REUTERS
"U.S. home builder sentiment, New York state factory activity drop"
Reuters
August 15, 2022
Aug 15 (Reuters) - U.S. single-family homebuilders' confidence and New York state factory activity fell in August to their lowest levels since near the start of the COVID pandemic, a further sign the economy is softening as the Federal Reserve raises interest rates.
The National Association of Home Builders/Wells Fargo Housing Market Index fell 6 points to 49 this month, the eighth consecutive monthly decline and the lowest reading outside of the pandemic era since 2014, a survey released on Monday showed.
A reading under 50 indicates that more builders view conditions as poor than good.
According to the NAHB, rising construction costs and high mortgage rates weighed on sentiment.
The Fed's increasingly aggressive fight to quash high inflation by lifting borrowing costs has already begun to be felt in the housing sector, which is highly sensitive to interest rates.
The current sales of single-family homes component fell to 57 from 64 and the gauge of single-family sales expectations for the next six months fell to 47 from 49, while the prospective buyer traffic index declined to 32 from 37.
Meanwhile, a separate survey by the New York Fed showed the "Empire State" index on current business conditions plummeted 42.4 points to a reading of -31.3 this month.
A reading below zero signals a contraction in the New York manufacturing sector.
Manufacturers reported a sharp decline in orders and shipments.
The survey's new orders index tumbled 36 points to a reading of -29.6 while the shipments index plummeted 49.4 points to -24.1.
The activity decline in the Aug. 2-9 survey also is seen as reflecting the impact of the Fed's actions, which have caused financial market conditions to tighten.
The U.S. central bank has raised its benchmark overnight interest rate by 225 basis points since March and is expected to raise its policy rate by another 50 or 75 basis points at its next meeting on Sept. 20-21.
The Fed is aiming to dampen demand across the economy enough to cool inflation, which is running at a four-decade high, without sparking a sharp rise in unemployment.
The effort, however, has fueled fears of a recession.
Fed policymakers have underscored that the central bank will need global supply chains to untangle somewhat in order to help bring down inflation.
On that front, some parts of the New York state manufacturing survey were encouraging.
The prices paid index moved to its lowest level since February 2021, unfilled orders also fell and the delivery times index declined for the first time since May 2020.
"This suggests that supply chain issues have eased noticeably, although this likely at least in part reflects weakening in demand," said Daniel Silver, an economist at J.P. Morgan.
Reporting by Lindsay Dunsmuir; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-08-15/
THE HOUSING MARKET
Re: THE HOUSING MARKET
REUTERS
"U.S. housing starts near 1-1/2-year low; factory output rebounds"
By Lucia Mutikani
August 16, 2022
Summary
* Housing starts drop 9.6%; building permits fall 1.3%
* Single-family starts tumble 10.1%; permits drop 4.3%
* Housing construction backlog rises 5.0%
* Manufacturing production rebounds 0.7%
WASHINGTON, Aug 16 (Reuters) - U.S. homebuilding fell to the lowest level in nearly 1-1/2 years in July, weighed down by higher mortgage rates and prices for construction materials, suggesting the housing market could contract further in the third quarter.
The housing market's declining fortunes brought fears of a broader economic recession back into focus.
But with other data on Tuesday showing industrial production rising to an all-time high last month despite the high interest rate environment, the Federal Reserve is expected to stay on its aggressive monetary policy tightening path.
"Reading the tea leaves on the economy hasn't been this difficult in years," said Christopher Rupkey, chief economist at FWDBONDS in New York.
"Industrial production has turned down in every economic recession in history, so the record high this month is not consistent with a downturn."
Housing starts plunged 9.6% to a seasonally adjusted annual rate of 1.446 million units last month, the lowest level since February 2021.
Data for June was revised slightly higher to a rate of 1.599 million units from the previously reported 1.559 million units.
Economists polled by Reuters had forecast starts would decline to a rate of 1.540 million units.
Single-family housing starts, which account for the biggest share of homebuilding, dropped 10.1% to a rate of 916,000 units, the lowest level since June 2020.
Single-family homebuilding decreased in the Midwest and the densely populated South, but rose in the West and Northeast.
Starts for housing projects with five units or more declined 10.0% to a rate 514,000 units.
Multi-family housing construction remains supported by strong demand for rental apartments, with rising borrowing costs pushing homeownership out of the reach of many Americans.
Permits for future homebuilding fell 1.3% to a rate of 1.674 million units.
Single-family building permits dropped 4.3% to a rate of 928,000 units.
Permits for multi-family housing projects increased 2.5% to a rate of 693,000 units.
The Fed, which is struggling to bring inflation back to the U.S. central bank's 2% target, has hiked its policy rate by 225 basis points since March.
Mortgage rates, which move in tandem with U.S. Treasury yields, have soared even higher.
The 30-year fixed-rate mortgage is hovering around an average of 5.22%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.
Residential fixed investment declined at its steepest pace in two years in the second quarter, contributing to the second straight quarterly drop in gross domestic product during that period.
More pain is likely yet to come for the housing market.
A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market sentiment index fell for an eighth straight month in August, dropping below the break-even level of 50 for the first time since May 2020.
Rising construction costs and mortgage rates were largely blamed for the drop.
Stocks on Wall Street were trading mixed.
The dollar was steady against a basket of currencies.
U.S. Treasury prices fell.
BROAD MANUFACTURING GAINS
While housing is struggling, another sector that is sensitive to interest rates is forging ahead for now.
In a separate report on Tuesday, the Fed said manufacturing output rebounded 0.7% in July after declining 0.4% in June.
Economists had forecast factory production would rise 0.2%.
Output increased 3.2% compared to July 2021.
Manufacturing, which accounts for 11.9% of the U.S. economy, remains supported by strong demand for goods even as spending is gradually shifting back to services.
But risks are rising, with retailers sitting on excess inventory, especially of apparel.
A strong dollar as a result of tighter monetary policy could make U.S. exports more expensive.
Production at auto plants surged 6.6% last month.
Excluding motor vehicles, manufacturing rose 0.3%.
Output of long-lasting manufactured consumer goods increased 3.5%, while that of nondurable consumer goods fell 0.3%.
Mining production increased 0.7%, continuing to be underpinned by oil and gas extraction.
Output at utilities fell 0.8%.
The rise in manufacturing and mining output helped to lift the overall industrial production index by 0.6% to a record high of 104.8.
Industrial output was unchanged in June.
The strong manufacturing production is in stark contrast with regional factory surveys that have shown a sharp deterioration in business sentiment.
"Recessions are normally a loss of faith, and it would appear that manufacturers' sentiment is frayed," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
"However, it's important to watch what manufacturers do rather than say."
"For now, manufacturers are not acting as if the economy is in or headed toward a recession."
Though higher borrowing costs are chilling the housing market, an outright collapse is unlikely because of a critical shortage of single-family homes for sale, which is keeping prices elevated.
Fewer homes being built because of financial constraints could pose a conundrum for the Fed, which is seeking to bring down house prices by slowing demand for houses.
"Lower construction will limit the supply of housing and potentially dampen the impact of higher rates on home prices," said Isfar Munir, an economist at Citigroup in New York.
The number of houses approved for construction that are yet to be started surged 5.0% to 296,000 units.
The single-family housing backlog increased 2.1% to 146,000 units, with the completions rate for this segment falling 0.8%.
The inventory of single-family housing under construction fell 1.2% to a rate of 816,000 units.
Reporting by Lucia Mutikani; Editing by Mark Porter, Mark Potter and Paul Simao
https://www.reuters.com/markets/us/us-h ... 022-08-16/
"U.S. housing starts near 1-1/2-year low; factory output rebounds"
By Lucia Mutikani
August 16, 2022
Summary
* Housing starts drop 9.6%; building permits fall 1.3%
* Single-family starts tumble 10.1%; permits drop 4.3%
* Housing construction backlog rises 5.0%
* Manufacturing production rebounds 0.7%
WASHINGTON, Aug 16 (Reuters) - U.S. homebuilding fell to the lowest level in nearly 1-1/2 years in July, weighed down by higher mortgage rates and prices for construction materials, suggesting the housing market could contract further in the third quarter.
The housing market's declining fortunes brought fears of a broader economic recession back into focus.
But with other data on Tuesday showing industrial production rising to an all-time high last month despite the high interest rate environment, the Federal Reserve is expected to stay on its aggressive monetary policy tightening path.
"Reading the tea leaves on the economy hasn't been this difficult in years," said Christopher Rupkey, chief economist at FWDBONDS in New York.
"Industrial production has turned down in every economic recession in history, so the record high this month is not consistent with a downturn."
Housing starts plunged 9.6% to a seasonally adjusted annual rate of 1.446 million units last month, the lowest level since February 2021.
Data for June was revised slightly higher to a rate of 1.599 million units from the previously reported 1.559 million units.
Economists polled by Reuters had forecast starts would decline to a rate of 1.540 million units.
Single-family housing starts, which account for the biggest share of homebuilding, dropped 10.1% to a rate of 916,000 units, the lowest level since June 2020.
Single-family homebuilding decreased in the Midwest and the densely populated South, but rose in the West and Northeast.
Starts for housing projects with five units or more declined 10.0% to a rate 514,000 units.
Multi-family housing construction remains supported by strong demand for rental apartments, with rising borrowing costs pushing homeownership out of the reach of many Americans.
Permits for future homebuilding fell 1.3% to a rate of 1.674 million units.
Single-family building permits dropped 4.3% to a rate of 928,000 units.
Permits for multi-family housing projects increased 2.5% to a rate of 693,000 units.
The Fed, which is struggling to bring inflation back to the U.S. central bank's 2% target, has hiked its policy rate by 225 basis points since March.
Mortgage rates, which move in tandem with U.S. Treasury yields, have soared even higher.
The 30-year fixed-rate mortgage is hovering around an average of 5.22%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.
Residential fixed investment declined at its steepest pace in two years in the second quarter, contributing to the second straight quarterly drop in gross domestic product during that period.
More pain is likely yet to come for the housing market.
A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market sentiment index fell for an eighth straight month in August, dropping below the break-even level of 50 for the first time since May 2020.
Rising construction costs and mortgage rates were largely blamed for the drop.
Stocks on Wall Street were trading mixed.
The dollar was steady against a basket of currencies.
U.S. Treasury prices fell.
BROAD MANUFACTURING GAINS
While housing is struggling, another sector that is sensitive to interest rates is forging ahead for now.
In a separate report on Tuesday, the Fed said manufacturing output rebounded 0.7% in July after declining 0.4% in June.
Economists had forecast factory production would rise 0.2%.
Output increased 3.2% compared to July 2021.
Manufacturing, which accounts for 11.9% of the U.S. economy, remains supported by strong demand for goods even as spending is gradually shifting back to services.
But risks are rising, with retailers sitting on excess inventory, especially of apparel.
A strong dollar as a result of tighter monetary policy could make U.S. exports more expensive.
Production at auto plants surged 6.6% last month.
Excluding motor vehicles, manufacturing rose 0.3%.
Output of long-lasting manufactured consumer goods increased 3.5%, while that of nondurable consumer goods fell 0.3%.
Mining production increased 0.7%, continuing to be underpinned by oil and gas extraction.
Output at utilities fell 0.8%.
The rise in manufacturing and mining output helped to lift the overall industrial production index by 0.6% to a record high of 104.8.
Industrial output was unchanged in June.
The strong manufacturing production is in stark contrast with regional factory surveys that have shown a sharp deterioration in business sentiment.
"Recessions are normally a loss of faith, and it would appear that manufacturers' sentiment is frayed," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
"However, it's important to watch what manufacturers do rather than say."
"For now, manufacturers are not acting as if the economy is in or headed toward a recession."
Though higher borrowing costs are chilling the housing market, an outright collapse is unlikely because of a critical shortage of single-family homes for sale, which is keeping prices elevated.
Fewer homes being built because of financial constraints could pose a conundrum for the Fed, which is seeking to bring down house prices by slowing demand for houses.
"Lower construction will limit the supply of housing and potentially dampen the impact of higher rates on home prices," said Isfar Munir, an economist at Citigroup in New York.
The number of houses approved for construction that are yet to be started surged 5.0% to 296,000 units.
The single-family housing backlog increased 2.1% to 146,000 units, with the completions rate for this segment falling 0.8%.
The inventory of single-family housing under construction fell 1.2% to a rate of 816,000 units.
Reporting by Lucia Mutikani; Editing by Mark Porter, Mark Potter and Paul Simao
https://www.reuters.com/markets/us/us-h ... 022-08-16/
Re: THE HOUSING MARKET
CNBC
"Home sales fell nearly 6% in July as housing market slides into a recession"
Diana Olick @IN/DIANAOLICK @DIANAOLICKCNBC @DIANAOLICK
PUBLISHED THU, AUG 18 2022
KEY POINTS
* Sales of previously owned homes fell nearly 6% in July compared with June, according to a monthly report from the National Association of Realtors.
* Sales dropped about 20% from the same month a year ago.
* “In terms of economic impact we are surely in a housing recession because builders are not building,” said Lawrence Yun, chief economist for the Realtors.
Sales of previously owned homes fell nearly 6% in July compared with June, according to a monthly report from the National Association of Realtors.
The sales count declined to a seasonally adjusted annualized rate of 4.81 million units, the group added.
It is the slowest sales pace since November 2015, with the exception of a brief plunge at the beginning of the Covid pandemic.
Sales dropped about 20% from the same month a year ago.
“In terms of economic impact we are surely in a housing recession because builders are not building,” said Lawrence Yun, chief economist for the Realtors.
“However, are homeowners in a recession?"
"Absolutely not."
"Homeowners are still very comfortable financially.”
The July sales figures are based on closings, so the contracts were likely signed in May and June.
Mortgage rates spiked higher in June, with the average rate on the 30-year fixed loan crossing 6%, according to Mortgage News Daily.
It then settled back into the high 5% range.
That rate started this year around 3%, so the hit to affordability in June was hard, especially coupled with soaring inflation.
Homebuyers are also still contending with tight supply.
There were 1.31 million homes for sale at the end of July, unchanged from July 2021.
At the current sales pace, that represents a 3.3-month supply.
While demand is falling off due to weaker affordability, prices remain stubbornly high.
The median price of a home sold in July was $403,800, an increase of 10.8% year over year.
Price gains are now moderating, though, as this is the smallest annual rise since July 2020.
“The median home sales price continued to climb, but at a slower pace for the fifth consecutive month, shining a light on how downshifting buyer demand is moving the housing market back toward a more normal pace of activity,” said Danielle Hale, chief economist at Realtor.com.
“A look at active inventory trends shows that home listings were nearly twice as likely to have had a price cut in July 2022 compared to one year ago.”
Sales activity continues to be stronger on the higher end of the market, although that too is fading fast.
There is simply more supply available on the top tiers.
Sales of homes priced between $100,000 and $250,000 were 31% lower compared with the year before, while sales of homes priced between $750,000 and $1 million were down 8%.
Sales of homes priced above $1 million fell 13% from a year ago.
First-time buyers represented just 29% of buyers in July.
Historically they usually make up about 40% of sales, but they are clearly struggling the most with affordability.
High rents are also making it harder for them to save for a down payment.
Even as sales slow, this is still a fast-moving market.
A typical home in July went under contract in just 14 days, which matches the fastest ever recorded in June.
One year ago, it was 17 days.
Yun called that “unusual.”
https://www.cnbc.com/2022/08/18/home-sa ... ssion.html
"Home sales fell nearly 6% in July as housing market slides into a recession"
Diana Olick @IN/DIANAOLICK @DIANAOLICKCNBC @DIANAOLICK
PUBLISHED THU, AUG 18 2022
KEY POINTS
* Sales of previously owned homes fell nearly 6% in July compared with June, according to a monthly report from the National Association of Realtors.
* Sales dropped about 20% from the same month a year ago.
* “In terms of economic impact we are surely in a housing recession because builders are not building,” said Lawrence Yun, chief economist for the Realtors.
Sales of previously owned homes fell nearly 6% in July compared with June, according to a monthly report from the National Association of Realtors.
The sales count declined to a seasonally adjusted annualized rate of 4.81 million units, the group added.
It is the slowest sales pace since November 2015, with the exception of a brief plunge at the beginning of the Covid pandemic.
Sales dropped about 20% from the same month a year ago.
“In terms of economic impact we are surely in a housing recession because builders are not building,” said Lawrence Yun, chief economist for the Realtors.
“However, are homeowners in a recession?"
"Absolutely not."
"Homeowners are still very comfortable financially.”
The July sales figures are based on closings, so the contracts were likely signed in May and June.
Mortgage rates spiked higher in June, with the average rate on the 30-year fixed loan crossing 6%, according to Mortgage News Daily.
It then settled back into the high 5% range.
That rate started this year around 3%, so the hit to affordability in June was hard, especially coupled with soaring inflation.
Homebuyers are also still contending with tight supply.
There were 1.31 million homes for sale at the end of July, unchanged from July 2021.
At the current sales pace, that represents a 3.3-month supply.
While demand is falling off due to weaker affordability, prices remain stubbornly high.
The median price of a home sold in July was $403,800, an increase of 10.8% year over year.
Price gains are now moderating, though, as this is the smallest annual rise since July 2020.
“The median home sales price continued to climb, but at a slower pace for the fifth consecutive month, shining a light on how downshifting buyer demand is moving the housing market back toward a more normal pace of activity,” said Danielle Hale, chief economist at Realtor.com.
“A look at active inventory trends shows that home listings were nearly twice as likely to have had a price cut in July 2022 compared to one year ago.”
Sales activity continues to be stronger on the higher end of the market, although that too is fading fast.
There is simply more supply available on the top tiers.
Sales of homes priced between $100,000 and $250,000 were 31% lower compared with the year before, while sales of homes priced between $750,000 and $1 million were down 8%.
Sales of homes priced above $1 million fell 13% from a year ago.
First-time buyers represented just 29% of buyers in July.
Historically they usually make up about 40% of sales, but they are clearly struggling the most with affordability.
High rents are also making it harder for them to save for a down payment.
Even as sales slow, this is still a fast-moving market.
A typical home in July went under contract in just 14 days, which matches the fastest ever recorded in June.
One year ago, it was 17 days.
Yun called that “unusual.”
https://www.cnbc.com/2022/08/18/home-sa ... ssion.html
Re: THE HOUSING MARKET
REUTERS
"U.S. new home sales tumble to 6-1/2-year low; prices still high"
By Lucia Mutikani
August 23, 2022
Summary
* New single-family home sales drop 12.6% in July
* Median house price up 8.2% to $439,400 from year ago
* Private sector activity contracts again in August
WASHINGTON, Aug 23 (Reuters) - Sales of new U.S. single-family homes plunged to a 6-1/2-year low in July as persistently high mortgage rates and house prices further eroded affordability.
The report from the Commerce Department on Tuesday added to a stream of weak housing data, and suggested that the Federal Reserve's aggressive monetary policy tightening campaign to slow the economy in order to tame inflation was achieving some desired results in the housing market.
But with house prices remaining elevated amid a critical shortage of previously owned properties, a total housing market collapse is unlikely.
"The Fed is getting what it wants," said Matthew Walsh, an economist at Moody's Analytics in West Chester, Pennsylvania.
"The housing market needed to cool, and higher interest rates were the only thing that was going to accomplish that."
New home sales tumbled 12.6% to a seasonally adjusted annual rate of 511,000 units last month, the lowest level since January 2016.
June's sales pace was revised down to 585,000 units from the previously reported 590,000 units.
Sales rose in the Northeast, but dove in the West and the Midwest as well as the densely populated South.
Economists polled by Reuters had forecast that new home sales, which account for 9.6% of U.S. home sales, would decrease to a rate of 575,000 units.
Sales dropped 29.6% on a year-on-year basis in July.
They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.
Data last week showed single-family housing starts plumbed two-year lows in July, while home resales fell to levels last seen in May 2020.
The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020.
The Fed has hiked its policy rate by 225 basis points since March.
Fed Chair Jerome Powell's address on Friday at the annual Jackson Hole global central banking conference in Wyoming could signal how much further the U.S. central bank needs to tighten monetary policy.
Overall economic activity is slowing in response to the stiffest run of interest rate increases since the 1980s.
A survey from S&P Global on Tuesday showed its measure of private sector business activity falling to a 27-month low of 45 in August from 47.7 in July.
A reading below 50 indicates a contraction in activity.
But the second straight monthly decline, which was concentrated in the services sector, probably exaggerates the emerging softness in the economy.
The Institute for Supply Management survey, which has a longer history than the S&P Global survey, showed the services sector growing at a strong clip in July.
Underlying retail sales were also solid last month.
"We would not take weaker S&P services PMI alone as a signal that near-term recession risks have risen, as third-quarter hard activity data have generally been somewhat more positive in recent releases," said Veronica Clark, an economist at Citigroup in New York.
"We generally see ISM services as a more reliable indicator of real activity patterns."
Stocks on Wall Street were mixed.
The dollar slipped against a basket of currencies.
U.S. Treasury prices rose.
HIGHER MORTGAGE RATES
Mortgage rates, which move in tandem with U.S. Treasury yields, have soared, with the 30-year fixed-rate mortgage averaging 5.13%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.
Despite slowing demand, house price growth remains strong.
The median new house price in July was $439,400, an 8.2% jump from a year ago.
While that was a deceleration from the double-digit growth seen early in the year, average house prices jumped 18.3% year-on-year in July.
None of the houses sold last month were below $200,000.
"Significant price decreases will be needed keep a floor under new homes sales," said Matthew Martin, a U.S. economist at Oxford Economics in New York.
There were 464,000 new homes on the market at the end of last month, the most since March 2008 and up from 450,000 units in June.
Houses under construction made up 67.2% of the inventory, with homes yet to be built accounting for 23.1%.
With builders facing a multitude of challenges, including supply constraints, some of these houses will probably not be built.
Completed houses accounted for 9.7% of the inventory, well below a long-term average of 27%.
"There remains a structural and long-term shortage in the housing market," said Odeta Kushi, deputy chief economist at First American Financial Corporation in Washington.
At July's sales pace it would take 10.9 months to clear the supply of houses on the market, up from 9.2 months in June.
The raft of weak housing data left economists expecting that residential investment would contract again this quarter after declining at its sharpest pace in two years in the second quarter.
Reporting by Lucia Mutikani; additional reporting by Dan Burns; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-n ... 022-08-23/
"U.S. new home sales tumble to 6-1/2-year low; prices still high"
By Lucia Mutikani
August 23, 2022
Summary
* New single-family home sales drop 12.6% in July
* Median house price up 8.2% to $439,400 from year ago
* Private sector activity contracts again in August
WASHINGTON, Aug 23 (Reuters) - Sales of new U.S. single-family homes plunged to a 6-1/2-year low in July as persistently high mortgage rates and house prices further eroded affordability.
The report from the Commerce Department on Tuesday added to a stream of weak housing data, and suggested that the Federal Reserve's aggressive monetary policy tightening campaign to slow the economy in order to tame inflation was achieving some desired results in the housing market.
But with house prices remaining elevated amid a critical shortage of previously owned properties, a total housing market collapse is unlikely.
"The Fed is getting what it wants," said Matthew Walsh, an economist at Moody's Analytics in West Chester, Pennsylvania.
"The housing market needed to cool, and higher interest rates were the only thing that was going to accomplish that."
New home sales tumbled 12.6% to a seasonally adjusted annual rate of 511,000 units last month, the lowest level since January 2016.
June's sales pace was revised down to 585,000 units from the previously reported 590,000 units.
Sales rose in the Northeast, but dove in the West and the Midwest as well as the densely populated South.
Economists polled by Reuters had forecast that new home sales, which account for 9.6% of U.S. home sales, would decrease to a rate of 575,000 units.
Sales dropped 29.6% on a year-on-year basis in July.
They peaked at a rate of 993,000 units in January 2021, which was the highest level since the end of 2006.
Data last week showed single-family housing starts plumbed two-year lows in July, while home resales fell to levels last seen in May 2020.
The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020.
The Fed has hiked its policy rate by 225 basis points since March.
Fed Chair Jerome Powell's address on Friday at the annual Jackson Hole global central banking conference in Wyoming could signal how much further the U.S. central bank needs to tighten monetary policy.
Overall economic activity is slowing in response to the stiffest run of interest rate increases since the 1980s.
A survey from S&P Global on Tuesday showed its measure of private sector business activity falling to a 27-month low of 45 in August from 47.7 in July.
A reading below 50 indicates a contraction in activity.
But the second straight monthly decline, which was concentrated in the services sector, probably exaggerates the emerging softness in the economy.
The Institute for Supply Management survey, which has a longer history than the S&P Global survey, showed the services sector growing at a strong clip in July.
Underlying retail sales were also solid last month.
"We would not take weaker S&P services PMI alone as a signal that near-term recession risks have risen, as third-quarter hard activity data have generally been somewhat more positive in recent releases," said Veronica Clark, an economist at Citigroup in New York.
"We generally see ISM services as a more reliable indicator of real activity patterns."
Stocks on Wall Street were mixed.
The dollar slipped against a basket of currencies.
U.S. Treasury prices rose.
HIGHER MORTGAGE RATES
Mortgage rates, which move in tandem with U.S. Treasury yields, have soared, with the 30-year fixed-rate mortgage averaging 5.13%, up from 3.22% at the start of the year, according to data from mortgage finance agency Freddie Mac.
Despite slowing demand, house price growth remains strong.
The median new house price in July was $439,400, an 8.2% jump from a year ago.
While that was a deceleration from the double-digit growth seen early in the year, average house prices jumped 18.3% year-on-year in July.
None of the houses sold last month were below $200,000.
"Significant price decreases will be needed keep a floor under new homes sales," said Matthew Martin, a U.S. economist at Oxford Economics in New York.
There were 464,000 new homes on the market at the end of last month, the most since March 2008 and up from 450,000 units in June.
Houses under construction made up 67.2% of the inventory, with homes yet to be built accounting for 23.1%.
With builders facing a multitude of challenges, including supply constraints, some of these houses will probably not be built.
Completed houses accounted for 9.7% of the inventory, well below a long-term average of 27%.
"There remains a structural and long-term shortage in the housing market," said Odeta Kushi, deputy chief economist at First American Financial Corporation in Washington.
At July's sales pace it would take 10.9 months to clear the supply of houses on the market, up from 9.2 months in June.
The raft of weak housing data left economists expecting that residential investment would contract again this quarter after declining at its sharpest pace in two years in the second quarter.
Reporting by Lucia Mutikani; additional reporting by Dan Burns; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-n ... 022-08-23/
Re: THE HOUSING MARKET
CNBC
"Pending home sales slip 1% in July, but Realtors say market may be ‘at or close to the bottom’"
Diana Olick @IN/DIANAOLICK @DIANAOLICKCNBC @DIANAOLICK
PUBLISHED WED, AUG 24 2022
KEY POINTS
* Pending home sales, a measure of signed contracts on existing homes, dropped 19.9% in July compared with July 2021.
* The figure has fallen for eight of the past nine months as rising mortgage rates made housing less affordable.
Pending home sales, a measure of signed contracts on existing homes, slipped 1% from June to July, according to the National Association of Realtors.
Compared with a year ago, sales were down 19.9%.
The figure, a future indicator of closed sales, has fallen for eight of the past nine months as rising mortgage rates made housing less affordable.
Higher rates pushed the typical mortgage payment up by 54% from a year ago, according to the NAR.
The drop in sales was smaller than previous months and could be a sign of the market settling, even if for a brief period.
“We may be at or close to the bottom in contract signings,” said Lawrence Yun, chief economist for the Realtors association.
“This month’s very modest decline reflects the recent retreat in mortgage rates."
"Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
Mortgage rates have been climbing steadily this year, peaking in June before dropping slightly in July.
Rates resumed their rise this week and are now approaching 6% again, according to Mortgage News Daily.
Regionally, pending home sales in the Northeast fell 1.9% for the month and were down 15.4% from July 2021.
In the Midwest, sales dropped 2.7% monthly and are down 13.4% year over year.
The South saw sales decline 1.1% from the previous month and 20% from a year ago.
The West was the only region to see a monthly gain, up 2.2%.
But sales were still down 30.1% from July 2021.
https://www.cnbc.com/2022/08/24/pending ... -july.html
"Pending home sales slip 1% in July, but Realtors say market may be ‘at or close to the bottom’"
Diana Olick @IN/DIANAOLICK @DIANAOLICKCNBC @DIANAOLICK
PUBLISHED WED, AUG 24 2022
KEY POINTS
* Pending home sales, a measure of signed contracts on existing homes, dropped 19.9% in July compared with July 2021.
* The figure has fallen for eight of the past nine months as rising mortgage rates made housing less affordable.
Pending home sales, a measure of signed contracts on existing homes, slipped 1% from June to July, according to the National Association of Realtors.
Compared with a year ago, sales were down 19.9%.
The figure, a future indicator of closed sales, has fallen for eight of the past nine months as rising mortgage rates made housing less affordable.
Higher rates pushed the typical mortgage payment up by 54% from a year ago, according to the NAR.
The drop in sales was smaller than previous months and could be a sign of the market settling, even if for a brief period.
“We may be at or close to the bottom in contract signings,” said Lawrence Yun, chief economist for the Realtors association.
“This month’s very modest decline reflects the recent retreat in mortgage rates."
"Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity.”
Mortgage rates have been climbing steadily this year, peaking in June before dropping slightly in July.
Rates resumed their rise this week and are now approaching 6% again, according to Mortgage News Daily.
Regionally, pending home sales in the Northeast fell 1.9% for the month and were down 15.4% from July 2021.
In the Midwest, sales dropped 2.7% monthly and are down 13.4% year over year.
The South saw sales decline 1.1% from the previous month and 20% from a year ago.
The West was the only region to see a monthly gain, up 2.2%.
But sales were still down 30.1% from July 2021.
https://www.cnbc.com/2022/08/24/pending ... -july.html
Re: THE HOUSING MARKET
REUTERS
"U.S. pending home sales fall less than expected in July"
Reuters
August 24, 2022
WASHINGTON, Aug 24 (Reuters) - Contracts to buy U.S. previously owned homes fell less than expected in July as mortgage rates eased a bit, pulling some buyers back into the housing market.
The National Association of Realtors (NAR) said on Wednesday its Pending Home Sales Index, based on signed contracts, dropped 1.0% to 89.8 last month, the lowest level since April 2020.
Contracts have declined in eight of the last nine months.
In July, contracts fell in the Northeast, South and Midwest, but rose in the West.
Economists polled by Reuters had forecast contracts, which become sales after a month or two, would drop 4.0%.
Pending home sales tumbled 19.9% in July on a year-on-year basis.
The 30-year fixed-rate mortgage retreated from 5.78% in mid-June to 5.30% at the end of July, according to data from mortgage finance agency Freddie Mac.
The rate at the start of the year was 3.22%.
"In terms of the current housing cycle, we may be at or close to the bottom in contract signings," said Lawrence Yun, the NAR's chief economist.
"Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity."
The housing market is the main area of the economy where the Federal Reserve's aggressive monetary policy tightening campaign to slow demand in order to tame inflation is achieving some results.
Data on Tuesday showed new home sales plunged to a 6-1/2-year low in July.
Home resales and single-family housing starts are at two-year lows.
The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020, other reports showed last week.
But with house prices remaining elevated amid a critical shortage of affordable homes, a housing market collapse is unlikely.
Reporting by Lucia Mutikani; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-08-24/
"U.S. pending home sales fall less than expected in July"
Reuters
August 24, 2022
WASHINGTON, Aug 24 (Reuters) - Contracts to buy U.S. previously owned homes fell less than expected in July as mortgage rates eased a bit, pulling some buyers back into the housing market.
The National Association of Realtors (NAR) said on Wednesday its Pending Home Sales Index, based on signed contracts, dropped 1.0% to 89.8 last month, the lowest level since April 2020.
Contracts have declined in eight of the last nine months.
In July, contracts fell in the Northeast, South and Midwest, but rose in the West.
Economists polled by Reuters had forecast contracts, which become sales after a month or two, would drop 4.0%.
Pending home sales tumbled 19.9% in July on a year-on-year basis.
The 30-year fixed-rate mortgage retreated from 5.78% in mid-June to 5.30% at the end of July, according to data from mortgage finance agency Freddie Mac.
The rate at the start of the year was 3.22%.
"In terms of the current housing cycle, we may be at or close to the bottom in contract signings," said Lawrence Yun, the NAR's chief economist.
"Inventories are growing for homes in the upper price ranges, but limited supply at lower price points is hindering transaction activity."
The housing market is the main area of the economy where the Federal Reserve's aggressive monetary policy tightening campaign to slow demand in order to tame inflation is achieving some results.
Data on Tuesday showed new home sales plunged to a 6-1/2-year low in July.
Home resales and single-family housing starts are at two-year lows.
The National Association of Home Builders/Wells Fargo Housing Market sentiment index fell below the break-even level of 50 in August for the first time since May 2020, other reports showed last week.
But with house prices remaining elevated amid a critical shortage of affordable homes, a housing market collapse is unlikely.
Reporting by Lucia Mutikani; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-08-24/
Re: THE HOUSING MARKET
BLOOMBERG
"BofA Sees Currency Risks Rising on Housing-Market Slowdowns"
Mary Biekert
31 AUGUST 2022
(Bloomberg) -- A housing-market downturn may drag some of the world’s major currencies down with it.
Bank of America Corp. strategists led by Howard Du said in a note Wednesday that the run-up in real estate prices has increased debt levels in some countries and left many homeowners exposed to higher interest rates on floating-rate mortgages.
The use of such loans is notable in Canada, New Zealand, Australia and Scandinavian countries.
That means higher rates will ripple more rapidly through their economies by driving up consumers’ bills.
So central banks there may not need to tighten monetary policy as aggressively as others to achieve the same ends, the strategists said.
And if policy makers keep pace with those abroad, a severe recession could result.
Either outcome would have negative implications for those countries’ currencies, since lower rates would give traders an incentive to shift money elsewhere for higher returns.
“High housing risks have negative FX implications, in our view: less tightening to achieve the same outcome in real terms is FX-negative on relative monetary policy grounds,” they wrote.
“Delivering the same amount of hikes in a more leveraged economy could trigger a greater growth slowdown, which is also FX-negative.”
The warning comes after the Federal Reserve’s rate hikes have pushed the dollar up strongly this year against its major counterparts, including those Bank of America sees as vulnerable to the housing market.
Of those, the Canadian dollar has fared best, slipping less than 4% this year.
The Australian and New Zealand dollars are down 5.7% and 10.3%, respectively.
The Norwegian krone has declined 11% and the Swedish krona 15%.
https://www.msn.com/en-us/money/realest ... eb380dab76
"BofA Sees Currency Risks Rising on Housing-Market Slowdowns"
Mary Biekert
31 AUGUST 2022
(Bloomberg) -- A housing-market downturn may drag some of the world’s major currencies down with it.
Bank of America Corp. strategists led by Howard Du said in a note Wednesday that the run-up in real estate prices has increased debt levels in some countries and left many homeowners exposed to higher interest rates on floating-rate mortgages.
The use of such loans is notable in Canada, New Zealand, Australia and Scandinavian countries.
That means higher rates will ripple more rapidly through their economies by driving up consumers’ bills.
So central banks there may not need to tighten monetary policy as aggressively as others to achieve the same ends, the strategists said.
And if policy makers keep pace with those abroad, a severe recession could result.
Either outcome would have negative implications for those countries’ currencies, since lower rates would give traders an incentive to shift money elsewhere for higher returns.
“High housing risks have negative FX implications, in our view: less tightening to achieve the same outcome in real terms is FX-negative on relative monetary policy grounds,” they wrote.
“Delivering the same amount of hikes in a more leveraged economy could trigger a greater growth slowdown, which is also FX-negative.”
The warning comes after the Federal Reserve’s rate hikes have pushed the dollar up strongly this year against its major counterparts, including those Bank of America sees as vulnerable to the housing market.
Of those, the Canadian dollar has fared best, slipping less than 4% this year.
The Australian and New Zealand dollars are down 5.7% and 10.3%, respectively.
The Norwegian krone has declined 11% and the Swedish krona 15%.
https://www.msn.com/en-us/money/realest ... eb380dab76
Re: THE HOUSING MARKET
REUTERS
"U.S. mortgage interest rates top 6% for first time since 2008"
Reuters
September 14, 2022
Sept 14 (Reuters) - The average interest rate on the most popular U.S. home loan rose above 6% for the first time since 2008 and is now more than double the level it was one year ago, Mortgage Bankers Association (MBA) data showed on Wednesday.
Rising mortgage rates are increasingly weighing on the interest-rate sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs in order to tame high inflation.
The central bank has raised its benchmark overnight lending rate by 225 basis points since March.
Expectations for Fed tightening have led to a surge in Treasury yields since the start of this year.
The yield on the 10-year note acts as a benchmark for mortgage rates.
The average contract rate on a 30-year fixed-rate mortgage rose by 7 basis points to 6.01% for the week ended Sept. 9, a level not seen since towards the end of the financial crisis and Great Recession.
The MBA also said its Market Composite Index, a measure of mortgage loan application volume, declined 1.2% from a week earlier and is now down 64.0% from one year ago.
Its Refinance Index fell 4.2% from the prior week and was down 83.3% compared to one year ago.
A worse-than-expected key inflation reading on Tuesday cemented expectations the Fed will be forced to deliver a third straight 75-basis point interest rate hike at its policy meeting next week, with investors now predicting the central bank will have to hike rates faster and further than previously thought.
The impact of higher interest rates is being felt across the housing sector.
New home sales plunged to a 6-1/2-year low in July while home resales and single-family housing starts are at two-year lows.
But house prices remain elevated amid a critical shortage of affordable homes, making a housing market collapse unlikely.
Reporting by Lindsay Dunsmuir; Editing by Toby Chopra
https://www.reuters.com/markets/us/us-m ... 022-09-14/
"U.S. mortgage interest rates top 6% for first time since 2008"
Reuters
September 14, 2022
Sept 14 (Reuters) - The average interest rate on the most popular U.S. home loan rose above 6% for the first time since 2008 and is now more than double the level it was one year ago, Mortgage Bankers Association (MBA) data showed on Wednesday.
Rising mortgage rates are increasingly weighing on the interest-rate sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs in order to tame high inflation.
The central bank has raised its benchmark overnight lending rate by 225 basis points since March.
Expectations for Fed tightening have led to a surge in Treasury yields since the start of this year.
The yield on the 10-year note acts as a benchmark for mortgage rates.
The average contract rate on a 30-year fixed-rate mortgage rose by 7 basis points to 6.01% for the week ended Sept. 9, a level not seen since towards the end of the financial crisis and Great Recession.
The MBA also said its Market Composite Index, a measure of mortgage loan application volume, declined 1.2% from a week earlier and is now down 64.0% from one year ago.
Its Refinance Index fell 4.2% from the prior week and was down 83.3% compared to one year ago.
A worse-than-expected key inflation reading on Tuesday cemented expectations the Fed will be forced to deliver a third straight 75-basis point interest rate hike at its policy meeting next week, with investors now predicting the central bank will have to hike rates faster and further than previously thought.
The impact of higher interest rates is being felt across the housing sector.
New home sales plunged to a 6-1/2-year low in July while home resales and single-family housing starts are at two-year lows.
But house prices remain elevated amid a critical shortage of affordable homes, making a housing market collapse unlikely.
Reporting by Lindsay Dunsmuir; Editing by Toby Chopra
https://www.reuters.com/markets/us/us-m ... 022-09-14/
Re: THE HOUSING MARKET
REUTERS
"U.S. home builder sentiment falls for ninth straight month in September"
By Lucia Mutikani
September 19, 2022
WASHINGTON, Sept 19 (Reuters) - Confidence among U.S. single-family homebuilders fell for the ninth straight month in September as soaring mortgage rates and persistently high prices for building materials made new housing less affordable for many first-time buyers.
The National Association of Home Builders/Wells Fargo Housing Market index dropped three points to 46 this month.
Discounting the plunge during the spring of 2020 when the economy was reeling from the first wave of COVID-19, this was the lowest reading since May 2014.
A reading below 50 indicates that more builders view conditions as poor rather than good.
Economists polled by Reuters had forecast the index at 47.
The Federal Reserve's aggressive monetary policy tightening has had a significant impact on the housing market, compared to the labor market and consumer spending, where demand remains fairly strong.
The U.S. central bank is expected to raise its policy rate by 75 basis points on Wednesday for the third time since June.
Since March, the Fed has lifted that rate from near zero to its current range of 2.25% to 2.50%.
Mortgage rates have surged even higher.
The 30-year fixed mortgage rate averaged 6.02% last week from 5.89% in the prior week, breaking above 6% for the first time since November 2008, according to data from mortgage finance agency Freddie Mac.
"Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households," said NAHB Chairman Jerry Konter.
"In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month."
The NAHB also noted that endless disruptions in the supply chain for building materials continued to take a toll, adding that "more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions."
The survey's measure of current sales conditions slipped three points to 54.
Its gauge of sales expectations over the next six months dipped one point to 46.
The component measuring traffic of prospective buyers fell one point to 31.
Data from the Commerce Department on Tuesday is expected to show housing starts little changed in August as rising rents boost the construction of multi-family housing units, offsetting the drag from the single-family housing segment.
According to a Reuters survey, housing starts likely slipped to a seasonally adjusted annual rate of 1.445 million units last month from a pace of 1.446 million units in July.
Permits for future home construction are, however, expected to have declined to a rate of 1.610 million units from a pace of 1.685 million units in July.
"It looks clear that higher rates have been weighing on the housing market, and we continue to see weak trends across many of the related recent reports," said Daniel Silver, an economist at JPMorgan in New York.
Reporting By Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-h ... 022-09-19/
"U.S. home builder sentiment falls for ninth straight month in September"
By Lucia Mutikani
September 19, 2022
WASHINGTON, Sept 19 (Reuters) - Confidence among U.S. single-family homebuilders fell for the ninth straight month in September as soaring mortgage rates and persistently high prices for building materials made new housing less affordable for many first-time buyers.
The National Association of Home Builders/Wells Fargo Housing Market index dropped three points to 46 this month.
Discounting the plunge during the spring of 2020 when the economy was reeling from the first wave of COVID-19, this was the lowest reading since May 2014.
A reading below 50 indicates that more builders view conditions as poor rather than good.
Economists polled by Reuters had forecast the index at 47.
The Federal Reserve's aggressive monetary policy tightening has had a significant impact on the housing market, compared to the labor market and consumer spending, where demand remains fairly strong.
The U.S. central bank is expected to raise its policy rate by 75 basis points on Wednesday for the third time since June.
Since March, the Fed has lifted that rate from near zero to its current range of 2.25% to 2.50%.
Mortgage rates have surged even higher.
The 30-year fixed mortgage rate averaged 6.02% last week from 5.89% in the prior week, breaking above 6% for the first time since November 2008, according to data from mortgage finance agency Freddie Mac.
"Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new home purchase out of financial reach for many households," said NAHB Chairman Jerry Konter.
"In another indicator of a weakening market, 24% of builders reported reducing home prices, up from 19% last month."
The NAHB also noted that endless disruptions in the supply chain for building materials continued to take a toll, adding that "more than half of the builders in our survey reported using incentives to bolster sales, including mortgage rate buydowns, free amenities and price reductions."
The survey's measure of current sales conditions slipped three points to 54.
Its gauge of sales expectations over the next six months dipped one point to 46.
The component measuring traffic of prospective buyers fell one point to 31.
Data from the Commerce Department on Tuesday is expected to show housing starts little changed in August as rising rents boost the construction of multi-family housing units, offsetting the drag from the single-family housing segment.
According to a Reuters survey, housing starts likely slipped to a seasonally adjusted annual rate of 1.445 million units last month from a pace of 1.446 million units in July.
Permits for future home construction are, however, expected to have declined to a rate of 1.610 million units from a pace of 1.685 million units in July.
"It looks clear that higher rates have been weighing on the housing market, and we continue to see weak trends across many of the related recent reports," said Daniel Silver, an economist at JPMorgan in New York.
Reporting By Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-h ... 022-09-19/
Re: THE HOUSING MARKET
REUTERS
"U.S. homebuilding buoyed by multi-family projects; falling permits signal weakness"
By Lucia Mutikani
September 20, 2022
Summary
* Housing starts surge 12.2% in August
* Single-family starts rise 3.4%; multi-family up 28.6%
* Building permits drop 10.0%; single-family down 3.5%
WASHINGTON, Sept 20 (Reuters) - U.S. homebuilding unexpectedly increased in August as rising rents boosted the construction of multi-family housing to the highest level in more than 36 years, but soaring mortgage rates and high prices are undercutting the overall housing market.
The report from the Commerce Department on Tuesday showed permits for future homebuilding plunged to levels last seen during the first wave of the COVID-19 pandemic in the spring of 2020.
Homebuilding is also being hobbled by persistent supply chain bottlenecks, which are raising prices for materials.
The Federal Reserve's aggressive monetary policy tightening has significantly weakened the housing market.
In contrast, other sectors of the economy, like the labor market, have shown incredible resilience despite the Fed's attempts to cool demand.
"Since the Fed is signaling that it isn't going to stop raising rates until it tames inflation, the housing market will continue to be weak, with the potential it experiences its own recession," said Ryan Sweet, a senior economist at Moody's Analytics in New York.
"This isn't entirely bad news, as the housing market was red-hot."
Housing starts rebounded 12.2% to a seasonally adjusted annual rate of 1.575 million units last month.
Data for July was revised down to a rate of 1.404 million units from the previously reported 1.446 million units.
Last month's broad rise was also due to the progress homebuilders made in reducing the construction backlog as some materials became more available.
Economists polled by Reuters had forecast starts would come in at a rate of 1.445 million units.
Housing starts dipped 0.1% on a year-on-year basis in August.
Starts for housing projects with five units or more soared 28.6% to a rate 621,000 units, the highest since April 1986.
Multi-family housing construction is being driven by strong demand for rental apartments, with rising borrowing costs pushing homeownership out of the reach of many Americans.
A key measure of rents jumped 6.3% on a year-on-year basis in August, the most since April 1986, according to the latest consumer price data.
Single-family housing starts, which account for the biggest share of homebuilding, increased 3.4% to a rate of 935,000 units, after declining every month since March.
Single-family homebuilding rose in the Midwest, the densely populated South and the West, but plunged in the Northeast.
Stocks on Wall Street were trading lower as investors anticipated another oversized interest rate hike from the Fed on Wednesday.
The dollar rose against a basket of currencies.
U.S. Treasury prices fell.
MORTGAGE RATES SOARING
The U.S. central bank is expected to raise its policy rate by 75 basis points for the third time in as many policy meetings.
Since March, the Fed has lifted that rate from near zero to its current range of 2.25% to 2.50%.
Mortgage rates have risen even higher.
The 30-year fixed mortgage rate averaged 6.02% last week, from 5.89% in the prior week, breaking above 6% for the first time since November 2008, according to data from mortgage finance agency Freddie Mac.
Permits for future homebuilding tumbled 10.0% to a rate of 1.517 million units, the lowest level since June 2020.
Single-family building permits dropped 3.5% to a rate of 899,000 units, the lowest level since June 2020.
Permits for housing projects with five units declined 18.5% to a rate of 571,000 units.
Economists expect spending on homebuilding to contract further this quarter after it declined at its steepest pace in two years in the April-June quarter.
Weak residential investment contributed to the second straight quarterly drop in gross domestic product during that period.
A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market sentiment index fell for the ninth straight month in September.
The survey found almost a quarter of builders reported reducing home prices and more than half were offering incentives to bolster sales, including mortgage rate buydowns and free amenities.
An outright housing market collapse is, however, unlikely because of an acute shortage of single-family homes for sale.
Realtors estimate that the United States had a shortage of about 5 million homes before the COVID-19 pandemic.
Though house price inflation has started slowing, there are fewer homes being built because of financial constraints, suggesting the pace could be moderate.
That could pose a conundrum for the Fed, which is seeking to bring down house prices by slowing demand for houses.
The number of houses approved for construction that are yet to be started fell 2.7% to 290,000 units.
The single-family homebuilding backlog decreased 3.4% to 143,000 units, but the completions rate for this segment increased 0.4% to a rate of 1.017 million units.
The inventory of single-family housing under construction fell 0.4% to a rate of 812,000 million units.
Builders are likely foregoing applying for new permits while working through their backlogs.
"These homes will have to be started, and with new demand slowing, builders can 'catch up' on backlogged starts," said Isfar Munir, an economist at Citigroup in New York.
"This can potentially support housing starts even if permits continue to fall, at least in the near term."
Reporting by Lucia Mutikani; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-09-20/
"U.S. homebuilding buoyed by multi-family projects; falling permits signal weakness"
By Lucia Mutikani
September 20, 2022
Summary
* Housing starts surge 12.2% in August
* Single-family starts rise 3.4%; multi-family up 28.6%
* Building permits drop 10.0%; single-family down 3.5%
WASHINGTON, Sept 20 (Reuters) - U.S. homebuilding unexpectedly increased in August as rising rents boosted the construction of multi-family housing to the highest level in more than 36 years, but soaring mortgage rates and high prices are undercutting the overall housing market.
The report from the Commerce Department on Tuesday showed permits for future homebuilding plunged to levels last seen during the first wave of the COVID-19 pandemic in the spring of 2020.
Homebuilding is also being hobbled by persistent supply chain bottlenecks, which are raising prices for materials.
The Federal Reserve's aggressive monetary policy tightening has significantly weakened the housing market.
In contrast, other sectors of the economy, like the labor market, have shown incredible resilience despite the Fed's attempts to cool demand.
"Since the Fed is signaling that it isn't going to stop raising rates until it tames inflation, the housing market will continue to be weak, with the potential it experiences its own recession," said Ryan Sweet, a senior economist at Moody's Analytics in New York.
"This isn't entirely bad news, as the housing market was red-hot."
Housing starts rebounded 12.2% to a seasonally adjusted annual rate of 1.575 million units last month.
Data for July was revised down to a rate of 1.404 million units from the previously reported 1.446 million units.
Last month's broad rise was also due to the progress homebuilders made in reducing the construction backlog as some materials became more available.
Economists polled by Reuters had forecast starts would come in at a rate of 1.445 million units.
Housing starts dipped 0.1% on a year-on-year basis in August.
Starts for housing projects with five units or more soared 28.6% to a rate 621,000 units, the highest since April 1986.
Multi-family housing construction is being driven by strong demand for rental apartments, with rising borrowing costs pushing homeownership out of the reach of many Americans.
A key measure of rents jumped 6.3% on a year-on-year basis in August, the most since April 1986, according to the latest consumer price data.
Single-family housing starts, which account for the biggest share of homebuilding, increased 3.4% to a rate of 935,000 units, after declining every month since March.
Single-family homebuilding rose in the Midwest, the densely populated South and the West, but plunged in the Northeast.
Stocks on Wall Street were trading lower as investors anticipated another oversized interest rate hike from the Fed on Wednesday.
The dollar rose against a basket of currencies.
U.S. Treasury prices fell.
MORTGAGE RATES SOARING
The U.S. central bank is expected to raise its policy rate by 75 basis points for the third time in as many policy meetings.
Since March, the Fed has lifted that rate from near zero to its current range of 2.25% to 2.50%.
Mortgage rates have risen even higher.
The 30-year fixed mortgage rate averaged 6.02% last week, from 5.89% in the prior week, breaking above 6% for the first time since November 2008, according to data from mortgage finance agency Freddie Mac.
Permits for future homebuilding tumbled 10.0% to a rate of 1.517 million units, the lowest level since June 2020.
Single-family building permits dropped 3.5% to a rate of 899,000 units, the lowest level since June 2020.
Permits for housing projects with five units declined 18.5% to a rate of 571,000 units.
Economists expect spending on homebuilding to contract further this quarter after it declined at its steepest pace in two years in the April-June quarter.
Weak residential investment contributed to the second straight quarterly drop in gross domestic product during that period.
A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market sentiment index fell for the ninth straight month in September.
The survey found almost a quarter of builders reported reducing home prices and more than half were offering incentives to bolster sales, including mortgage rate buydowns and free amenities.
An outright housing market collapse is, however, unlikely because of an acute shortage of single-family homes for sale.
Realtors estimate that the United States had a shortage of about 5 million homes before the COVID-19 pandemic.
Though house price inflation has started slowing, there are fewer homes being built because of financial constraints, suggesting the pace could be moderate.
That could pose a conundrum for the Fed, which is seeking to bring down house prices by slowing demand for houses.
The number of houses approved for construction that are yet to be started fell 2.7% to 290,000 units.
The single-family homebuilding backlog decreased 3.4% to 143,000 units, but the completions rate for this segment increased 0.4% to a rate of 1.017 million units.
The inventory of single-family housing under construction fell 0.4% to a rate of 812,000 million units.
Builders are likely foregoing applying for new permits while working through their backlogs.
"These homes will have to be started, and with new demand slowing, builders can 'catch up' on backlogged starts," said Isfar Munir, an economist at Citigroup in New York.
"This can potentially support housing starts even if permits continue to fall, at least in the near term."
Reporting by Lucia Mutikani; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-09-20/