Existing Home Sales, New Construction Slow
Sales of existing homes declined in January but are projected to increase throughout the year. Meanwhile, concerns over tariffs have led home builders to adopt a more cautious stance. Read on for further insights.
· Existing Home Sales Expected to Improve This Year
· Home Builder Confidence Declines Amid Tariff Concerns
· Construction Activity Slows in January
· Jobless Claims Data Continues to Show a Consistent Trend
Existing Home Sales Expected to Improve This Year
In January, existing home closings decreased 4.9% from December to a 4.08 million-unit annualized pace, slightly missing projections. However, sales have risen year-over-year for four consecutive months, and inventory saw a modest uptick.
What’s the bottom line? This was a strong January report, considering it measured home shopping from November and December when rates were elevated. Plus, January is typically a slow time for the housing market.
“Things are looking up,” according to the National Association of REALTORS® Chief Economist Lawrence Yun, who expects home sales to continue rising as rates and prices stabilize.
While January inventory improved to 1.18 million units, it remains tight compared to pre-pandemic levels. Plus, only 829,000 of those were active listings; the rest were under contract and not truly available. This ongoing supply shortage, combined with pent-up buyer demand, bodes well for continued home price appreciation.
Home Builder Confidence Declines Amid Tariff Concerns
Home builder sentiment took a hit in February, with the National Association of Home Builders (NAHB) reporting a drop in their confidence index from 47 in January to 42. This figure is now well below the neutral benchmark of 50, signaling contraction.
All three components of the index – buyer traffic, current sales and future sales expectations – decreased, with future sales expectations seeing a significant 13-point drop to their lowest level since December 2023.
What’s the bottom line? NAHB Chief Economist Robert Dietz noted that the decline was driven by uncertainty over the "scale and scope of tariffs," with 32% of appliances and 30% of softwood lumber coming from international trade.
However, the survey timing appears to have impacted the results. Responses collected before the announcement of a one-month tariff pause on goods from Canada and Mexico recorded a lower Housing Market Index (HMI) of 38, while those gathered after the pause produced a higher score of 44. This suggests the decline in sentiment could have been less severe with different survey timing.
Construction Activity Slows in January
Housing Starts declined by nearly 10% from December to January, with decreases seen in both single-family and multifamily construction. However, the December housing data reflected one of the strongest levels of activity in 2024, providing important context for the January decline. Meanwhile, Building Permits, a leading indicator, rose slightly to start the year.
What’s the bottom line? NAHB Chair Carl Harris noted that "high construction costs, elevated mortgage rates, and challenging housing affordability conditions are causing builders to approach the market with caution." This also suggests home prices will remain supported, as insufficient supply is coming on the market to meet demand, presenting ongoing opportunities for wealth-building through homeownership.
Jobless Claims Data Continues to Show a Consistent Trend
Initial Jobless Claims increased by 5,000, totaling 219,000. Continuing Jobless Claims also rose by 24,000 to 1.869 million, remaining above 1.8 million for the thirty-seventh consecutive week.
What’s the bottom line? The latest data suggests that while layoffs remain low, the labor market continues to encounter difficulties in promptly reintegrating job seekers. Additionally, as many individuals are eligible for benefits for just 26 weeks, the rise in Continuing Claims upon benefit expiration points to persistent vulnerabilities in the labor market.
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