The recovering U.S. housing market took a bit of a breather in recent months, according to Metrostudy, the research arm of BUILDER. Year-to-date figures from the Commerce Department for residential permits, housing starts, and new home sales through August all show gains of 20% or more over 2012, but recent months have been weaker than the first half of the year.
Metrostudy projects total new home sales as 437,000, only slightly lower than the 440,000 the firm anticipated last quarter, and representing an increase of 19% over the 2012 total.
Third-quarter figures indicate move-ins increased year-over-year at about the same rate as in the first half 2013, while the rate of increase in new housing starts slowed moderately.
Median closing price figures from Metrostudy’s nationwide deed transaction database indicate the appreciation rate peaked in the June/July time frame, and has since stepped back slightly. In light of the most recent trends, the data firm adjusted its Housing Starts Forecast for annual 2013 downward to 938,000 from 949,000 last quarter.
The pace of new construction over the last year has been influenced by a substantial amount of investor activity in the resale market, which Metrostudy says has pushed prices upward and driven out-bid consumers toward the new home market. But the investor cycle looks to have peaked early this year, as cash purchase and absentee owner trends have ebbed moderately.
Why is the New Home Market Taking a Pause?
Several factors are likely to be playing a role in the relative “pause” in torrid market action, Metrostudy officials say. The pace of price increases in some markets has simply been unsustainable, and in that sense a chance to consolidate and reassess the substantial gains in housing is a healthy opportunity. The frenzied pace of activity in many housing markets earlier this year also may have served to pull forward some demand, leaving a slightly less aggressive consumer mindset.
The U.S. home buyer suddenly had a number of factors to inspire some caution as summer came to a close, Metrostudy says. They included a mild re-assertion of seasonal factors after nearly a half decade of uncharacteristic seasonal trends, and a momentary interest rate spike stemming from rumors that the Federal Reserve’s bond purchasing would taper off.
While autumn has seen a slightly less enthusiastic attitude toward housing, Metrostudy still projects healthy growth in new home sales volume this year. Inventory remains very low in many markets, and sufficient supply is as much of a concern as sufficient demand.