LAG IN NEW U.S. HOUSING JUST A PAUSE: CIBC

A new report from CIBC says the recent weakness in the u.S. housing market is only temporary and that sales will pick up again over the next year.

“The levelling off in new home sales in recent months could still be viewed as a giveback from a few months of above-trend reports,” said Avery Shenfeld and emanuella enenajor, cIbc capital Markets economists. “existing home sales, in contrast, surged above their trend of late, but a softening in pending home sales points to a downward move back to trend in that market as well.”

regardless, they’re saying the past few months is likely a “pause that refreshes” the housing market.

The pair note an interesting hand-off that is happening. retail investors, primarily hedge funds and money managers, have helped prop up sales numbers in recent years as they took advantage of rock-bottom prices and record-low interest rates.

but with the recent spike in bond yields and subsequent rise in mortgages, they’re now holding off on buying, said Mr. Shenfeld and Ms. enenajor.

“The existing market investors may be past the peak of activity relative to the past two years, when low borrowing costs and depressed prices made for a powerful lift to buying houses for the purpose of renting to others,” they said.

On the other hand, mainstream property development companies are seeing more reason to jump in. The u.S. rental vacancy rate has declined to just above 8% this year, from more than 11% in 2009. That’s driven up rents, giving builders an incentive to start building.

All those trends mean more housing growth next year, said Mr. Shenfeld and Ms. enenajor. They forecast that housing starts will grow to almost 1.2 million in 2014, from a projected 930,000 in 2013, with the ability to hit 1.5 million annually over the next few years.