Market Forecast: Housing Market Index, Housing Starts and Building Permits, Existing Home Sales
Posted On December 17, 2018
It will be a full week of housing news, heading into the end of the year. The Federal Open Market Committee (FOMC) will have its final semiannual monetary policy meeting of the year on Tuesday and Wednesday, with a press conference scheduled for Wednesday afternoon. Although the stock market has experienced some volatility in recent weeks, the Fed is still expected to raise interest rates following this meeting. The National Association of Home Builders’ (NAHB) housing market sentiment index is scheduled to come out on Monday, followed by housing starts and building permits on Tuesday, and existing home sales on Wednesday.
The NAHB housing market sentiment index surveys builders on their perceptions of the current outlook for the housing market, expectations for the next six months, and buyer foot traffic. The index has lost some steam in recent months, dropping slightly to a level of 60. Current sales conditions fell to 87, expectations for the next six months dropped to 65, and buyer foot traffic declined to 45. Any reading over 50 is considered positive. Jeffries Financial Group economists commented, “housing is performing at a moderately high level, but it also appears to be settling into a plateau.”
Housing starts track ground broken on residential projects and building permits track permits issued. Housing starts and building permits are used to predict future housing market activity. In October, housing starts improved 1.5% month-over-month to a seasonally adjusted annual rate of 1.228 million units. Building permits dipped 0.6% month-over-month to a seasonally adjusted annual rate of 1.263 million units.
Existing home sales or resales make up the majority of real estate transactions. After declining for several months, existing home sales turned around in October, up 1.4% month-over-month to a seasonally adjusted annual rate of 5.22 million. Almost all regions were gainful. National Association of Realtors chief economist, Lawrence Yun, noted, ““Gains in the Northeast, South and West – a reversal from last month’s steep decline or plateau in all regions – helped overall sales activity rise for the first time since March 2018.”
The FOMC will meet on Tuesday and Wednesday of this week, for their last meeting of 2018. Based on text from November’s meeting minutes, forecasters fully expect the Fed to raise interest rates at the December meeting. Specifically, Federal Reserve Chair Jerome Powell’s comment that interest rates were just below the neutral rate. The pivotal meeting will also give economists a preview of what to expect from the Fed in 2019.