Housing market may start to show some wrinkles
The housing market has held up remarkably well, but rising mortgage rates and a limited inventory of existing homes are likely to test its resiliency over the coming months.
Reports this week on new and existing home sales will provide a snapshot of the market’s performance in February.
Existing home sales rose a healthy 3.2% in January despite a 3.6-month supply of units, lowest since January 2005. Still, the thin stockpile is taking some toll on sales and probably more than offset unusually warm weather in February, Nomura economist Lewis Alexander says. Mortgage rates actually dipped last month but, at about 4.17%, were still up from 3.47% in October.
Alexander notes that mortgage applications declined in February while pending home sales, an indicator of future transactions, were down the previous month. All told, economists estimate the National Association of Realtors will announce Wednesday that existing home sales fell 1.8% last month to a seasonally adjusted annual rate of 5.6 million.
And, Alexander notes, the industry is grappling with a shortage of labor and construction materials. Economists expect the Commerce Department on
Thursday to report a measured 0.9% increase in new home sales for February.
Business investment has started to bounce back from a downturn as a result of the recovering oil industry and improving global economy. Orders for non-defense capital goods excluding aircraft — a proxy for business capital spending — fell 0.4% in January, but that came after three consecutive increases. Economists expect Commerce to report Friday that category jumped another 0.6% in February.
Reports this week on new and existing home sales will provide a snapshot of the market’s performance in February.