The March data for new home sales were released last week, and rose for the third consecutive month to a 621,000-unit annual rate. Sales for the first quarter of this year are running about 6 percent ahead of 2016. More interestingly, as can be seen in the chart below, sales for March are almost 16 percent above their level a year ago.
Sales of existing homes rose by a robust 4.4 percent in March, to reach a 5.710-million-unit annual rate. This is the highest level of existing house sales in 10 years; we have to look at data before the 2008-09 recession to see similar levels of activity.
Sales of high-end homes shot-up by 24 percent in the first quarter, totaling 26,000 new high-end homes sold. We are defining “high-end” homes as all those sold for $500,000 and above.
We learned late last week that the economy grew by 0.7 percent in the first quarter. Although we have seen similar slow growth rates several times over the last 10 years, we have never had a string of years with average growth of 2 percent or less. For reference, the table below displays GDP growth rates for three time periods:
After several weeks of declines, mortgages rates rose last week. The 30-year fixed rate, depicted in the chart below, rose by 6 basis points to 4.03 percent. It is hard to pinpoint an exact cause for the increase, but we can speculate that the modest tightening that the Fed initiated at the end of last year may be having an impact.
But for our businesses, the concern is that rising rates may bar some households from qualifying for a loan, rendering them unable to purchase a home.
Last week, we also learned that more households became homeowners rather than renters in the first quarter. 1.29 million more households were formed in the first quarter of this year compared to 1.27 million new households formed in the first quarter of 2016. But, more importantly, this is the first time in several years more households opted to become homeowners rather than renters.
The table above shows that this year we have seen 900,000 more homeowner households, and just under 400,000 new renters.
Visit the NKBA website to view the latest economic and industry research available to NKBA members.
Manuel Gutierrez, Consulting Economist to NKBA, economist @nkba.org
Explanation of NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator. Note that all the data, except for “mortgage rate” and “appliance store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately-owned homes (excludes rentals, etc.). The data are in billions of dollars and are issued monthly by the U.S. Department of Commerce.
Single Family Starts. It is the number of single family houses for which construction was started in the given month. The data are in thousands of houses and are issued monthly by the U.S. Department of Commerce.
Existing Home Sales. These data are issued monthly by the National Association of Realtors, and capture the number of existing homes that were sold in the previous month.
High-End Home Sales. This series represents sales of new homes priced at $750,000 and over. The data are released quarterly by the U.S. Department of Commerce, and are not seasonally adjusted. Thus, a valid comparison is made to the same quarter of prior year.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building Materials Sales. These data, released monthly by the Department of Commerce, capture the total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data also include sales to projects other than residential houses.
Appliance Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as Home Centers.
We hope that you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.
