The U.S. homebuilding industry is in good shape, and still one of the pillars on which the economy rests. The 2017 outlook for homebuilding is quite compelling given historically low mortgage rates, impressive first-quarter 2017 existing home sale data and a tight inventory. Consistent job growth, healthy demand-supply balance and seemingly high homebuilders’ confidence are adding to the momentum.
What Numbers Have to Say
According to recently released existing home sales data by the National Association of Realtors, existing home sales increased 1.1% to a seasonally adjusted rate of 5.62 million units in May. Sales were 2.7% higher than the year-ago level, growing at the third-highest clip in the last one year. (Read: How to Build a Winning ETF Portfolio for Second-Half 2017)
Notably, in the first quarter of 2017, total existing home sales rose 1.4% from the preceding quarter, marking the highest increase in a decade. This was also 5% higher than the corresponding period last year.
Given the low inventory situation, the median existing-home price for all housing types in May was up 5.8% year over year, marking the 63rd straight month of year-over-year gains. It is important to note here that existing home sales make up a large part of all U.S. homebuilding activity relative to new home sales. (Read: Best & Worst ETFs of Q2)
Meanwhile, new home sales increased 2.9% month over month to a seasonally adjusted rate of 610,000 units in May, as per the latest report released by the Commerce Department. April’s sales pace was also revised sharply higher to 593,000 units from 569,000 units. Sales of new single-family houses in May 2017 were 8.9% higher year over year.
The median house price increased to a record high of $345,800 in May from $310,200 in April thanks to robust demand. The average sales price of $406,400 in May was also a record high.
The housing market stands tall courtesy of continued strong job growth. The 2017 outlook for homebuilding is quite compelling, given historically low mortgage rates, healthy demand, consistent job growth and solid homebuilders’ confidence. Although homebuilders’ confidence dipped slightly in June, it’s still above 50, which is encouraging. Moreover, mortgage rates are near historic lows even after the Fed’s recent interest rate hike. Through May 2017, the U.S. economy added jobs for the 80th straight month. The unemployment rate was 4.3% in May, the lowest since 2001. (read more: Hot Housing ETFs to Buy Now)
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