It seems like we were in a mode where things were proceeding in fits and starts since March, and then the third quarter hit and we experienced a bit of a bounce. We’ll get into that down below, but for real estate agents, it should be extremely exciting that housing has been leading the way all along.
The Big Story
Several things have been trending in the market and we finally got some data to fully back up assertions we’ve been making for a while. In addition, the Federal Reserve had a meeting and there was an election plopped in the middle of all this. Let’s take a second to unpack it all.
I’m going to start with something we don’t usually touch on too much – gross domestic product. GDP is the most prominent measure of economic growth, and residential investment makes up a big portion of the measurement, both because of the size of the transaction and everything people invest in after getting their home.
Housing contributed 2.09% to GDP growth in the third quarter as residential investment was up a staggering 59.3% on an annualized basis. That’s just based on new-home demand being fulfilled by builders. That doesn’t count furniture or anything else people might buy to actually put in a home.
At the same time, maybe you already know this because home sales are through the roof. They’re moving along at an annual rate of near 1 million on the new home side and a staggering pace well over 6 million for existing homes. I’m wondering where you find time to sleep.
Meanwhile, the Federal Reserve released a statement on short-term interest rates that apparently differed from the last statement by exactly seven words. I would love for you to click the link above and check it out, but if time is short, the status quo reigns supreme.
Finally, there was an election. I know you’re sick of the rhetoric and you’re just glad that the campaign ads are over, so I won’t say too much. However, the one thing that’s important to note is that the markets make bets on what they think will happen if one party or the other has the power of the White House and Congress.
The market shifts around these bets can cause a certain amount of volatility, with the side effect being that mortgage rates move around. We say this all the time, but if you have a client who likes the rate they see, go ahead and lock. No one has a crystal ball.
More News You Can Use
This portion of the report was put together with the assistance of Econoday.1 OK, let’s get to it!
Housing Market Index
Builder confidence hit another all-time high in October as this index rose 2 points to 85. This is being heavily supported by lower interest rates, but we’ll have to keep track of this going forward.
Current sales were up 2 points to come in at 90. Meanwhile, sales over the next 6 months were up a few points to 88. Finally, traffic of potential buyers touring homes was unchanged from 74, but it had been revised higher since the initial release of September numbers. This is encouraging because traffic had been stubbornly low for a long time.
New Residential Construction
The number with the most immediate effect on strained housing supply is housing completions and these were up 15.3% in October to settle at 1.413 million. Crucially, there was a 2.1% increase in single-family housing completions at 921,000 on a seasonally adjusted annual basis.
Meanwhile, housing starts came in at an annual rate of 1.415 million, up 1.9% for the month. Even better, there was an 8.5% uptick in single-family starts at 1.108 million.
Finally, this is the furthest out, but more construction is on the way. Permits were up 5.2% for the month at 1.553 million. This included a 7.8% increase in single-family permits at 1.119 million.
Existing Home Sales
As mentioned earlier, the housing market is hotter than Phoenix in the middle of summer. Existing home sales were up 9.4% in September to settle at 6.54 million on a seasonally adjusted annual basis. Year-to-year, sales are up 20.9%. There is no lack of interest out their right now.
On the downside, supply was 1.3% lower at 1.47 million homes on the market. This means that at the current pace of sales, there are only 2.7 months’ worth of supply available. This is helping push prices up as they’ve risen 14.8% from the same time a year ago to $311,800.
Low mortgage rates are supporting higher sales everywhere, but with everyone working remotely, places that would typically be vacation markets are really seeing a boom.
New Home Sales
New home sales were down 3.5% in September to an annual rate of 959,000. While this is below estimates, it’s still 33.9% higher than sales were on a seasonally adjusted basis in February. The good news is that supply is up and it’s at 3.8 months vs. 3.4 months at the current rate of sales in August.
Prices for new homes are also up 3.5% on the year with the median coming in at 326,800. This is up 1.4% on the month.
Case-Shiller House Price Index
These numbers are from August and represent a 3-month average, but they do provide a look at average prices for all sales in the 20 metro areas covered. Prices were up 0.5% on a seasonally adjusted basis and 1.1% overall.
In a sign that should be more encouraging for real estate agents working on commission, overall undigested prices are up 5.2% on the year, which is the fastest pace of appreciation in 15 years.
FHFA House Price Index
Unlike the Case-Shiller index, this one isn’t a 3-month average. It also only covers homes bought with conventional mortgages backed by Fannie Mae or Freddie Mac. In the index, home prices were up 1.5% for the month and 8% for the year, which is also the fastest yearly rate for home price increases since 2005.
Gains were widespread across the country ranging from 1.9% in the West South Central region 20.9% in the East South Central region.
Consumer Confidence
Consumer confidence was down 0.4 points in October, settling at 100.9. Results were mixed, but one really good thing if you’re an agent is the fact that plans to buy a home in the next 6 months were up a bit at 6.6% of those surveyed.
Pending Home Sales Index
Pending home sales were down 2.2% in the month of September to an index level of 130. Because this refers specifically to the number of existing homes with a purchase agreement in place for sale, existing home sales will likely be lower next month. Still, it should be noted that this is 20.5% higher than September last year.
Mortgage Rates
Mortgage rates have pushed slightly higher recently, but they still remain in a very good spot. All rates are from the Freddie Mac weekly survey and based on 20% down payments.
The average rate on a 30-year fixed mortgage with 0.7 points paid in fees was up 6 basis points to 2.84% last week. This is down from 3.75% last year.
Looking at a 15-year term, the average fixed interest rate was up a couple of basis points to 2.34% with 0.6 points paid. That’s fallen from 3.2% a year ago.
Finally, the average interest rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage with 0.4 points paid at closing was 3.11%, which is up 22 basis points. However, that’s still down from 3.44% at this time last year.
We hope this has given you new insight to share with your clients. For even more, check out our real estate page.
1 Important Legal Notice: Econoday has attempted to verify the information contained in this calendar. However, any aspect of such information may change without notice. Econoday does not provide investment advice, and does not represent or warrant that any of the information is accurate or complete at any time. Copyright 2020 Econoday, Inc. All rights reserved.
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