The month of May saw another tick down for existing-home sales and pending home sales, falling by 0.4% and 1.3%, respectively. Compared to this time a year ago, Housing Starts on new construction are up more than 7.2% and are projected to reach a year-on-year jump of 11% by the end of September 2018; these Housing Starts are expected to continue rising as the real number of starts increases in conjunction with the 30-year fixed rate mortgage, from 4.5% to 4.7% over the same period.
As trade tensions increase between the United States and other nations, it is possible that tit-for-tat tariffs could disrupt the home-building process as supply drops and prices increases for necessary raw materials. Earlier this year, the president of the National Association for Home Builders released a statement criticizing the Trump administration for its use of tariffs on steel and aluminium, which has led to an increase in the cost of building a home and thus decreased access to affordable housing. As the administration picks up steam with its isolationist trade policies, American home buyers will continue to be adversely affected.
This month, we have the opportunity to share some optimistic news for the housing market: both existing-home sales and pending home sales increased in the month of March by 1.1% and 0.4%, respectively. Be sure to check out this quick video with economist Dr. Lawrence Yun about the pending home sales index.
Now, to keep us firmly grounded in reality, let's check in with the Case-Shiller U.S. National Home Price Index (graph below). It's important to note the continued climb in national housing prices past the peak 2007 levels. As the Federal Reserve seeks to continue its policy of rate hikes over the course of 2018, homeowners should be aware that this will drag down the buoyancy of housing prices, and help to avoid another market collapse.
We'd normally start with the good news first, but we're lacking content in that category so let's get straight into the numbers.
January was a rough month for the housing market: Pending Home Sales fell by 4.7% in January, reaching their lowest levels since October 2014; furthermore, Existing Home Sales fell by 3.2% their largest drop in 3 years. Compared to a year ago, available listings were down 9.5%, undoubtedly contributing to falling purchases.
Troubling economic trends continue to undermine the health of the U.S. housing market. Homebuilders are starting new-home construction at a slower than average pace, and wealthy investors are looking to unload single-family home assets on to the market. Ideally, these single-family homes will help meet market demand for more affordable housing, but given the current market conditions, professional wealth-management investors could choose to sell their assets in small quantities, preserving higher profits and maintaining market demand. It's not unreasonable to assume their sell-off would only begin after new-home starts present a threat to their margins as production increases.
Despite all the doom and gloom, Dr. Lawrence Yun of the National Association of REALTORS believes home sales will remain constant from 2017 to 2018 (roughly 5.5 million homes).
How is market demand, lack of affordable housing, and increasing interest rates effecting your homeowner experience? Let us know on Twitter (@NC_Homeowners) or on Facebook.