The recent housing data released illustrates that a successful housing market depends on a number of factors – most of which take time.
Overall, the industry’s reports have mentioned a housing revival and continued optimism in the market. Single-family home prices increased in 89 percent of U.S. cities in the first quarter – Atlanta included.
As home-buying season shifts into high gear, we’ll see an effect on inventory. Data from Realtor.com states that as of April, homes remained on the market 81 days – a time period 11 percent shorter than this time last year.
The short listing periods led to a nationwide decrease in inventory in 11 of the 146 markets monitored by Realtor.com. The decrease was drastic, with most markets reporting a drop of 20 percent or more in listings. The numbers represent near record lows of homes available.
With existing inventory shrinking, a successful housing market would need to make up the difference in new home construction.
Right now, we are still waiting for new home starts. Home starts on private residences dropped from the March estimate of 1.02 million units in to 853,000 units in April. The 16.5 percent decline is drastic but not a means to an end.
Home starts were less than expected and a little disappointing as such, but there is much optimism to be had from the spike in permits. Permits in April increased 14.3 percent to 1.02 million – an increase that is 35.8 percent higher than the estimate in April 2012.
“Overall, housing may still be coming out of winter month volatility,” an Econoday analyst stated. “But permits point to gradual improvement for the housing sector.”
As we’ve mentioned before, the housing industry creates a ripple effect through other industries and strongly influences the economy. The lack of construction right now could be in part due to the need for the employment rate to go up – and whether or not the growing workforce will move at the same pace of needed construction.
“Historically, the new construction has correlated very close with the job trends,” Martha Ucko of CreditSights stated. “When we are gaining jobs in this country, construction activity has been much better than when we are losing jobs.”
The rampant home-buying season is expected to continue as values increase and rates remain low. The increase in permits indicates that we’ll have to be patient, but construction starts will eventually replenish the low inventory and accommodate the increasing number of homebuyers.
- J.D. Crowe, Senior Vice President of Southeast Mortgage