The latest housing market index from the National Association of Home Builders (NAHB) marked a rough start to the month’s schedule of housing data. This morning’s tally of starts conveyed even less optimism. Virtually all major indicators are pointing to a broad slowdown in homebuying and building activity in the June-July period and the NAHB has now declared the ongoing weakness a “housing recession”.
Projections from Moody’s see US home prices flatlining throughout 2023, assuming there is no recession in the US economy during that period. Rising home inventories and slipping sales data are likely indicative of much less upward price pressure than we had seen earlier this year when the stock of available homes for sale was scraping record lows.
Related ETFs: SPDR S&P Homebuilders ETF (XHB), iShares U.S. Home Construction ETF (ITB)
Souring housing data continues to roll in as we pass the mid-point of August, suggesting weakness in the housing market could continue to drag on the economy for the foreseeable future.
Homebuilders themselves appear to be losing confidence quickly as the National Association of Home Builders’ (NAHB) survey of nearly 1,000 member firms, known as the housing market index (HMI), fell to new lows for an eighth consecutive month, touching 49 in August. That is the lowest reading since May of 2020 and down -6 points from 55 in June. The reading was worse than the most downbeat estimate in a Bloomberg survey of economists.
This dip below 50, which suggests sentiment is now in negative territory and indicative of what NAHB economists have termed a “housing recession”, is only the second time the HMI has fallen below its breakeven point since 2014. Of the index’s three components, current sales conditions dropped -7 points to 57, sales expectations in the next six months fell -2 points to 47 and buyer traffic fell -5 points to 32.
That data was compounded by new housing starts data, released this morning, which showed a -9.6% tumble MoM to an annualized rate of just 1.446 million units in July. That is the lowest rate of starts since February 2021. Permits for future residential construction declined for the third month out of the last four, falling by -1.3%.
Growth in spending on construction as a whole has been in a trend of deceleration since February, but the latest data from the US Census Bureau shows construction expenditures in the US contracted by -1.1% from the previous month to a seasonally adjusted annual rate of $1.76 trillion in June. That was the first decrease since last September and the largest since February 2021. Economists polled by the Wall Street Journal had expected a 0.4% increase. National Mortgage Professional notes spending on private construction was at a…
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