Existing Home Sales, Housing Starts, Builder Confidence and more: The Week in Housing
This was a busy week for housing. Data is in from the NAR on existing home sales, builder confidence, interest rates, housing starts, housing completions, and building permits.
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Existing Home Sales Rise
March gave us a marked improvement in existing home sales. The National Association of Realtors reported that sales of existing homes rose 3.7% in March to a seasonally adjusted annual rate of 5.10 million. While up from February, home sales are down 6.3% from last March. At this time last year the second home buyer tax credit had just kicked off.
After a disappointing February, existing home sales ticked up in March. Much of the cold weather is behind us and we should see more improvement in the month-over-month results. I doubt we’ll see year-over-year improvement until the last tax credit fully 1 year behind us. What’s important to note is the impact that cash buyers and investors are having on the market. Cash buyers made up 35% of sales this March versus 27% a year ago and investors are 22% of existing home sales vs. 19% a year ago.
Housing Starts Increase, Building Permits Up, and Housing Completions Down
The Census Bureau reported this week that housing starts increased by 7.2% in March to a seasonally adjusted annual rate of 549,000. Housing starts are still 13.4% below March of 2010. Building permits were also up over February. Permits were 11.2% higher than February to a rate of 594,000 annually. Lastly, the number of homes being completed dropped in March by 14.2% to a rate of 509,000. This is 20.8% below last March.
Essentially builders continue to struggle. March was an improvement on leading indicators. Any improvement in permits and starts is a step in the right direction for builders. For the rest of the housing market, continued low completions means less supply.
Interest Rates Decrease
After seeing 4 weeks of rate increases, mortgage rates dropped, wiping out a month of increases. Freddie Mac reported that the 30-year fixed mortgage rate decreased to 4.80% from 4.91% for the week ending April 21st, 2011. The 15-year fixed decreased to 4.02% from 4.13%.
Rates have backed down again providing some relief for the market. This follows reports that core prices increased only 0.1%. Unfortunately the Consumer Price Index doesn’t include food or energy prices. I still believe this is a false low in rates and we’re trending up from here. Just a quick side note, the owner’s equivalent index for rents rose 0.1%.
Builder Confidence Goes Even Lower:
Just when you thought builders couldn’t be less confident in market conditions, confidence declines. The National Association of Home builders reported builder confidence declined from 17 to 16; anything above 50 is considered healthy.
Home builders are having a tough time getting financing to build. This year is projected to be the lowest on record for housing completions. Financing is improving for some larger developers. In fact I was at an event a week ago where some of the largest developers in New York were in attendance. Representatives from SL Green, Fortress, Avalon Communities, and Silverstein discussed the improving financing conditions. I think we’ll see this work its way to smaller builders in the single-family arena in the next 24 months. This year is going to remain tough.