GRAPHIC-America’s real estate market is falling back to earth
NEW YORK, July 22 (Reuters) – The US real estate market appears to be straining under the weight of its own success linked to the pandemic. Recent data shows the sector is returning from the stratosphere and returning to pre-COVID levels, as evidenced by a wealth of data released this week.
While during much of the pandemic, a rush to the suburbs made home and real estate the stars of the recovery, falling inventories and the resulting shortage of building materials kicked up prices. homes beyond the reach of many potential buyers, especially at the lower end of the market.
“The housing market is not collapsing yet,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York City. “Have we reached a peak? It is a possibility, but in the worst case I see stabilization. “
The best news of the week for investors was released Thursday by the National Association of Realtors (NAR), which reported that sales of previously owned homes rose 1.4% to 5.86 million units in June. at a seasonally adjusted annualized rate, although the rebound was weaker than expected.
The number broke the consensus of 40,000 units and followed the downward-revised 1.2% drop in May.
The inventory drought has provided strong support for housing construction, but that support appears to be waning.
While groundbreaking work on new residential homes rose 6.3% in June, building permits, a more forward-looking indicator, fell 5.1% to an eight-month low.
With these movements, departures and permits returned to pre-pandemic levels.
On Monday, the National Association of Homebuilders reported weakening builder sentiment as rising input costs and rising home prices appear to be hurting traffic from potential buyers.
The most recent data shows an annual increase of 14.9% in the composite house price index of 20 cities of Case-Shiller and traffic from potential buyers of NAHB – while remaining well above the levels of ‘before the pandemic – down 15.6% from the November peak.
Indeed, demand for mortgages fell 4% last week, according to the Mortgage Bankers Association (MBA). Home purchase loan applications are down 18% from the same week last year.
The equity market, the most forward-looking indicator of all, also reflects some luster for real estate stocks.
During much of the pandemic, the group outperformed the broader market, even as much of the economy struggled with the effects of social distancing mandates that spawned an exodus from cities to more spacious properties in suburbs and beyond.
Over the past 12 months, the S&P 1500 Homebuilding Index and the Philadelphia SE Housing Index have increased by 36.2% and 31.2% respectively, which roughly corresponds to the 33.0% increase in S&P 500 during the same period.
Reporting by Stephen Culp; Editing by Alden Bentley and Sonya Hepinstall