Housing Going Strong, Will Keep Going Strong


Housing led the economy out of the 2009 recession. It leads the economy to this day.

New housing activity is a big deal to economic growth. When all the inputs to a new home — material, financing, sales, accouterments (furnishings and such) — are factored in, it’s easy to appreciate new housings’ contribution to the economy. 

New housing activity remains a big deal, and it remains a big deal where it matters most. The single-family-home segment is where it matters most. 

Single-family-home starts were up a stout 5.3% in October. Starts rose to 877,000 on an annualized rate for the month. More single-family starts are in store. Permits rose to 839,000 on an annualized rate in October.

The numbers in total, which include the multi-family segment (also up in October), show starts at 1.29 million on an annualized rate. Starts have trended higher in recent months. They’ve trended higher for the past five years, but they remain below the historical 1.5 million (annualized) average. Room for growth exists. 

As for tenured homes, buyer interest creeps higher.

Existing home sales rose 2% in October to lift overall sales to 5.48 million on an annualized rate. Single-family homes led the charge. They rose 2.1% for the month.

Buyer interest is there. Seller supply continues to dampen enthusiasm, though. 

Total housing inventory decreased 3.2% in October. It’s now lower than it was this time last year. No one should be surprised when prices are considered. The median price for an existing home rose 5.5% to $247,000 in October. The October price increase marks the 68th consecutive month of year-over-year price gains.

We offer the usual caveat — housing markets are local markets: Colorado, Connecticut; New York, New Mexico, they’re hardly the same. Overall, though, things look good. They look good despite a high degree of skepticism.  Read enough of the popular financial media outlets and you’re sure to encounter an article with at least one sentence that contains both “bubble” and “housing.”

A high degree of skepticism is a positive. The fact that many market participants are worried about a bubble suggests there is no bubble. The housing market remains a healthy market due in large part to healthy skepticism. 

Is it a perfect market? No market ever is. That said, we see little proof the housing market floats on air.  


All Quiet on the Interest-Rate Front

The range remains the same, as we expected it would. 

We’ve been portending the recent tend for at least the past month. With little new information on taxes, consumer-price inflation, and economic growth, we thought that interest rates would continue to hold within a tight range. That has been the case, at least on the long-end of the yield curve. 

The 10-year U.S. Treasury note has been anchored at 2.35% for most of November. Deviations have been no more than five basis points up or down. 

As the 10-year Treasury note goes, so go long-term mortgage rates. To no one’s surprise, the 30-year fixed-rate mortgage continues to hold a narrow range. The range has held within 12.5 basis points up or down for most of the year, with 4% serving as the pivot point. Mortgage News Daily tells that 4% has been the most prevalent quote across the country for a prime 30-year conventional loan for the past week. Again, we’re not surprised.

With the holiday shopping season heading to full force, we’ll stick to our mortgage-rate thesis: We see nothing but range-bound quotes from now until the new year. A quote below 4% on a prime conventional 30-year loan is likely worth locking. A quote above 4%? That might be worth floating. Of course, it all distills to individual risk preferences.

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