In October, the latest month for which data is available, existing-home sales rose by 2.0% to their fastest pace since earlier this summer. A continued short supply of homes led to lower sales year-on-year for last October, however. Additionally, pending home sales rose a robust 3.5% in October, following three months of diminishing activity. Pending sales also fell behind in a year-on-year comparison, however.
The market conditions caused by having a limited supply of homes for sale are prevalent in all relevant economic and behavioral metrics, particularly in October's foot traffic, which rose by 28.8 points last month and is up over 33.9 points year-on-year. Dr. Lawrence Yun, the National Association of REALTORS®' resident economist, views foot traffic as an indicator of future sales between two and three months into the future.
While the labor market has become rather tight over the last couple of years and wage growth has increased accordingly, the market for home-sales is likely to remain taught (with continued price increases) for some time into the future. As the Federal Reserve acts to increase interest rates, the costs of borrowing for home-buyers will increase as well, outpacing any rise in wages causing downward pressure on housing prices. This, according to market data and forecast for the next three quarters, is likely to be met with increased new-home construction. Notably, labor productivity in construction has remained constant since about 1960, dramatically lagging behind other economic sectors of labor. As these trends continue, the market seems amenable to a long-term spate of new-home construction, exactly what our economic data seems to indicate for 2018Q2.
As the North Carolina Homeowners Alliance closes out the 2017 year, we are keeping our eyes on National Tax Reform and the National Flood Insurance Program-- should these developments materialize, we will reach out to you with a call for action!