Pending home sales rose by 0.9% in July from the previous month, according to the monthly index released Thursday by the National Association of Realtors.

The figure exceeded expectations on Wall Street. Economists were expecting pending home sales to fall 0.5% in July.

Transactions were still down 14% from last year.

Pending home sales reflect transactions where the contract has been signed for the sale of an existing home, but the sale has not yet closed. Economists view it as an indicator for the direction of existing-home sales in subsequent months.

Big picture: High rates and home prices have sent many potential buyers to the sidelines, but those who are purchasing a home out of necessity, or who have the ability to make a cash offer, are still pushing through. Sales activity was a lot less brisk in July due to the ongoing inventory issue and with the 30-year loan rate at or near the 7% range. And with rates hitting a multidecade high in August, expect the data to continue to show a housing market that’s dragging along.

What the realtors said: “The small gain in contract signings shows the potential for further increases in light of the fact that many people have lost out on multiple home buying offers,” said Lawrence Yun, chief economist at the NAR.

“Jobs are being added and thereby enlarging the pool of prospective home buyers,” he added. “However, rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many.”

Market reaction: Stocks were up in early trading on Wednesday. The yield on the 10-year Treasury note was around 4.1%.
(Realtor.com 8/30/23)

The numbers: U.S. home prices rose in June, as demand to purchase homes outpaced the supply of for-sale listings.

The S&P CoreLogic Case-Shiller 20-city house-price index rose 0.9% in June, as compared with the previous month. Prices were up for a fourth month in a row.

A broader measure of home prices, the national index, rose on a month-over-month basis in June by 0.7%, but it was flat over the past year. All numbers are seasonally adjusted.

On a year-over-year basis, U.S. home prices were down 1.2% nationally.

Home prices grew the most on an annual basis in Chicago, Cleveland, and New York, according to the Case-Shiller report.

Despite an average 30-year mortgage rate of over 7%, buyer demand hasn’t dried up.

And a persistent lack of home listings has pushed up home prices, as buyers converge on a limited number of homes on the market. Bidding wars are back in some markets, while others are seeing an uptick in all-cash buying, as those purchasers avoid relatively high borrowing costs.

Key details: Several big office hubs posted the strongest home-price gains in the month of June.

Chicago, Cleveland and New York led the rankings as the three cities with the highest year-over-year price gains among the top 20 cities in June.

Homes in Chicago were up 4.2% in June as compared with the same month last year.

The West Coast continued to lag behind the rest of the country: Home prices fell in San Francisco and Seattle the most.

A separate report from the Federal Housing Finance Agency also showed home prices rising in June, up 0.3% from May. Home prices were the strongest in New England, according to the government’s data.

And over the last year, the FHFA index was up 3.1%. The agency also said that home prices rose 3% between the second quarters of 2022 and 2023.

Big picture: Home prices went up in June as the housing market continues to be hampered by its inventory woes. Homeowners who have no reason to sell hang on to their homes, and buyers converge on a limited number of home listings.

What S&P said: “Regional differences continue to be striking,” Craig J. Lazzara, managing director at S&P DJI, said.

“On a year-over-year basis, June’s three best-performing cities were Chicago (+4.2%), Cleveland (+4.1%), and New York (+3.4%),” he said, while “the worst performers continue to be in the Pacific and Mountain time zones.”

Lazzara also noted that prices rose in all 20 cities in June on a month-over-month basis.

Overall, home prices have held up amid a sharp rise in interest rates engineered by the Federal Reserve to reduce inflation. “We recognize that the market’s gains could be truncated by increases in mortgage rates or by general economic weakness, but the breadth and strength of this month’s report are consistent with an optimistic view of future results,” Lazzara added.

What are they saying? The Case-Shiller data reflects the housing market in June, which is “different” from today, Lisa Sturtevant, chief economist at Bright MLS, said in a statement.

Rates are over 7% and home sales have fallen to the lowest level since 2010, which may push more buyers out of the market, she added. And given the “robust economy and low supply, don’t expect a major price correction, but it’s likely we’ll see modest year-over-year price declines in many markets this fall,” Sturtevant said.

Market reaction: U.S. stocks were up in early trading on Tuesday. The yield on the 10-year Treasury note rose above 4.2%.
(Realtor.com, 8/30/23)

Home buyers are finding few listings of previously-owned homes, and are turning to builders, who have scaled up efforts to build more homes.

U.S. new home sales rose 4.4% to an annual rate of 714,000 in July, from a revised 684,000 in the prior month, the Commerce Department reported Wednesday.

The number is seasonally adjusted and refers to how many homes would be built over an entire year if builders continue at the same pace every month.

The pace of sales in July is still the highest since February 2022.

The jump exceeded expectations on Wall Street. Economists had forecast new home sales to total 703,000 in July.

The rise in new home sales was led by a sharp increase in the Midwest.

New home sales have been generally trending higher in the past few months as home builders are one of the few players offering inventory to buyers.

The data from June was revised significantly. New home sales fell to a revised 684,000 in June, compared with the initial estimate of a 2.5% drop to 697,000.

The new home sales data are volatile month-on-month and are often revised.

Key details: The median sales price of a new home sold in July rose to $436,700 from $415,400 the month prior.

The supply of new homes for sale fell 2.7% between June and July, equating to an 8-month supply.

Regionally, the Midwest led the nation in new home sales, posting an increase of 47.4%. The West also saw sales rise by 21.5%. New home sales fell in the Northeast and the South.

Overall, sales of new homes are up 31.5% compared to last year.

Big picture: Home builders have thus far enjoyed the effect of low inventory of previously-owned homes, as it pushed more buyers to newly built homes and boosted sales.

Publicly listed home builders have reported an increase in profits as the housing market grapples with an imbalance between buyer demand and low supply of homes. Toll Brothers, which reported its third-quarter earnings on Tuesday, exceeded Wall Street expectations with its results.

“Our third quarter performance reflects a market for new homes that continues to benefit from historically low levels of resale inventory, favorable long-term demographic trends, and the persistent underproduction of homes for well over a decade,” Douglas C. Yearley, Jr., chairman and chief executive officer of Toll Brothers, said in a statement.

But with mortgage rates rising since July, even builders are worried about a drop in sales as buyers find it increasingly difficult to buy a home with rising borrowing costs. In mid-August, the 30-year mortgage rate rose to the highest level since 2000, staying firmly above 7%.

Though builders will likely turn to incentives like price cuts and mortgage rate buy downs, that sales may still take a dip as buyers pull back. Builders are prepared for that to happen, as seen in their August confidence survey, when confidence waned for the first time this year.

What are they saying? “Given the ability of builders to buy rates down for prospective borrowers, if you are looking to buy, the new market is the best option,” Neil Dutta, head of economics at Renaissance Macro Research, wrote in a note. “One thing to monitor will be the extent to which higher rates might be pushing up cancellations.”

“Mortgage payments as a share of income are still higher than during the [Great Financial Crisis] and mortgage applications for purchase in July fell back down toward 30-year lows,” Leah Fahy at Capital Economics wrote in a note.

“We don’t think the Fed will start cutting interest rates until 2023, so average mortgage rates are likely to remain above 6% for the rest of this year. Given the affordability constraints facing buyers, we expect new home sales to level off from here, stalling at around 700,000 annualised before rising again later in 2024,” she added.

Market reaction: Stocks were up in early trading on Wednesday. The yield on the 10-year Treasury note was above 4.2%.

Shares of builders, including D.R. Horton, Inc., Lennar Corp, PulteGroup Inc., and Toll Brothers Inc. were up in the morning trading session.
(Realtor.com 8/30/23)

Construction rose 3.9% that month as home builders sought to fill Americans’ need for homes.

So-called housing starts rose to a 1.45 million annual pace from 1.4 million in June, the government said Wednesday. That’s how many houses would be built over an entire year if construction took place at the same rate in every month as it did in July.

Housing starts are down from a peak of 1.8 million in April 2022.

The July data was in line with expectations on Wall Street. Economists on Wall Street were expecting an increase in starts to 1.45 million. All numbers are seasonally adjusted.

The number of homes started in June was heavily revised downwards, to a drop of 11.7% to 1.44 million, from an initial reading of a drop of 8%. The drop in June was the biggest in a year.

Strong interest from aspiring homeowners is boosting builders’ business, as buyers face a lack of options in the resale market, but with mortgage rates remaining high, that may dampen home-buying demand further, which could hurt home buyers in the upcoming months.

Single-family construction led in July, while multi-family was flat. The increase in construction activity in July was led by the West, where builders reported a 28.5% increase in single-family home starts.

Building permits, a sign of future construction, rose 0.1% to a 1.44 million rate.

Key details: The construction pace of single-family homes rose by 6.7% in July, and apartment building was flat.

Home builders ramped up the most in the West, followed by the Midwest. Housing starts overall in the West rose by 14%, and 10% in the Midwest.

Housing starts fell in only one of the four regions—the South. Construction of homes fell by 1.3% in July in the region.

Permits for single-family homes inched up 0.6% in July, while permits for buildings with at least five units or more dropped by 0.2%.

Around 1.68 million homes were under construction as of July.

Big picture: Home builders are seen as the biggest winners of this frozen housing market, but even their shine may wear off in the face of the new normal of 7% mortgage rates.

Even though housing starts rose in July, builders are concerned about demand and are upping sales incentives to boost sales. The share of builders cutting prices to boost sales rose for the first time in five months to 25% in August, the National Association of Home Builders. The average price cut was 6%. Builders were also becoming less optimistic about future sales, as traffic of potential buyers fizzled out.

What are they saying? “There was no major drama in the US housing starts data for July, staying consistent with the slow pace for homebuilding seen since last summer,” Ali Jaffery, an economist with CIBC Economics, wrote in a note. “Momentum in housing starts over the past few months has picked up from its lows around the start of the year but the level remains fairly weak.”

“It does seem that housing activity is in the process of forming a bottom after plunging from early 2022 through the beginning of this year,” Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, wrote in a note.

He also noted that multi-family starts—which includes the construction of townhomes and apartments—fell in July to the lowest reading in nearly two years. “The boom in apartment building that took place in 2021 and 2022 is beginning to lose steam,” Stanley said. “A large amount of apartment supply is coming on line, which may help to tamp down the uptrend in shelter costs. The slowdown in multifamily starts in recent months suggests that builders have determined that there is enough apartment supply in the pipeline.”

Market reaction: U.S. stocks were set to open lower early Wednesday. The yield on the 10-year Treasury note rose above 4.2%.
(Realtor.com 8/30/23)