Housing market
In August, housing starts and building permits rebounded, signalling potential stabilization. Existing home sales fell short of expectations, but lower mortgage rates and increased inventory suggest future growth.
Housing starts rebounded from their lowest level since May 2020, driven by a notable 16% increase in single-family starts. Single-family permits, a key indicator of future activity, also showed signs of recovery, though they remain 6% below their peak for 2024. This uptick follows several months of decline, suggesting potential stabilization in permits. The report reflects an improvement in homebuilder sentiment, which recovered after hitting its lowest point since December 2023 last month, amidst high mortgage rates. With anticipated Fed rate cuts likely leading to a gradual decline in mortgage rates, both buyer interest and builder sentiment are expected to strengthen further, potentially supporting sustained housing starts and permits in the coming months.
Conversely, existing home sales fell short of expectations, decreasing by 2.5% MoM compared to the anticipated decline of 1.3%, and were down 4.22% YoY, reaching their lowest level since December. Despite this, the combination of lower mortgage rates and increasing inventory points to potential future sales growth. As of the end of July, total housing inventory had reached 1.33 million units, a 0.8% increase from June and a 19.8% rise from 1.11 million units a year earlier. The median sales price for existing homes increased by 4.2% from July 2023, marking the 13th consecutive month of yearly price gains. However, the increase in inventory has been constrained by homeowners' reluctance to relinquish their sub-3% mortgage rates.
We expect that a recovery in the housing market may not occur until 2025. Mortgage rates remain elevated, though they are projected to decline gradually with anticipated Fed rate cuts.