Housing Is Heating Back Up

The US housing market is snapping back, and that is great news for anyone tied to that market and for the US economy in general. This comes after a categorically (and expectedly) horrible April.

The highlights – or, I suppose, lowlights – of that month include:

• US Single-Family Housing Starts defied what should have been a seasonal rising trend in April, declining from March for just the third time ever.
• US New Homes Sold in April were down more than 15% compared to April 2019.
• The US Average Price of Homes Sold in April sank 6.8% from March pricing, marking the most severe month-to-month drop in pricing on a percentage basis on record for that time period.

All this negativity offered an appealing buying opportunity to those who were bold enough to strike, as those negative trends are back on a bullish trajectory:

• The Average Price of Homes Sold bounced back in May, jumping from $352.3 thousand on average in April to $368.8 thousand in May. This 4.7% increase marks the fourth-strongest month-to-month increase on record for May.
• New Homes Sold posted an impressive improvement as well, leaping to 64.0 thousand units in May from 54.0 thousand in April. This massive 18.5% month-to-month increase is the second strongest in the data’s nearly 60-year history.
• The US Median Sales Price for New Homes, specifically, posted a similarly bullish jump, going from $303.0 thousand in April to $317.9 thousand in May.

Developers seemed to be encouraged by the demand revival, as Single-Family Housing Starts stabilized in May, and the National Association of Home Builders' Housing Market Index finally jumped in June, rising to 58.0 from 37.0 in May. At 56.8%, that is the sharpest increase ever for the month of June by a factor of more than three.

I could inundate you with impressively positive statistics, but I will stop there. We were bullish on the housing market for 2020, and it appears to be regaining its footing. The anecdotal evidence we have received from our consulting clients tied to housing in recent weeks corroborates the above stats. Our clients are now indicating that demand is no longer the issue; instead, labor and supply-chain issues are throttling their ability to meet demand in many cases.

Given that much of the country was still early in the reopening process in May, and that existing home inventories are still tight and interest rates favorable, it is probable that most of these housing trends will continue to improve with June data and on through the summer. This is, of course, barring a second wave of COVID-19-related shutdowns, a possibility that Brian and Alan Beaulieu will be discussing during their July 22 special-edition webinar.

Given that single-family housing is not only an important market for the overall US economy but also a leading indicator, the swift stabilization we are witnessing is encouraging. It should portend the emergence of more green shoots across the economy as we advance through the second half of this year, setting the stage for the macroeconomic rebound we anticipate for 2021.

Connor Lokar
Economist