Graphic: U.S. housing market floats back to earth

Castles Technology Co

22/07/2021 18:04

By Stephen Culp
    NEW YORK, July 22 (Reuters) - The U.S. housing market
appears to be straining under the weight of its own
pandemic-driven success. Recent data shows the sector is
returning from the stratosphere and coming back to pre-COVID
levels, as evidenced by a slew of data released this week.
    While for much of the pandemic a rush to suburbia made the
home and real estate stars of the recovery, the resulting plunge
in inventory and dearth of building supplies have launched home
prices beyond the grasp of many potential buyers, particularly
at the lower end of the market.
    "The housing market isn't caving just yet," said Peter
Cardillo, chief market economist at Spartan Capital Securities
in New York. "Have we reached a peak? That’s a possibility, but
worst case scenario, I see a leveling off."
    The best news of the week for investors was delivered on
Thursday by the National Association of Realtors (NAR), which
reported that sales of previously owned homes  USEHS=ECI  rose
1.4% to 5.86 million units in June at a seasonally adjusted
annualized rate, although the rebound was weaker than
expected. urn:newsml:reuters.com:*:nL1N2OX2HQ
    The number undershot consensus by 40,000 units, and followed
May's downwardly-revised 1.2% decline.
    The inventory drought has provided sturdy support for
homebuilding, but that support appears to be on the wane.
    While groundbreaking on new residential homes  USHST=ECI 
increased by 6.3% in June, building permits  USBPE=ECI , a more
forward-looking indicator, dropped 5.1% to an eight-month low.
 urn:newsml:reuters.com:*:nL1N2OW0WS
    With these moves, starts and permits returned to
pre-pandemic levels. 
    On Monday, the National Association of Homebuilders reported
builder sentiment  USNAHB=ECI  softening, as higher input costs
and rising home prices appear to be denting the traffic of
potential homebuyers.
    The most recent data shows an annual increase of 14.9% in
the Case-Shiller's 20-city composite home price index, and
NAHB's traffic of potential buyers - while still well above
pre-pandemic levels - off 15.6% from November's apex.
    Indeed, mortgage demand dropped by 4% last week, according
to the Mortgage Bankers Association (MBA). Applications for
loans to purchase homes  USMGPI=ECI  are down 18% from the same
week last year. 
    The equities market, the most forward-looking indicator of
them all, also reflects a bit of fading luster for housing
stocks.
    Through much of the pandemic the group outperformed the
broader market, even as much of the economy struggled with the
effects of social distancing mandates that spawned an exodus
from the cites to more spacious properties in the suburbs and
beyond. 
    Over the last 12 months, the S&P 1500 Homebuilding index
 .SPCOMHOME  and the Philadelphia SE Housing index  .HGX  are up
36.2% and 31.2%, respectively, more or less in line with the S&P
500's 33.0% advance over the same time period.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Existing home sales    https://tmsnrt.rs/3iz50Kl
NAHB    https://tmsnrt.rs/3Blf2HF
Home prices and potential buyer traffic    https://tmsnrt.rs/3wSWnQ0
MBA    https://tmsnrt.rs/3eBQJvh
Housing stocks    https://tmsnrt.rs/3hZbQKa
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Stephen Culp; Editing by Alden Bentley and Sonya
Hepinstall)
 ((stephen.culp@thomsonreuters.com; 646-223-6076;))