Author: Stephen Culp
New York (Reuters)-The US real estate market seems to be strained under the weight of its own pandemic-driven success. Recent data shows that the industry is recovering from the stratosphere and back to its pre-COVID levels, as evidenced by the large amount of data released this week.
Although housing and real estate have become the stars of the recovery during most of the pandemic, the resulting inventory plummet and shortage of construction supplies have made many potential buyers unable to control housing prices, especially in low-end areas. market.
“The real estate market has not collapsed,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “Have we reached the peak? It is possible, but in the worst case, I think it will level off.”
For investors, the best news this week is the announcement from the National Association of Realtors (NAR) on Thursday. The association reported that second-hand home sales in June increased by 1.4% at a seasonally adjusted annual rate. 5.86 million sets, although the rebound was weaker than expected.
This number was 40,000 units lower than market expectations, following a downward revision of 1.2% in May.
Chart: Existing house sales: https://graphics.reuters.com/USA-STOCKS/movanmkqkpa/ehs.png
The inventory drought has provided strong support for housing construction, but this support seems to be waning.
Although the rate of new residential starts increased by 6.3% in June, the more forward-looking building permits fell 5.1% to an eight-month low.
Through these measures, operating rates and permits have been restored to pre-pandemic levels.
On Monday, the National Association of Home Builders reported weaker sentiment among builders because higher input costs and rising house prices appeared to weaken the flow of potential home buyers.
Chart: NAHB: https://graphics.reuters.com/USA-STOCKS/yxmvjzzwdvr/nahb.png
The latest data shows that Case-Shiller’s 20-city composite house price index has an annual growth rate of 14.9%, and NAHB’s potential buyer traffic—although still much higher than pre-pandemic levels—is The November peak dropped by 15.6%.
Chart: house prices and potential buyer traffic: https://graphics.reuters.com/USA-STOCKS/gkvlgmgblpb/pricesbuyers.png
In fact, according to data from the Mortgage Bankers Association (MBA), mortgage demand fell by 4% last week. Loan applications for the purchase of a house have fallen by 18% compared to the same period last year.
Picture: MBA: https://graphics.reuters.com/USA-STOCKS/movanmnwwpa/mba.png
As one of the most forward-looking indicators, the stock market also reflects some of the brilliance of real estate stocks.
The group has outperformed the market for most of the pandemic, although most economies are struggling to cope with the impact of social distancing regulations, which have led to people moving from cities to more spacious properties in suburbs and other areas.
In the past 12 months, the Standard & Poor’s 1500 Residential Building Index and the Philadelphia Southeast Housing Index rose by 36.2% and 31.2%, respectively, which is basically the same as the 33.0% increase over the same period.
Chart: Housing inventory: https://graphics.reuters.com/USA-STOCKS/egpbknyogvq/hgx.png