Market Forecast: Housing Market Index, Housing Starts, Building Permits, and Existing Home Sales
The Federal Open Market Committee voted to raise the benchmark interest rate last week, and mortgage rates have not yet reacted. This year’s mortgage rate activity has been gradual, with rates continuing to hover historic lows. This week, the National Association of Home Builders (NAHB) will release their housing market sentiment index on Monday, housing starts and building permits come out on Tuesday, and the existing home sales report comes out Wednesday.
The NAHB housing market sentiment index is based on builders’ perceptions of current sales conditions, expectations for the next six months, and buyer foot traffic. Any reading above 50 is considered positive. The index hit an eight-month high in November, improving to a level of 70 and each component of the index was positive or neutral, with current sales conditions and six-month expectations each reading 77, and buyer foot traffic registering at 50.
Housing starts and building permits are used to gauge future housing activity like new home sales. In November, housing starts soared, up 13.7% to a seasonally adjusted annual rate of 1.29 million units. Building permits also climbed, up 5.9% to a level of 1.297 million units.
Existing home sales or resales make up the majority of real estate transactions. Although housing activity tends to slow in the winter month, existing home sales surged in October, up 2.0% month-over-month. Gains were driven by sales in the south, but each region posted gains. Limited inventory continues to be a problem for the housing market, however. The National Association of Realtors (NAR) reported a 3.9-month supply of available homes for sale, the lowest level since 1999.
In its statement, the FOMC explained that economic expansion was driven by job growth, but the inflation rate remains under the targeted 2% rate. According to the 2018 dot plot, the Fed is expecting three additional rate hikes next year. Fed Chair Janet Yellen will be succeeded by Jerome Powell in February, but he will likely maintain the gradual pace of raising rates.
Sources: Bloomberg, Business Insider, MarketWatch, Mortgage News Daily