Early indications point to housing data bouncing off of a bottom in the April – May period. Homebuilders have rallied in recent weeks, defying many of the more bearish predictions from the depths of the COVID-19 pandemic. Even with an extremely tight supply, rising prices, and high unemployment, housing market activity remains resilient and well positioned for recovery. Additionally, the economic and psychological impact of the virus, combined with the recent spate of heated protests across the country, may have begun to wipe the shine off of expensive city living, stoking a new wave of demand for housing in more suburban communities, away from densely-packed metropolitan apartment blocks.
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Housing starts fell a seasonally adjusted 30% in April from a month earlier, which came on the back of a 19% decline in March. That brought the level of construction begun on new homes to its lowest level since February 2015.
That’s the bad news. The good news, however, shows that the bottom could be in for the housing market.
Despite the decline in starts, homebuilder sentiment actually rose 7 points from 30 to 37, according to the National Association of Home Builders (NAHB). April prices rose at a stronger pace than March as per CoreLogic, and the latest Redfin data shows intensifying competition among buyers, as over 41% of listed homes saw a bidding war in the four weeks ending on May 9. That’s a big spike from the 9% of homes that saw a bidding war in January this year.
Though we are still waiting on NAHB data for May, a survey of 300 US builders by John Burns Real Estate Consulting estimates that new home sales increased 21% YoY in May. The survey also shows that buyers who were planning to buy a home in 2021 have decided to move up their timeline.
Mortgage applications for home purchases in the week ended May 29 also rose for the seventh straight week, up 5.3% from a week earlier and 17% from a year earlier, according to the Mortgage Bankers Association. The average rate on the 30-year fixed mortgage fell to just 3.37% at the end of May, another record low.
In addition to low mortgage rates and rising home prices, builders benefit from…