Following the winter lull, U.S. housing data had been increasingly positive. But the momentum in the housing market seems to have come to an abrupt halt.
Federal Reserve chair Janet Yellen never quite accepted talking of a housing snapback. During her semi-annual monetary policy report earlier this month she said that U.S. housing market was witnessing a lackluster recovery.
“The housing sector, however, has shown little recent progress,” she said. “While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing.”
Here’s a quick recap of all the ugly data.
- Housing starts unexpectedly plunged 9.3% to an annualized rate of 893,000, while building permits tumbled 4.2% to 963,000. Though the weakness was largely concentrated in the South.
- Pending home sales fell 1.1% in June, missing expectations for a 0.5% increase.
- New home sales fell 8.1% in June to an annualized rate of 406,000. And sales fell in every region.
- Case Shiller home prices fell 0.3% month-over-month, the first drop since January 2012. This missed expectations of a 0.3% gain. On a year-over-year basis they were up 9.3%, again missing expectations for a 9.9% rise. This was the sixth straight month that YoY home price growth decelerated.
- Mortgage applications fell 2.2% for the week ending July 25. Refinancing activity was down 4%, while purchase applications were up 0.2%. “The purchase index has been in negative territory on a year-over-year basis since September of 2013 and is currently running ~12% below year-ago levels,” writes Scott Buchta at Brean Capital.
The two positive data points we saw include a rise in homebuilder confidence to 53. With a reading above 50 showing that more homebuilders think conditions are good than bad.
And, the 2.6% rise in June existing home sales to an annualized rate of 5.04 million. Existing home sales rose above 5 million for the first time since fall 2013, but the weakness in pending sales suggests that this will trend down.
The two big constraints on the housing market continue to be tight supply and tight credit.
“If we see a material easing in the latter, an easing in the former would not likely be far behind given the improving labour market conditions and pent up demand for housing,” writes Gluskin Sheff’s David Rosenberg.
“Think of it as a modified voice from the cornfields of Iowa in Filed of Dreams: if they lend it, they will build.”