September Housing Report – Sales Snap Back
At the highest pace of the year, existing home sales turned the corner after August’s slight decline and increased 2.4 percent to a seasonally adjusted annual rate of 5.17 million in September. Sales still remain 1.7 percent below the 5.26 million-unit level from last September.
We’re looking at a housing shortage next year if builders don’t swing the hammer at a faster pace. Whereas multi-family housing starts, apartments and condominiums, are practically back to normal – single-family construction has been a big slow-poke.
So, in September, although housing starts rose 6 percent to 1.02 million, the figure is well below the needed figure of 1.50 million.
The rise in renters as well as the rise in rents has driven builders to focus on apartments. This is causing a shortage of single-family home construction, which will cause prices to raise causing affordability to take a hit. Ideally, housing starts need to rise by 50 percent from the current levels to reach the historical average of 1.5 million., Chief Economist and Senior Vice President of Research at NAR makes sense of the construction situation:
Builders generally do not have problems selling newly built homes. The current supply situation is 4.8 months, which is already on the tight side. But trying to obtain construction loans has been very difficult for small-time homebuilders, with lenders complaining of excessive banking regulation that hinders construction loan approvals. The big-time homebuilders of Lennar, KB Homes, and Toll Brothers get their money to build from Wall Street and are having easy days because of less competition from small builders. Another reason for sluggish recovery in the single-family housing starts is due to labor shortage.
In a commentary by Mark Vitner, Senior Economist and Anika R. Khan, Senior Economist at Wells Fargo talk about how the current home sales and starts are veiling a good deal of housing market healing that has taken place:
Consumers have done a good job of repairing their balance sheets and fewer homeowners are in distress, with delinquency rates, foreclosures and the share of mortgages in a negative equity position all declining steadily over the past few years.
Mortgage rates have taken a tumble recently which is a good thing for making loans leaner for borrowers. Even still, credit standards are rigorous, making it tough for families to take advantage of the reduced rates. For a continued recovery, though, robust and steady job growth is a must. While federal regulators work to slacken credit reigns, mortgage access has top billing for the increase in sales of existing homes.