Posted On March 29, 2019
Mortgage rates continue to slide downward, following the Federal Open Market Committee’s decision to ease back on rate hikes this year. After an exceptionally strong January, February’s housing starts and building permits declined. The S&P CoreLogic Case-Shiller home price index posted the slowest annual rate of growth in seven years. New home sales exceeded expectations.
After showing strength in January, housing starts have pulled back, down 8.7% month-over-month to a seasonally adjusted annual pace of 1.16 million units. Building permits also weakened, falling 1.6% month-over-month to a seasonally adjusted annual rate of 1.3 million. Only the Midwest showed an increase, with housing starts up 27%. The Northeast, West, and South each declined. Although home buyers have had a reprieve with lower mortgage rates lately, builders are still grappling with a shortage of land and labor, plus costly construction materials.
The Case-Shiller home price index increased 0.1% from December to January and only 3.6% from one year ago, the slowest annual pace of growth since 2012. After years of rapid home price appreciation, home buyers are starting to see a break as prices settle. From the index, only Las Vegas saw a double-digit annual increase. Monthly data shows fourteen metros declined, one was unchanged, and just five increased.
New home sales, or the sales of newly constructed homes, increased in February, up 4.9% month-over-month, to a seasonally-adjusted annual pace of 667,000. The recent drop in mortgage rates combined with more favorable weather conditions for home construction may have spurred the growth. The South, Northeast, and Midwest all increased, and the West was unchanged. At the current sales pace it would take 6.5 months to exhaust all available inventory.
Many real estate professionals agree, we will be seeing a buyer’s market this Spring. Home price appreciation has slowed, and mortgage rates are significantly lower than they have been in recent months. This is also an opportunity for homeowners to consider a refinance, especially if they have been on the fence. Rates will likely stay low this year, and economic conditions will be favorable.