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Economic Forecasts

Price Growth Cools

Kiplinger's latest forecast on housing starts and home sales

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GDP 2.5% growth in '19, down from 2.9% in '18 More »
Jobs Unemployment rate will decline to 3.4% by end '19 More »
Interest rates 10-year T-notes at 3.6% by end ’19 More »
Inflation 2.3% in ’19, up from 1.9% in ’18 More »
Business spending Up 5% in ’19 as global growth slows More »
Energy Crude trading from $65 to $70 per barrel in March More »
Housing 5.35 million existing-home sales in ’19, down 0.4% More »
Retail sales Growing at least 4% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7%-8% in ’19 More »

Total housing starts rose in November and will likely continue climbing in the next couple of months. Starts rose 3.2% to a seasonally adjusted annual rate of 1.228 million. Yet all of the monthly rise came from the volatile multifamily segment. Single-family starts actually fell by 4.6% — their third consecutive monthly drop, which brings them to their lowest level since May 2017. While new single-family construction has clearly slowed down in recent months, the marked weakness in November is likely due to wildfires in California: The West saw a 24.4% drop in single-family starts. Building permits rose 5% in November and are up a slight 0.4% from a year ago.

Existing-home sales rebounded in November amid slower home-price growth in recent months. They rose 1.9% from October, to a seasonally adjusted rate of 5.32 million. On a year-over-year basis, these sales have dropped for nine consecutive months. One of the main reasons is that listings remain scarce, despite having bottomed out in 2018. Inventory has started to grow, but it still sits close to historical lows. The inventory increases in recent months indicate that more homeowners are putting their homes up for sale as price growth slows across the nation. On a year-to-year basis, total inventory was up 4.1% in November. It would take 3.9 months at the current pace to sell through it. Properties stayed on the market for an average of 42 days in November, up from 40 days a year ago.

See Also: A Housing Shortage Looms as Builders Can't Keep Up

Home values are rising at a slower pace across the nation. The S&P CoreLogic Case-Shiller National Home Price Index rose 5.5% in October from a year ago. The sizable increase in mortgage rates since the start of 2018 has reduced affordability and dampened the pace of home-value appreciation. Las Vegas saw the largest annual increase at 12.8%, followed by San Francisco at 7.9% and Phoenix at 7.7%. Denver fell from the top three as price growth there slowed for the fifth month in a row.

Mortgage rates have risen from the all-time lows reached in 2012 and will keep on climbing in 2019, to 5.2% on the average 30-year fixed-rate loan. That average rose to 4.51% this week.

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