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Turning The Dial – Commentary ~ July 24, 2015

This week’s housing data pretty much turned the home price dial to “recovered” and the one for sales to “almost there”. According to the National Association of Realtors (NAR), median existing home prices hit a new peak in June, and sales themselves were at an eight year high.


Existing homes sold at a national median price of $236,400, up 6.5% year-over-year, the 40th straight month of annual gains. That price beats the previous $230,400 high set in lively 2006.


A full come-back in prices was pretty much confirmed by the Federal Housing Finance Agency’s (FHFA) House Price Index.Its universe is slightly different than NAR’s–it covers mortgages bought or guaranteed by Fannie Mae and Freddie Mac and includes both existing and new home sales–but it put May prices 5.7% higher than a year earlier, back to 2006 levels and only a shade off of the 2007 peak.


Home sales were equally impressive. They ratcheted up 9.6% from June 2014 and 3.2% from only a month earlier. The resulting seasonally adjusted rate of 5.49 million sales was the highest since February 2007.


Not to be left out, the Mortgage Bankers Association revised some of its earlier projections. Seeing blooming sales and withering cash transactions it raised forecasts for 2015 purchase mortgage originations by $71 billion to $801 billion and expects volume to hit $885 billion in 2016, a +12% change.


The June residential construction report was also exuberant. Permits were up 7.4% from May and 30% year over year while housing starts increased 9.8% and 26.6% respectively. Terrific news for the economy and perhaps eventually for renters, but maybe not so much for single-family home buyers.


June increases, like those in both April and May were dominated by the multi-family sector. In June, single family permits rose only .9% percent while multi-family permits were up 16%. Figures for starts were even more glaring; single-family was down .9% while multi-family surged by 28.6%. It isn’t going to get much better short term. At the end of June two-thirds of the units under construction were in buildings with five units or more.


NAR chief economist Lawrence Yun noted the shift and said that local governments were wise to approve more new apartment construction “but more needs to be done for condominiums and single-family homes.”


According to Bloomberg, builders are shifting in response to rising rents which helped boost this week’s CPI report by .4%. We don’t see it boding well for those lagging new home inventories however, and shortages there could ultimately cascade into every level of the market.

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