Housing Remains Strong, Despite Low Inventories

Posted by jbrumley on March 24, 2016 10:26 AM

Housing Market Remains Strong, But Could Be Even Stronger If...

Any worries about an implosion of the residential real estate market were officially unmerited, at least as of the most recent look. The Department of Commerce reported February's new-home sales (XHB) pace today, rolling in at an annualized pace of 512,000. That's above expectations, and above January's level.

The figure was a bit in contrast to Monday's release of the nation's existing home sales pace, which fell to 5.08 million last month. Both data sets remain in broad uptrends though, and it's worth noting that both sales of new homes and existing homes could be better, were more inventory available.

As the chart below illustrates, inventory of existing homes for sale remains near multi-year lows, while the inventory of new home sales is only slightly better, and hasn't grown since early 2014.

032316-home-sales

Partially pointing to the lack of inventory is last quarter's the American Institute of Architects (AIA) AIA Home Design Survey Indexes of billings as well as inquiries, which measure the amount of interest in home-remodels. Both rolled in with a score of 60 for the fourth quarter of 2015; any reading above 50 is positive  Any reading above 50 is positive.

Also, in January residential construction spending was up 7.6% on a year-over-year basis, indicating growth.  There's clearly still room for more growth, however, given the low inventory levels.

While investors acceptance/belief of the trends has been a bit wobbly, with many assuming the housing market is on the verge of a breakdown that's yet to materialize, this week's data should restore at least some of that confidence as the economy's dark clouds continue to break up.

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