Home Prices Stay Hot This Summer
Home price gains stayed hot this summer, while new construction and home sales cooled.
Home prices, including distressed sales, rose 6.7 percent from June 2016 to June 2017, according to CoreLogic, a leading provider of market data and analytics. On a monthly basis, prices were up 1.1 percent from May. Limited inventory continues to be a factor driving prices up.
Unfortunately, new construction grounded down in July, as the Commerce Department reported that Housing Starts fell 4.8 percent from June. Year-over-year starts were down 5.6 percent. Single-family starts, which make up the biggest share of the housing market, fell 0.5 percent, while multi-family dwellings with five or more units plunged 17.1 percent from June to July. Building Permits, a sign of future construction, also fell 4.1 percent from June to July.
Sales of new homes also hit a seven-month low in July. New Home Sales fell by 9.4 percent from June to an annualized rate of 571,000 units, below the 615,000 expected, per the Commerce Department. Sales dropped in the Northeast, South and West but rose in the Midwest. From July 2016 to July 2017, sales of new homes were down nearly 9 percent. There was some good news, as the sales inventory for new homes rose to 5.8 months in July, up from 5.2 months in June. This is near the healthy rate of six months.
Existing Home Sales in July slipped as well from June, as large declines in the Northeast and Midwest outweighed sales increases in the South and West, according to the National Association of REALTORS®. Total Existing Home Sales fell 1.3 percent to 5.44 million units from a downwardly revised 5.51 million in June. Although July's sales pace is 2.1 percent above a year ago, it is the lowest of 2017. Total housing inventory at the end of July declined 1 percent to a 4.2-month supply and is now 9 percent lower than a year ago.
Consumer inflation also remained cool in July. The Core Consumer Price Index (CPI), which measures price changes in personal goods and services excluding volatile food and energy, rose by 1.7 percent year over year. This figure has been declining since earlier this year and is moving in the opposite direction of the Fed's inflation target of 2 percent.
Low inflation can benefit fixed assets like Mortgage Bonds and, in turn, the home loan rates tied to them. Mixed economic news and uncertainty overseas, like the recent attacks in Barcelona, can also benefit home loan rates as investors move their money into "safer" assets like Bonds.
At this time, home loan rates remain just above historic lows.
If you have any questions about home loans rates or loan products, please contact me. I'd be happy to help.