National Sales Rise, Supply Drops
Photo: © Jhorrocks - iStockphoto
For over 30 years, the National Association of Home Builders/Wells Fargo Housing Market Index (NAHB/HMI) has surveyed home builders about their levels of confidence in the single-family housing market. Builders are asked to rate both their current sales and future sales as good, fair, or poor. In addition, builders are asked to evaluate prospective buyer traffic as high, average, or low. The scores determine the strength of the single-family housing market as seen through the eyes of builders; any score over 50 signifies that more builders believe the housing market is good rather than poor. In December, the index reached 70, up seven points. The index hasn't been this high since July 2005, proving that builders are more confident about the current housing market than they have been in recent years.
"The rise in the HMI is consistent with recent gains for the stock market and consumer confidence," says Robert Dietz, chief economist of NAHB. The index measuring current sales conditions reached 76, a climb of seven points, and the index that calculates future sales expectations increased nine points to 78. Builders also noticed an uptick in the numbers of prospective buyers passing through their doors, as this index component jumped six points to 53—the highest level recorded since October 2005. But Dietz cautions that rising mortgage rates and building lot and labor shortages could impact builders in the coming months.
According to the National Association of Realtors (NAR), existing-home sales increased for the third month in a row. Sales climbed to 5.61 million, a rise of 15.4 percent from a year earlier, setting an outstanding sales pace not seen since February 2007. The Northeast saw the greatest increase in sales, due to slower price growth. According to Lawrence Yun, chief economist of NAR, two main factors were the driving forces behind the country-wide increase in home sales: "The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates actually rose from their historically low level."
But as more homes sold, fewer were available for prospective buyers. The end of November saw housing inventory fall 8 percent to 1.85 million available homes for sale, a four-month supply at the current sales pace. There were 9.3 percent fewer homes available for sale than at the same time last year, marking November as the 18th consecutive month of falling inventory. But it's not just the housing supply that is dwindling—available rental units are also scarce in today's market. Due to the lack of supply and increase in demand, both home prices and rents are increasing in many parts of the country; the median existing-home price climbed 6.8 percent from a year ago, making November the 57th consecutive month where home prices have increased year over year. Unfortunately, according to Yun, high home prices and rents are outstripping incomes in many regions.
Northeast - Existing-home sales annual rate of 810,000; up 8 percent from October 2016 and 15.7 percent from November 2015.
Midwest - Existing-home sales annual rate of 1.33 million; down 2.2 percent from October 2016 but up 18.8 percent from November 2015.
South - Existing-home sales annual rate of 2.22 million; up 1.4 percent from October 2016 and 11.6 percent from November 2015.
West - Existing-home sales annual rate of 1.25 million; down 1.6 percent from October 2016 but up an impressive 19 percent from November 2015.