Economic Indicators for Housing Market Are Crushing Pre-Pandemic Expectations
New York, N.Y. (PPD) — Economic indicators widely show the U.S. housing market is “booming”, surpassing pre-pandemic levels and expectations. Experts now foresee housing leading the economic recovery and have raised growth forecasts for the sector.
On Friday, the National Association of Realtors (NAR) reported existing home sales posted another record gain in July. The key housing market indicator rose 24.7% to a seasonally-adjusted annual rate of 5.86 million, surpassing the previous record set in June.
“The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days,” Lawrence Yun, the chief economist at NAR, said. “With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”
While existing home sales for the month of June were revised down slightly by 0.5% to 20.2%, these back-to-back records far surpassed economists’ expectations and follow three straight months of declines. Existing home sales are now up 8.7% from a year ago (5.39 million in July 2019).
“The number of new listings is increasing, but they are quickly taken out of the market from heavy buyer competition,” Mr. Yun added. “More homes need to be built.”
On Monday, the NAHB Housing Market Index (HMI) reported builder confidence unexpectedly rose another 6 points to 78 in August, matching the all-time high and beating the consensus forecast.
“Housing has clearly been a bright spot during the pandemic and the sharp rebound in builder confidence over the summer has led NAHB to upgrade its forecast for single-family starts, which are now projected to show only a slight decline for 2020,” said NAHB Chief Economist Robert Dietz.
During the period of strong economic growth under the Trump Administration, housing remained the only sector still underperforming. By the end of 2019 and start of 2020, it appeared the U.S. economy would be firing on all four cylinders.
The HMI started 2020 at a 20-year high. In January, builder confidence in the market for newly-built single-family homes edged just one point lower to 75 from December 2019. The two monthly readings had marked the highest sentiment levels since July of 1999.
But that was before the shutdown efforts to mitigate the coronavirus (COVID-19) pandemic, which only briefly shook builder confidence. The closely-watched HMI signals sustainability for the boom in the housing market. Indeed, new homes are being built at breakneck pace.
New residential construction statistics for housing starts and building permits skyrocketed in July, despite lingering effects due to coronavirus (COVID-19). The former gained 22.6% (±14.7%) and the latter 18.8% (±1.1%), respectively.
New home sales soared 13.8% (±17.8%) to a seasonally adjusted annual rate of 776,000 in June, easily beating the consensus forecast. That’s the highest level for new home sales since before the Great Recession, or July 2007.
The month of May was revised up from 672,000 to a rate of 682,000. New home sales have shown little impact due to the pandemic response and are now 6.9% (±13.7%) higher than the June 2019 estimate of 726,000.
The Pending Home Sales Index (PHSI) for July is due out next week. But as a result of the stronger-than-expected recovery and growth in the PHSI and the broader housing market, the NAR raised its forecast.