Category Archives: Finance & Economics

Sales of new homes rose unexpectedly in July, following significant revisions in the previous months data. Sales of newly built, single-family homes in July rose 10.6% to a 739,000 seasonally adjusted annual rate from significant upward revisions in June, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in July is up 5.6% from a year earlier. After the notably higher revisions for the May and June data, new home sales from January through July of 2024 are up 2.6% in 2024 compared to the same period in 2023. …New single-family home inventory in July ticked lower to a level of 462,000, down 1.1% from the previous month. Only 16.7% of inventory available for purchase consists of completed, ready-to-occupy homes (102,000), although this inventory component is up 44% from a year ago.

UNITED STATES — The housing crunch has been well documented in high-cost big cities, where rents and mortgages break the bank. Now it has moved into the rest of the country. The culprit is too little housing, and it began two decades ago. …Cities and states understand they have a housing problem. To increase the pace of construction, many have cut back regulatory barriers that make housing slow and expensive to build. …But the nation’s housing shortage isn’t only about zoning in cities. For one thing, developers everywhere find it harder to raise money, and homeowners find it harder to get loans. That’s because banks and the government, in a quest to prevent another housing bubble, have raised lending standards and made mortgages harder to get. For another, builders simply aren’t putting up subdivisions at the rate they once did. [to access the full story a NY Times subscription is required]

WASHINGTON, DC – Despite the recent pullback in mortgage rates, total home sales are expected to come in lower than previously forecast through the rest of 2024, and then not pick up meaningfully until further out in 2025, according to the August 2024 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group. The ESR Group notes that purchase mortgage applications have barely budged in response to the more favorable rate environment, and high-frequency measures of home purchase demand, including mortgage applications, showing requests, and listings views, remain below year-ago levels. Additionally, the Fannie Mae Home Purchase Sentiment Index^® continues to report a near-record low share of respondents indicating it’s a “good time to buy” a home. As such, the ESR Group has downgraded its total home sales forecast to 4.78 million in 2024 and 5.19 million in 2025.

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates gains for custom home building after some recent slowing. Custom home building typically involves home buyers less sensitive to changes for interest rates. There were 52,000 total custom building starts during the second quarter of 2024. This marks an almost 6% increase compared to the second quarter of 2023 and the best reading since the third quarter of 2022. Over the last four quarters, custom housing starts totaled 180,000 homes, a 5% decline compared to the prior four quarter total (189,000) due to weakness in prior quarters.

New residential construction in the U.S. saw a steep drop in the month of July, according to a report released by the Commerce Department on Friday. The report said housing starts plunged by 6.8% to an annual rate of 1.238 million in July after jumping by 1.1% to a revised rate of 1.329 million in June. Economists had expected housing starts to slump by 1.7% to an annual rate of 1.330 million from the 1.353 million originally reported for the previous month. With the sharp pullback, housing starts tumbled to their lowest level since hitting an annual rate of 1.053 million in May 2020. Single-family housing starts led the way lower, plummeting by 14.1% to an annual rate of 851,000 in July after edging down by 0.1% to rate of 991,000 in June. On the other hand, multi-family starts soared by 14.5% to an annual rate of 387,000 in July after surging by 4.6% to a rate of 338,000 in June.

A lack of affordability and buyer hesitation stemming from elevated interest rates and high home prices contributed to a decline in builder sentiment in August. Builder confidence in the market for newly built single-family homes was 39 in August, down two points from a downwardly revised reading of 41 in July. …Challenging housing affordability conditions remain the top concern for prospective home buyers, as both present sales and traffic readings showed weakness. However, with current inflation data pointing to interest rate cuts from the Federal Reserve and mortgage rates down markedly in the second week of August, buyer interest and builder sentiment should improve in the months ahead. …The HMI index charting current sales conditions in August fell two points to 44 and the gauge charting traffic of prospective buyers also declined by two points to 25. The component measuring sales expectations in the next six months increased one point to 49.

Inflation dropped below a 3% annualized growth rate for the first time since March 2021 even though housing costs continue to climb. Nonetheless, the headline reading is another dovish signal for future monetary policy, following signs of weakness in the most recent job report. Despite a slowdown in the year-over-year increase, shelter costs continue to exert significant upward pressure on inflation, contributing nearly 90% of the monthly increase in overall inflation and over 70% of the total 12-month increase in core inflation. As consistent disinflation and a cooling labor market bring the economy into better balance, the Fed is likely to further solidify behind the case for rate cuts, which could help ease some pressure on the housing market. …The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by 0.2% in July on a seasonally adjusted basis, after declining 0.1% in June. 

Wood framing remains the most dominant construction method for completed single-family homes in the U.S. For 2023 completions, 93% of new homes were wood-framed, another 7% were concrete-framed homes, and less than half a percent were steel-framed. On a count basis, there were 930,000 wood-framed homes completed in 2023. This was a 3% decrease compared to the 2022 total. The wood-framed market share decreased to 93% in 2023, after it increased for three consecutive years, from 2019 (90%) to 2022 (94%). As noted above, steel-framed homes are relatively uncommon. …The concrete-framed market share increased from 6% in 2022 to 7% in 2023. On a count basis, there were 65,000 concrete-framed homes completed in 2023, up 3% from the previous year. This is the first increase after three straight years of declines (down 13% in 2020, 5% in 2021 and 11% in 2022). Non-wood based framing methods are primarily concentrated in the South due to residential resiliency requirements. 

Confidence in the market for new multifamily housing declined year-over-year in the second quarter of 2024, according to results from the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB). The MMS produces two separate indices: The Multifamily Production Index (MPI) had a reading of 44, a decrease of 12 points year-over-year, while the Multifamily Occupancy Index (MOI) had a reading of 81, falling eight points year-over-year. Multifamily developers are less optimistic than they were at this time last year, given high interest rates and limited financing availability to develop multifamily properties. However, financial markets may become more stable later in the year, as recent weak economic data make it more likely that the Federal Reserve will cut interest rates.

The U.S. exported 739,277.2 metric tons of wood pellets in June, down from both 926,024.1 metric tons the previous month and 866,131.6 metric tons in June 2023, according to data released by the USDA Foreign Agricultural Service on Aug. 6. The U.S. exported wood pellets to more than a dozen countries in June. The U.K. was the top destination for U.S. wood pellet exports at 553,735 metric tons, followed by the Netherlands at 92,936.1 metric tons and Japan at 56,272.7 metric tons. The value of U.S. wood pellet exports fell to $145.2 million in June, down from $167.35 million in May and $171.46 million in June 2023. Total U.S. wood pellet exports for the first half of 2024 reached 4.86 million metric tons at a value of $919.83 million, compared to 4.62 million metric tons exported during the same period of last year at a value of $861.47 million. [END]

WASHINGTON, DC – The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased 1.1 points in July to 71.5, as an overall lack of affordability continues to hamstring consumer sentiment toward the housing market. This month, only 17% of consumers indicated that it’s a good time to buy a home, down from 19% in June, while the share believing it’s a good time to sell decreased from 66% to 65%. The shares expecting home prices to rise versus fall over the next 12 months converged but remain some distance apart at 41% and 21%, respectively. Twenty-nine percent of consumers expect mortgage rates to decrease over the next 12 months, while 31% expect them to increase. …Doug Duncan, Fannie Mae Chief Economist, “Our recently published Mortgage Understanding Study reaffirmed what we’ve long known: that a significant majority of consumers want to own a home. However, 82% told us in July that it’s a ‘bad time’ to buy, a share that’s remained consistent since January 2023.

Recent trends reveal a complex interplay between lumber prices, construction activity and broader economic indicators. …The observed stagnation in housing demand is mirrored in both wood product prices and industry sentiment. …The broader economic environment, particularly the anticipation around Federal Reserve (Fed) policies, plays a crucial role in shaping market expectations. With recent inflation readings suggesting that price increases are not accelerating, bond markets are feeling more optimistic about some rate cuts this year. Consumption indicators present a mixed picture for the lumber market, with peak seasonal demand failing to significantly tighten market conditions.  As the US housing market navigates these complexities, the potential for a revitalized construction sector in 2025 is emerging. Our forecast is now calling for housing construction to rise 11% in 2025. This growth is expected to address the current undersupply and stimulate market recovery.