The Mortgage Corner
Builders are most optimistic about single family homes, and the youngest adults are finally beginning to leave their parents’ nest, apparently. The National Association of Home Builders/Wells Fargo gauge rose four points to 58 in November, near the highest level in nine years. Readings above 50 signal that builders, generally, are optimistic about sales trends.
“Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery,” said NAHB Chief Economist David Crowe. “After a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015.”
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,009,000. This is 2.8 percent below the revised September estimate of 1,038,000, but is 7.8 percent above the October 2013 rate of 936,000. Single-family housing construction in October rose to 696,000 units; 4.2 percent above the revised September figure of 668,000. The October rate for units in buildings with five units or more was 300,000.
Why the optimism? More young buyers, a key segment of the housing market, are beginning to find jobs. This makes them more likely to buy an entry-level home, with rents rising as fast as 10 percent annually in some markets. Last Friday’s unemployment report showed signs that this group is getting closer to be able to buy a home, which would, in turn, help other families find a new home.
Among 25- to 34-year olds, the share who were employed hit 76.2 percent in October, according to Trulia.com—the greatest proportion since the end of 2008—and up from 74.8 percent a year earlier, according to the Bureau of Labor Statistics.
And those younger buyers are already making a difference, as total existing-home sales rose 1.5 percent to a seasonally adjusted annual rate of 5.26 million in October. Sales are at their highest annual pace since September 2013 (also 5.26 million) and is the First Year-Over-Year Increase since October 2013, according to the National Association of Realtors.
NAR chief economist Lawrence Yun says the housing market this year has been a tale of two halves. “Sales activity in October reached its highest annual pace of the year as buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth,” he said. “Furthermore, the job market has shown continued strength in the past six months. This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases.”
And though housing inventory at the end of October fell 2.6 percent to 2.22 million existing homes available for sale, a 5.1-month supply at the current sales pace, unsold inventory is now 5.2 percent higher than a year ago, when there were 2.11 million existing homes available for sale.
Economists will mine this data for signs that more Millennials are buying homes, but as job growth continues to pick up (weekly initial jobless claims have stayed below 300,000 now for 10 consecutive weeks), this is surely a portent for continued increase in new and existing-home sales in 2015.
Harlan Green © 2014
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