23 April 2016

THIS WAS A BUSY WEEK for housing data. On Monday, the NAHB released the NAHB/Wells Fargo Housing Market Index (HMI), which tracks home builder sentiment. On Tuesday we got New Residential Construction from Census/HUD which gives us housing starts and permits. On Wednesday we got Existing Home Sales (EHS) from the National Association of Realtors. And on Thursday (along with mortgage rates), we got the FHFA House Price Index.

These data were eagerly awaited. Housing market activity is highly seasonal and slow in the winter months, but picks up steam in the spring. These data give us some of the first readings on spring housing market activity. Overall these data gave a positive signal about the direction of housing markets this year.

Home builder sentiment remains upbeat

The HMI for April 2016, released on Monday was unchanged from last month’s reading. The overall index was at 58, which indicates that on balance, home builders are optimistic about trends in the housing market.

hmi

The gif above shows trends in the HMI since it began tracking home builder sentiment in 1985. The HMI has been above 50 since the summer of 2014 and remained so in the April 2016 report. The HMI was unchanged month-to-month at 58. The HMI has declined from its post-recession highs, but remains above 50, indicating that on balance home builders are upbeat.

Housing starts slip in March

Housing starts data for March 2016, were released on Tuesday. The overall number for starts declined from February for both total starts and starts on 1-unit properties. The data however, are noisy so that the sharp declines in the data were not outside the confidence interval. If we consider trends over a longer horizon, starts have been trending higher. The gif below shows trends in 1-unit housing starts.

starts

Existing home sales spring into spring

Existing home sales (EHS) for March 2016 were released on Wednesday. February disappointed, but sales bounced back in March. The gif below shows EHS trends since 2006, with annotations.

ehs

Strong house price growth

The FHFA reported on February 2016 house prices with their house price index on Thursday. On a year-over-year basis, house prices had been rising at a 6 percent rate, but in the latest data slowed to 5.6 percent. This pace however, is high relative to historical averages. The FHFA’s data show that from 1991 (2000) through February 2016 house prices grew at a compound annual growth rate of 3.4 (3.3) percent. Even with the moderation in February house price gains, the pace of growth is high relative to historical averages.

The gif below shows the history of the level and annual growth rate of the FHFA house price index (Purchase-only, seasonally adjusted) since 1991.

hpa

Mortgage rates still low

No recap of housing data would be complete without a mention of mortgage rates. In the Freddie Mac Primary Mortgage Market Survey rates on 30-year fixed rate mortgages ticked up 0.01 percent to 3.59 percent this week. These rates remain near the lowest in the past three years.

pmms

What it means for housing

On balance, the data were positive for the housing market outlook. Housing starts estimates did decline, but the data are so noisy we can’t conclude that actual activity fell for the month. And, longer term trends in construction remain positive.

Home sales bounced back and are trending higher. House prices are growing strong, and mortgage rates remain low. On balance housing markets are trending up.