Sun, 19 Sep 2021

Future indicators show U.S. housing market slowing

Robert Besser
26 Jul 2021, 03:04 GMT+10

NEW YORK CITY, New York: The home and real estate sector, which outperformed the broader market during the pandemic, even as much of the economy struggled with the effects of social distancing mandates, is returning to pre-COVID levels, according to data released this week.

On Monday, the National Association of Homebuilders reported builder sentiment softening, as higher input costs and rising home prices appear to be denting the traffic of potential homebuyers

"The housing market isn't caving just yet," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York, as reported by Reuters. "Have we reached a peak? That's a possibility, but worst-case scenario, I see a leveling off."

The best news of the week for investors was delivered on Thursday by the National Association of Realtors, which reported that sales of previously owned homes rose 1.4 percent to 5.86 million units in June at a seasonally adjusted annualized rate, although the rebound was weaker than expected.

The inventory shortage has provided sturdy support for homebuilding, but that support appears to be on the wane.

While groundbreaking on new residential homes increased by 6.3 percent in June, building permits, a more forward-looking indicator, dropped 5.1 percent to an eight-month low.

With these moves, starts and permits returned to pre-pandemic levels.

The most recent data shows an annual increase of 14.9 percent in the Case-Shiller's 20-city composite home price index, and NAHB's traffic of potential buyers - while still well above pre-pandemic levels - was off 15.6 percent from November's apex.

According to the Mortgage Bankers Association, mortgage demand dropped by 4 percent last week, while applications for loans to purchase homes are down 18 percent from the same week last year.

The equities market, the most forward-looking indicator of all measurements, also reflects a bit of fading luster for housing stocks.

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