The new home market is starting to take the lead in the economic indicators. The recent jump in new home sales, the large increase in housing starts & permits, and now the 5-point spike in the housing market index for June, solidifies that housing is definitely headed in a positive direction. The latest housing market index report is the strongest we have seen in a while and matches last September’s reading.
Based upon the latest readings the South is the strongest growth region for new homes in the country. The South is by far the largest region of the four. The West is the second strongest market followed then by the Midwest. Surprisingly the Northeast, which is the smallest new home region, continues to contract.
The new home market seems to be immune to rising interest rates. Despite recently rising rates the new home market continues to thrive. This sector of the housing market also seems to be getting a solid boost from the recent strength in the jobs market. Housing starts & permits surged in April, and although the May report unexpectedly declined, the numbers are still quite strong.
The headline for housing starts does not tell the real picture. Although the number of new homes being built declined by 11.1 percent for the month of May…when you combine the data with April’s revised upward record increase of 22.1 percent from March, new housing is quite strong.
Demonstrating just how strong this sector of the housing market really is, permits to construct new homes surged by 11.8 percent to 1.275 million. This follows April’s jump of 9.8 percent. Permits are the leading indicator in the report and the latest pace is the best since way back in August 2007.
At long last the housing sector is beginning to lead the economy higher. The first quarter housing numbers were far below expectations mainly due to the heavy winter weather in many parts of the country. The weather delayed both new construction as well as the listing and sales of existing homes. Today housing continues to improve and mortgage lenders around the country will confirm that they are handling an incredible amount of loan volume.
The investment community was expecting to hear Janet Yellen, the Fed Chief, announce a more definitive projection on when the Fed would be raising rates. Most experts were expecting to hear that the Fed was leaning towards a September increase. Well…that did not happen. The Fed continues to indicate that they are taking a wait and see approach towards monetary policy and that they will not rush to make a move. As mentioned in last week’s newsletter, the International Monetary Fund also made the unusual request to the Fed to hold off on raising rates.
This week’s potential market moving reports:
- Monday June 22nd – Existing Home Sales
- Tuesday June 23rd – New Home Sales and Durable Goods Orders
- Wednesday June 24th – MBA Applications and GDP
- Thursday June 25th – First Time Jobless Claims