September 19, 2012
In the past two days, we have received a much clearer picture about the state of the housing recovery, and as a whole the news has been pretty upbeat. It has been a few weeks since I last checked in on the residential market, so let's see what updates the last few reports have brought.
Yesterday, the National Association of Home Builders announced that their index for homebuilders' confidence rose three points to a reading of 40; topping estimates. This represents the fifth straight month that homebuilder confidence has risen and September's reading just so happens to be the highest in more than six years!
Today, the Commerce Department reported that August housing starts advanced 2% to a seasonally adjusted rate of 750,000. This came below economists' estimates of 775,000 starts, but construction of single-family homes jumped to 535,000—the fastest rate in over two and a half years. This gain was partially offset by a 4.9% drop in multifamily starts.
The Commerce Department also announced that national building permits remained largely unchanged at 803,000 in August—compared with 811,000 in July. However, it still topped the 775,000 consensus estimate. We also need to take into account that July's reading represented a four-year high.
Finally, August existing home sales jumped 7.8% to a 4.82 million annual rate—that's the highest since May 2010! This also blew economists' estimates out of the water—they had called for a 4.55 million pace.
These reports paint a picture where rock-bottom mortgage rates and the shrinking supply of homes for sale are aiding the housing recovery. All-in-all, this is great news for homebuilders, home sellers and also the market as a whole. A housing recovery oftentimes leads to more money in the pockets of homeowners—and this is great news for consumer confidence and spending.
Other than the weekly jobless report and the index of leading economic indicators report, that wraps up the domestic economic news for the week. Next week we'll receive the third update to second-quarter GDP, and you can bet that will be a market mover.