Housing demand improving in the U.S.
June 2, 2016 – The National Association of Home Builders (NAHB) is reporting strong housing demand in the U.S. in April after a weak first quarter.
Sales of newly built single-family homes increased 16.6 per cent on a monthly basis and 23.8 per cent year-over-year in April, as the pace of new home sales rose to an eight-year high (at an annual rate of 619,000) according to estimates from the Census Bureau and HUD. Inventory declined slightly to 243,000 homes for sale, representing only a 4.7 months’ supply at the April sales pace. Inventory remains tight as the inventory of homes listed for sale included only 56,000 completed, ready-to-occupy residences.
Additional good news for housing came from the resale market. According to estimates from the National Association of Realtors (NAR), April’s closings of existing home sales increased 1.7 per cent over the totals for March and were 6 per cent higher than a year ago. Even more promising, the share of first-time buyers increased again, rising to 32 per cent in April. Inventory remains tight however, standing 3.6 per cent lower than a year ago and representing only a 4.7 month’s supply (similar to that of new homes).
Tight inventory conditions mean faster turnover, with 45 per cent of homes on the market selling within one month, the highest such share since June 2015. NAR estimates suggest rising housing demand ahead. NAR’s Pending Home Sales Index jumped 5.1 per cent in April to the highest level in over a decade.
Home construction indicators remain positive, in part due to limited housing options in many markets. However, builders should be cognizant of changes within business lending channels. For example, lending conditions are tightening in the multifamily market. While still positive, the NAHB Multifamily Production Index registered a score of 53 for the first quarter of 2016. This marks the 17th consecutive quarter the index has conveyed a level above 50 (where more developers report positive market conditions than poor). But the current index is still below levels set earlier in 2015, as lending tightens and some local markets seek a new balance between supply and demand.