Weekly Economic Report

Weekly Economic Report 07.23.2018

KEY MARKET INDICATORS as of Jul 23, 2018

June Housing Starts

June Housing Starts, Existing Home Sales

Homebuilding activity in June slowed sharply. June housing starts show a decrease by 164,000 units or 12% from the revised May figure to a seasonally adjusted annual rate of 1.17 million units. Both single- and multi-family reported double-digit declines. Single-family housing starts decreased by 91,000 units (down 10%) from May to 858,000. Multi-family housing starts decreased by 73,000 units (down 19%) to 315,000. One reason for the sharp decline in June is that homebuilding activity had been unusually strong in May, so some pullback is to be expected. It is also interesting to note that most of the declines came from the South and the Midwest, so the stumble could be regional in nature. Finally, there is a good chance that the June figure is preliminary and could be revised up in subsequent months. Despite concerns about worker shortage and higher material costs, homebuilders are experiencing some of the best market conditions since 2007 with strong buyer demand. Historically, housing starts have averaged around 1.5 million units a year, so the 1.3 million units of housing starts remains low compared to historical levels and should continue to grow.

Housing starts averaged 1.29 million units in the first half of the year, up 8% from a year ago, with single-family and multi-family housing starts reporting similar growth rates. The strength in the multi-family segment so far this year has been surprising, with starts running at an annual run
rate of 395,000 units.

Most regions saw good year over year growth in single-family housing starts in the first half. But the fastest growth is coming from the West region, which has some of the highest home prices and is facing the most acute shortage of housing supply.

June Housing Starts

Existing home sales reported a seasonally adjusted annual rate of 5.38 million units in June, a decrease of 0.6% from the revised May figure. As the home-selling season got underway, inventory level continued to increased seasonally – rising 4.3% to 1.95 million units. The implied supply was 4.3 months at current sales pace, up from 4.2 months a year ago. The increase in the month of supply figure is a small positive step for the housing market, but the housing market remains under-supplied compared to a normal supply level of 6 months. The year-over-year decline in home sales is a drag for many areas of the housing market that depend on housing transaction volume, including realtors, mortgage lenders, building material producers, and contractors.

June Housing Starts

Tian Liu, Genworth Mortgage Insurance Chief Economist
tian.liu@genworth.com 919 807.9584

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