U.S. housing market data released on Friday and Monday suggests the industry may be cooling despite a steep drop in mortgage rates since the Fed turned dovish in March. Last year, buyers complained that a lack of inventory and expensive prices combined with a jump in mortgage rates due to an aggressive Federal Reserve policy was preventing them from getting the house they desired.
Recent data shows that inventories are increasing, but affordability is still an issue. Mortgage rates have fallen steeply since mid-March. Perhaps lower borrowing costs will eventually lead to increased sales. Provided the labor market remains strong, this could be a good thing for the housing industry. However, given the latest data, all it will take is slower job growth or layoffs to turn housing considerably weaker.
On Friday, when the U.S. markets were closed the U.S. released weaker-than-expected reports on Building Permits and Housing Starts.
Housing Starts Miss Forecast
According to the Commerce Department, U.S. homebuilding fell to a near two-year low in March. Persistent weakness in the single-family housing segment was the biggest drag on the market, suggesting the housing market continued to struggle despite declining mortgage rates.
Housing starts fell 0.3 percent to a seasonally adjusted annual rate of 1.139 million units last month, the lowest level since May 2017. Additionally, data for February was revised down to show homebuilding tumbling to a pace of 1.142 million units instead of the previously reported 1.162 million-unit rate.
Traders had forecast housing starts increasing to a pace of 1.23 million units in March.
Unimpressive Building Permits
U.S. building permits dropped 1.7 percent to a rate of 1.269 million units in March, the lowest in five months. Government data showed that building permits have now declined for three straight months. Additionally, permits for single-family housing dropped to a more than 1-1/2-year low in March. This development singles tougher time ahead for housing starts.
Early last week, a survey showed that though builders reported strong demand for new homes, they continued to highlight “affordability concerns stemming from a chronic shortage of construction workers and buildable lots.”
Existing Home Sales Fall More than Expected
To complete the trifecta of weak housing data, the National Association of Realtors said on Monday that U.S. home sales fell more than expected in March, pointing to continued weakness in the housing market despite declining mortgage rates and slowing house price gains.
Existing home sales dropped 4.9 percent to a seasonally adjusted annual rate of 5.21 million units last month. February’s sales pace was revised down to 5.48 million units from the previously reported 5.51 million units. Economists had forecast existing home sales would fall by 3.8 percent to a rate of 5.30 million units last month.