Friday, April 21, 2017
U.S. Housing Market Update
The U.S. housing market in March saw new home building fall 6.8 percent to a seasonally-adjusted annual rate of 1.215 million units, according to the Commerce Department. The Midwest suffered the biggest losses as the region saw its largest decline in housing starts in three years. Many real estate analysts speculate bad weather was the primary cause of the decline. The Commerce Department also revised its February totals for housing starts. The department changed the starts to a seasonallyadjusted average of 1.30 million units from the previously reported 1.29 million single-family home building starts. Real estate analysts and economists predicted the decline would occur when compared to the recordbreaking housing activity that happened in March of last year. Single-family home building saw a decline of 6.2 percent to 821,000 units in March with the Midwest accounting for most of the decline. That region of the country saw a 35 percent decline in single-family home building for the month of March. In the U.S., single family homes account for the largest segment of residential housing. Economists point to wage growth and a tightening labor market as the reasons for the decline in housing starts. However, many experts agree the underlying real estate market in the United States remains strong. Building permits in March increased by 3.6 percent with an increase in the demand for multi-family properties. Properties with more than one unit saw a 13.8 percent surge in activity for the month of March. Many analysts speculate that the housing market might see a substantial slowdown in the coming months. Real estate professionals point to the current demand-to-supply ratio as an indicator of future housing trends. Currently, there are more Americans who want to buy a home than there is available inventory. An important indicator of more weakness to come is the drop in mortgage applications. Home buyers are dropping out of the market due to a lack of inventory, and mortgage applications reflect that by dropping 1.8 percent during the second week of April even with interest rates hitting their lowest level in nearly five months. The housing forecast by the National Association of Realtors for 2017 is a 4 percent year-to-year increase in home prices on existing homes. The association stated in February that the housing market this year would see good growth with nothing on the significant or robust front. The NAR did state that some sectors in the real estate market could see growth in the 6 to 7 percent range for 2017.
Daniel Palmier is a leading Boston CEO, Real Estate Investment Manager, and Founder of UC Funds.