The US real estate market has been sluggish in recent history, but the latest numbers hint that the sector may enjoy a stronger run of growth in the spring. The supporting evidence is still thin, although the sales trend has clearly improved in February, particularly for purchases of newly built single family homes. Is this a sign that the property market is firming? If it is, the outlook for the US economy will improve a bit.
At the moment, it’s still unclear if the latest releases are noise or mark a change for the better that will endure. But reviewing the latest sales data certainly inspires a brighter view. New home sales were particularly strong in February, rising 7.8% to a seasonally adjusted annual rate of 539,000—the highest in seven years. The news is all the more striking because February was a rough month in several parts of the country in terms of winter weather.
Existing home sales, which represents a much larger slice of sales activity, also rose last month, albeit at a substantially lesser rate of 1.2%. But the modest improvement was notable for two reasons. First, it marks the first monthly gain since December. More importantly, last month’s improvement pushed the year-over-year increase to its best pace since Oct. 2013.
One reason for remaining cautious, however, is the latest dip in sentiment among home builders. Builder confidence in the market for newly built, single-family homes in March slipped two points to 53, the National Association of Home Builders reported earlier this month. “Even with this slight slip, the HMI remains in positive territory and we expect the market to improve as we enter the spring buying season,” said NAHB Chairman Tom Woods.
Today’s update of the Pending Home Sales Index will provide another clue for estimating the odds for an upbeat real estate market in the spring. In the previous release for January, this leading indicator for the housing market increased 1.7%, touching the highest level since Aug. 2013. Today’s update for February is expected to post another rise, albeit modestly so. Econoday.com’s consensus forecast sees a 0.3% rise. Tepid, but if it holds it’ll build on January’s gain and offer more support for thinking that the housing market will continue to improve in the near term.
Real estate agents are certainly feeling upbeat about the near term, according to last month’s release of the Realtors Confidence Index. “Confidence about the outlook for the next six months improved in February across all property types,” the National Association of Realtors advised recently. “The anticipated seasonal uptick in sales in the spring, the positive effect of low mortgage rates, and lower mortgage insurance premium payments underpinned the increased confidence.”
Last week’s update on demand for mortgage applications seemed to play along. Applications for home mortgages jumped 9.5% for the week through Mar. 20, delivering the first solid improvement on a weekly basis since January.
There’s still not much of a case for expecting much more than a slow and uneven recovery in housing. The trend in construction activity certainly suggests keeping expectations in check. But the relatively upbeat data for newly issued construction permits hints at something better. Yes, that’s a mixed message. Perhaps today’s release on pending home sales data will provide more clarity on what comes next.