Economic Snapshot: Recent housing market trends beg cautious optimism

We are seeing some positive numbers in the housing market this past month. Growth is present in the Housing Market Index, Housing Starts and Existing Home Sales, continuing an upward trajectory from earlier months in 2014. While existing home sales are still 4.3 percent below year-over-year, this consistent upward momentum demands cautious optimism.

Housing Market Index

The Housing Market Index, complied by The National Association of Home Builders, is up two points from July to 55. This is the third consecutive month of growth and the best reading since January 2014.

All components improved: future sales are up two points to 65 and present sales are also up two points to 58. Traffic is showing its best reading since December, up three points to 42.

Every region saw growth last month. The Midwest is up seven points to 55, the West is up four points to 56, the Northeast is up two points to 38 and the South is up one point to 52.

Any reading over 50 indicates more builders view conditions as good than poor.

Housing Starts

The Housing Starts report was solid for July. Privately owned housing starts were up to 1.093 million units for July, a 15.7 percent increase from 945,000 units last month and a 21.7 percent increase from 898,000 in July 2013. Single-family housing starts were at 656,000, an 8.3 percent increase from 606,000 in June.

Privately owned housing completions were at 841,000 in July, a 3.7 percent increase from June and an 8.0 percent increase from the previous year. Single-family housing completions rose to 635,000, a 6.2 percent increase from the previous month.

Existing Home Sales

Existing Home Sales rose 2.4 percent, up to 5.15 million in July from 5.03 million in June. This month’s reading is still 4.3 percent below July 2013, but existing home sales have risen four consecutive months and are at the highest pace in 2014.

The median existing home price among all housing types was $222,900, 4.9 percent above the previous year. This is the 29th consecutive month of YOY price gains.

Distressed homes – foreclosures and short sales – accounted for 9.0 percent of sales, down from 15 percent in July 2013 and in the single digits for the first time since October 2008. Both foreclosures and short sales sold below market value in July, with foreclosures at an average of 20 percent below and short sales at 14 percent below.

Total housing inventory was up 3.5 percent in July to 2.37 million, which represents a 5.5-month supply at the current sales pace. Unsold inventory is 5.8 percent higher than the previous year.