Summer starting off slow for housing
Home starts in March and April were higher than previously thought, but dropped in May, leading to some mixed attitudes regarding the health of the housing market.
Although there are expectations that an interest rate cut will happen this year, which has led to a drop in mortgage rates, neither buyers nor builders can take advantage of that because higher building costs, extensive labor shortages, and flooding in parts of the country are making it difficult for builders to break ground—and gain any ground when it comes to increasing inventory.
“If you were waiting for more construction to deal with the nation’s growing housing shortage, you are going to have a longer wait,” Chris Rupkey, chief economist at MUFG, told Reuters.
Builders aren’t especially confident about the market; builder confidence fell two points in June, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), which is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market.
“Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers,” said NAHB Chief Economist Robert Dietz in a statement. “And while new home sales picked up in March and April, builders continue to grapple with excessive regulations, a shortage of lots and lack of skilled labor that are hurting affordability and depressing supply.”
The gauge on current single-family home sales dipped to 71 from 72, while the barometer on prospective buyers decreased to 48 from 49. The measure on expectations on home sales over the next six months fell to 70 from 72 in May.
Summer tends to be a good time for the housing market, and permits for single-family homes have been up slightly over the last couple of months, increasing 3.7% to a rate of 815,000 units in May. This is following five months of a continual decline, and permits are still down overall from 2018. Single-family housing permits fell in the Northeast, West and Midwest, but permits got a 7.7% jump in the South, which was the largest gain since December 2016.
Starts for the multi-family housing segment saw a 10.9% boost in May, but permits for the sector dropped 5%.
“Housing continues to wander along, not doing much better but not weakening a whole lot,” Joel Naroff, chief economist at Naroff Economic Advisors, told Reuters.
Overall, the numbers shows a very modest level of improvement, although it’s clear that home buyers in tight markets aren’t going to see marked relief anytime soon.
