when the Census Bureau and HUD reported new housing starts in October jumped 25.5%t from the previous month and ahead 23.3 % from a year ago. Much of that lift was due to a rebound in multifamily activity, up 68.8 % for the month. Still, single-family housing starts rose a healthy 10.7 % compared to September’s revised figure. Requests for new permits were flat overall, but up 2.7% for single-family units.
In terms of the dollar value of projects, new residential construction also had a good month in October, found the analysts at Dodge Data & Analytics. While overall new construction starts fell by 4%, residential building was up 6 % from the previous month and 5% for the year. The value of multifamily projects rose 5% and single-family projects 6% — an increase of 1% and 7% year-to-date, respectively.
Historically, demand for housing softens during the last months of the year, and that appears to be the case this year as well. The National Association of Home Builders stated its Builder Confidence Index held steady in November, with builders reporting diminished activity in buyer traffic, current sales and expected sales in the near term.
NAHB Chairman Ed Brady projected “slow, gradual growth” on “a steady, upward glide path” in the months to come. In releasing the results of its October Architecture Billings Index, the American Institute of Architects reported a drop in requests for new design contracts for the second month in a row. However, in keeping with the overall industry trend, billings for multifamily projects rebounded from a reading of 48.8 in September to 51.2 in October.
Housing prices are on the rise again, the inventory of existing homes is falling, and mortgage rates are creeping upward. That would seem to be a scenario for slower growth. Yet the Mortgage Bankers Association last week in releasing the results of its Weekly Mortgage Applications Survey reported the seasonally adjusted Purchase Index increased 19% from one week earlier, while the unadjusted Purchase Index was 11% higher than the same week one year ago.
This suggests some prospective buyers may be looking for opportunities before increases in both prices and mortgage rates drive home ownership out of their reach. If the weather cooperates, that could help the industry buck the historical trend and end the year with the wind at its back.
About the Author
Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at firstname.lastname@example.org.