Market Forecast: Housing Market Index, Housing Starts and Building Permits, and New Home Sales
Posted On October 14, 2019
Mortgage rates are not expected to move significantly this week and continue to remain historically low. This week, the National Association of Home Builders’ (NAHB) housing market sentiment index is scheduled for release on Wednesday, followed by housing starts and building permits and new home sales on Thursday.
The NAHB housing market sentiment index is based on home builders’ perceptions on current sales conditions, expectations for the next six months, and buyer foot traffic. In September, the overall index rose to a level of 68 points. Current sales conditions improved to a level of 75, sales expectations for the next six months fell to a level of 70, and buyer foot traffic was unchanged at a level of 50. Any reading above 50 is considered positive.
Housing starts track ground broken on residential projects and building permits track permits issued. In August, housing starts climbed 12.3% month-over-month to a seasonally adjusted annual rate of 1.364 million. Building permits also increased, up 7.7% month-over-month to a seasonally adjusted annual rate of 1.419 million units, a 12-year high.
New home sales, or the sales of newly constructed homes, make up approximately 10% of total real estate transactions. In August, new home sales increased 7.1% month-over-month to a seasonally adjusted annual rate of 713,000. July’s figure was revised upward.
This week’s data will help us predict home building activity for the rest of the year. Typically, home building slows down because of cooler winter weather across most of the country. However, with historically low mortgage rates, there may be an incentive for builders to keep building.