Economical UpdatesReal Estate Activity October 22, 2016

Perhaps They’re Back

Existing home sales rebounded after a two-month slump but the National Association of Realtors was even more excited by a second stat–the share of first-time homebuyers rose 3 percentage points to 34%, the highest since July 2012.
NAR Chief Economist Lawrence Yun said, “The market fundamentals–primarily consistent job gains and affordable mortgage rates–are there for the steady rise in first-timers needed to finally reverse the decline in the homeownership rate.”
Existing home sales rose 3.2% in September to a seasonally adjusted rate of 5.47 million units and are now running 0.6% ahead of sales a year earlier. Increases were posted in all four regions.
It wasn’t all good news; the August existing sales numbers, already lagging July, were revised down from a rate of 5.33 million to 5.30 million.
Fannie Mae’s October Economic Developments Commentary calls residential construction “lackluster”. The company’s economists were basing that opinion on the Census Bureau’s report on public and private construction spending issued a few weeks ago, but this week’s residential construction data from September does little to dispel the image.
For quite some time the two key residential construction indicators (housing permits and housing starts) have been taking turns; one rising from the previous month while the other falls behind. With increasing frequency, one or the other also lags year-earlier levels.
This month it was permits that performed well, gaining 6.3% to a seasonally adjusted annual rate of 1.225 million units and outpacing analysts’ predictions. It was the second highest rate in the last 12 months (in November 2015 it hit 1.286 million units) but it is still only 8.5% higher than in September 2015.
Single-family permits did not fare as well, up 0.4% for the month and 4.4% for the year; the action was all in the multi-family sector.
Housing starts fell a significant 9.0% from August and dropped 11.9% lower than starts a year earlier although single-family starts did much better with an 8.1% month-over-month increase.
Fannie Mae’s Commentary had nuggets of good news both for and about younger homebuyers. Owner household growth grew faster than rental household growth in 2015 for the first time in nine years and the homeownership rate for persons under 35 has finally stabilized after declining “substantially and relentlessly” since 2009. Now builders are apparently starting to acknowledge these trends and have been increasingly focusing on entry-level buyers. The size of a typical home, which increased sharply at the end of the recession, stabilized in 2014 and 2015 and began to decline in the second quarter of this year. Smaller, of course, usually means less expensive when it comes to homebuilding.
Greg Timms Blog | FreddieMac 102116