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Mixed Housing Data - February 19, 2019

“We’re getting kind of a mixed message right now”

As federal housing data continues to come out on a modified release schedule, other housing data is mixed. On the positive side, it appears that both homebuilders and consumers are confident in the outlook for housing. As the light construction industry meets in Vegas for the International Builders’ Show, the NAHB Housing Market Index is reporting a boost in sentiment. All three of the underlying indexes were up as lower mortgage rates and a healthy economy and labor market helped “fuel builder sentiment”. As Randy Noel, NAHB Chairman, said in an article from NAHBNow, “many builders are reporting positive expectations for the spring selling season”. This optimism among builders is mirrored in some recent consumer sentiment data. For example, the University of Michigan Survey of Consumers reported a record high in the percentage of respondents who planned to buy a home in the next six months. In an interview with Fox Business, Jerry Howard, NAHB President also referenced the strength of consumer confidence as part of the driving force behind builder confidence.

However, it’s not all good news. Howard did warn that there are some clouds on the horizon. In particular, the NAHB’s Opportunity Index, a measure of housing affordability, is still at its “lowest in ten years”. There’s also reason to believe that all the optimism isn’t being turned into action. The Senior Loan Officers Opinion Survey showed that even though residential real estate lending standards “remain basically unchanged”, a “significant net share of banks reported weaker demand for all categories of residential mortgages”. This was corroborated by the latest MBA Mortgage Application data, which showed a decrease of 3.7% WoW, and the related Purchase Index was down an unadjusted 5% YoY.

What’s more, according to an article from HousingWire, there’s another “key signal” of potential economic instability: declining single-family authorization. The article cites BuildFax data showing a 3.48% YoY decline in authorizations and warns that “single-family housing authorizations are historically correlated with economic recessions”. While we don’t want to be too alarmist in using the r-word, we would encourage new readers, and those in need of a refresher, to read our TFTD from July 2018, “Housing is the Business Cycle”.