Housing May Be on the Rebound, or Not

New home sales pick up, but existing ones still lag.

Some good news for the problematic housing industry: Sales of new homes continue to nudge up, likely due to dipping mortgage costs.

Now, all the housing market needs is for flagging existing home sales to get the message.

The National Association of Home Builders index, which tumbled a stunning 15% from October to January, returned this month to last year’s healthy levels. Ian Shepherdson, chief economist at Pantheon Macroeconomics, attributed much of the rise to lower mortgage rates—a 30-year loan now charges 4.25%, almost a full point below last fall, according to Bankrate.

Strong job growth this year is another factor, said Shepherdson. Consequently, he added in a research note that he expects new home sales to “hit new highs in the summer, lifting homebuilders’ sentiment too, and allowing them to run down excess inventory.”

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The housing market. which has been gradually lifting itself out of the Great Recession doldrums despite a downward detour during the 2014-15 oil slump, sparked concern in late 2018 and earlier this year. Slowing global economies and escalating Federal Reserve-ordered interest rates combined to chill housing’s advance. Not to mention wildfires, hurricanes, and unusually cold weather. 

“In short, talk earlier this year of a housing-led downturn in the broader economy was way off the mark,” Shepherdson wrote.

But for the housing market, crosscurrents do linger. Following a surge in February, the far-larger existing home sales sector flagged a worrisome 4.9%. In all, reports the National Association of Realtors (NAR), sales of these homes are down 5.4% from 12 months before.

A large part of that falloff may stem from the ongoing problem with affordability. The NAR’s affordability index slid 2.8% in February, the last month available, compared to the year-before number. The median price for a single-family home rose 3.6% to $251,400 over the period.


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