Housing Market: Housing Starts & Home Sales

Economic Forecasts

Housing Slowdown will be Temporary

Kiplinger's latest forecast on housing starts and home sales

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Housing activity has slowed because of lockdowns, but will rebound strongly when lockdowns are lifted. The housing market was showing signs of momentum in the months prior to the COVID-19 outbreak. With federal, state and local governments having adopted measures to force social distancing and slow down the spread of the virus, the housing market has been slowed, though not stopped completely. After lockdowns are lifted, it should rebound quickly, as strong buyer demand collides with still limited inventories.

Apartment construction slowed down as the virus hit. Multifamily starts fell 14.9% in February, while single-family starts rose 6.7%. Total housing starts fell 1.5% to a seasonally adjusted rate of 1.599 million. Prior to February’s decline, housing starts had a positive trend thanks to unseasonably warm weather in the winter months. Home builders ramped up construction late last year, so building began 2020 at a strong pace.

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See Also: A Housing Shortage Looms as Builders Can't Keep Up

New-home sales fell in February by 4.4% to a seasonally adjusted rate of 765,000. January’s sales were revised higher to 800,000. A combination of earlier declines in mortgage rates and solid job growth had been supporting new home sales. There were 319,000 homes for sale in February – a five-month supply at the current sales pace. Sales continue to outpace inventory growth; the number of new homes listed for sale has trended down since January 2019. New-home prices increased in February. With tight inventories pushing prices up, the share of new homes sold at prices below $300,000 fell to 38% in February from 43% in the previous month. The construction backlog increased in February. Sales of homes where construction had not yet started accounted for 30% of total sales over the month, up from 27% in January.

Existing-home sales surged in February, reversing the previous month’s decline. Sales of existing homes rose 6.5% in February to a seasonally adjusted rate of 5.77 million – a post-recession high. Compared with a year earlier, sales were up 7.2%. Existing-home sales have bounced around in recent months, posting small gains and small losses over the past seven months. Homes continue to sell fairly quickly, averaging 36 days on the market. Many are selling much quicker than that, with 47% of homes sold in February staying on the market for less than one month. On a year-over-year basis, total inventory was down 9.8% – the eighth consecutive decline.

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Home-price growth continued to rise ahead of the COVID-19 disruption. The S&P CoreLogic Case-Shiller National Home Price Index rose 3.9% in January from a year ago, up from 3.7% in December. This is the seventh consecutive month of year-over-year increases.

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