Market Recap: Retail Sales Surge, Housing Market Index Dips, and Housing Starts and Building Permits Rise
Mortgage rates did not move significantly this week, trending slightly upward according to some sources. Retail sales rebounded with strength after several months of ticking downward. The National Association of Home Builders’ (NAHB) housing market index dropped by one point, but the reading was still positive. Housing starts and building permits each increased.
Retail sales track the total receipts of goods and services sold at retail stores. Retail sales are used to gauge consumer spending habits and consumer spending accounts for two-thirds of total economic activity. When consumers are spending, the economy strengthens. In March, retail sales jumped 0.6% month-over-month, exceeding forecasters’ expectations. Gains were driven by auto sales, with dealers reporting their best month since last September. Other strong categories were online retailers, pharmacies, and home furnishings stores. Not counting autos and gas, sales still increased 0.3%. Strong spending is likely to continue into the Spring as consumers tap into the savings they have rebuilt since the holiday season.
The NAHB housing market index fell slightly in April to a level of 69, though any reading above 50 is considered positive. Despite sustained buyer demand and low supply, builder confidence wavered regarding materials costs. Current sales dropped 2 points to a level of 75 and sales expectations for the next six months dropped 1 point to 77. Buyer foot traffic was unchanged at a level of 51. NAHB Chairman Randy Noel explained, “builders are facing supply-side constraints, such as lack of buildable lots and increasing construction material costs. Tariffs placed on Canadian lumber and other imported products are pushing up prices and hurting housing affordability.”
Housing starts track ground broken on residential projects and building permits track permits issued. These reports are used to gauge future housing market activity like new home sales. In March, housing starts increased 2% month-over-month and 10.9% year-over-year to a seasonally adjusted annual pace of 1.32 million. Building permits also gained, up 2.5% month-over-month and 7.5% year-over-year to a seasonally adjusted annual pace of 1.35 million. Housing starts and building permits have been volatile this year, with strong buyer demand and uncertainty surround tariffs on construction materials.
Zillow reported, it took an average of 81 days to sell a home in 2017, the fastest time ever recorded. With high buyer demand and limited for sale inventory the market is likely to get increasingly competitive. Getting preapproved for a mortgage before shopping is one way for buyers to show sellers they are serious candidates and ready to make a purchase.
Sources: Bloomberg, CNBC, MarketWatch, MarketWatch, Mortgage News Daily