Sales of existing homes rebounded strongly in February 2019, after experiencing a tough time in the last three consecutive months. Moreover, this marked the highest reading in the past 11 months and the biggest monthly rise since December 2015.
In the words of NAR's chief economist Lawrence Yun, "A powerful combination of lower mortgage rates, more inventory, rising income and higher consumer confidence is driving the sales rebound."
Meanwhile, shares of homebuilding bigwigs like PulteGroup, Inc. PHM, D.R. Horton, Inc. DHI, NVR, Inc. NVR and Lennar Corporation LEN rose 1.1%, 1%, 0.7% and 0.6%, respectively, on Mar 22.
Per the National Association of Realtors’ (“NAR”) report released on Mar 22, existing home sales jumped 11.8% to a seasonally adjusted annual rate of 5.51 million units last month from 4.93 million in January. Meanwhile, the February figure surpassed market expectations of 5.13 million units by 7.4%.
However, sales of previously-owned homes, which account for about 90% of U.S. home sales, decreased 1.8% on a year-on-year basis.
Regionally, sales grew in three of the four major U.S. regions. Sales in the West rose by an impressive 16%, while that in the South and Midwest increased 14.9% and 9.5%, respectively. However, sales in the Northeast remained in line with the prior month.
Median sales price in February grew 3.6% from the comparable year-ago period, marking the 84th straight month of year-over-year gain.
Total housing inventory at the end of February 2019 increased 2.5% from a month ago and 3.2% from the prior-year period. It will take around 3.5 months to deplete the current supply of homes in the market, down from 3.9 months in January but up from 3.4 months a year ago.
First-time buyers accounted for 32% of sales in February, up from 29% in both January 2019 and February 2018.
Declining Mortgage Rates a Boon
According to the mortgage finance company Freddie Mac’s Primary Mortgage Survey, the average U.S. 30-year fixed-rate mortgage slipped to the lowest level in a year to 4.28% for the week ended Mar 21 from 4.31% recorded a week ago. The said figure was also lower than the year-ago level of 4.45%.
For the week ended Mar 15, mortgage applications for new home purchases increased 1.6% from the prior week on a seasonally adjusted basis, per the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey. Volumes were also 1.8% higher than the year-ago level.
Homebuilders’ confidence was strong in the months of January and February for newly-built single-family homes, while the same remained stable in March, per the National Association of Home Builders/Wells Fargo sentiment index.
Total housing starts increased 18.6% in January from a month ago, per the U.S. Housing and Urban Development and Commerce Department.
Recovering Housing Industry?
It is quite evident from the above-mentioned housing data that the U.S. housing industry is gradually recovering from the damages caused by higher mortgage rates and rising home prices. In the upcoming quarters, the housing industry is likely to gain from higher demand, given improving economic conditions, rising disposable income and favorable demographic changes.
In fact, according to the NAR's chief economist Lawrence Yun, the U.S. homebuilding industry is likely to benefit greatly in 2019 compared with the previous year, courtesy of additional new housing.
This positive momentum that is currently being experienced by the housing industry can be substantiated by its share price performance. The Zacks Building Products - Home Builders industry has outperformed the broader S&P 500 composite in the past three months. The industry has gained 16.3% compared with the S&P 500 Index’s rally of 14.4%.
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