Freddie Mac Weekly Economic Update from Rich Moroscak of EagleBank:
Housing Starts, Existing-Home Sales Weaker-Than-Expected in June
According to the Census Bureau, housing starts fell unexpectedly in June to a seasonally adjusted annual rate of 836,000 units, a decline of 9.9 percent from May. The June pace of housing starts is the slowest since August 2012. The volatile multifamily sector drove the decline, with starts falling 26.2 percent, but single-family starts also weakened, dropping 0.8 percent to a seasonally adjusted annual rate of 591,000 units in June. All regions recorded a decline in starts this month.
Permits fell 7.5 percent in June to a seasonally adjusted annual rate of 911,000 units. However, of positive note, single-family permits increased 0.6 percent and have now increased in 14 of the last 15 months. Completions increased 6.3 percent in June. All three measures of residential construction (starts, permits, and completions) are up strongly on a year-over-year basis.
Existing-home sales also came in below consensus in June. Sales fell 1.2 percent from a seasonally adjusted annual rate of 5.14 million units in May to 5.08 million units in June. May sales were revised downward 0.8 percent by the National Association of Realtors. Sales of existing single-family homes fell 1.1 percent from May.
Existing-home sales did, however, record an annualized gain of 10.1 percent in the second quarter. The gain from the first quarter marks the eighth consecutive quarter sales have realized a gain. Moreover, inventories of homes for sale rose 1.9 percent in June but supply still remains tight. Listings are 8 percent below this time last year with 5.2 months of supply, which is well below the 6-month mark that indicates a balanced market.
House price appreciation continues to be exceptionally strong. The median existing-home price posted an annualized gain of 27 percent in the second quarter, the strongest on record which dates back to the late 1960s.
All in all, despite some disappointing numbers this month that could suggest a dip in the housing recovery, there were some positive signs to take away as well. Single-family permitting has advanced steadily, suggesting that starts will move up again. Additionally, although existing-home sales retreated in June, the trend is still upward. Rising mortgage interest rates will take steam out of sales, but are not expected to reverse the upward trend. Positive demand drivers are expected to more than offset the weight of rising mortgage rates, leading to a stronger housing rebound by the end of this year.
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