The housing sector continues to defy economic weakness and deflationary forces …
Both single-family housing and remodeling activity continue to pace a truly remarkable performance by the housing sector of the U.S. economy. Indeed, broad-scale economic weakness has bestowed benefits on the interest-sensitive housing market, buoying home sales and stimulating waves of mortgage refinancings that have freed up huge amounts of accumulated housing equity to support spending on remodeling (and other things) by homeowners.
The support to housing demand from falling mortgage rates (now below 5.4%) also has bolstered house prices, a dramatic development in an economy toying with broad deflationary forces. Indeed, median prices for existing homes sold posted a solid 7% increase (year-over-year) in the first quarter, equivalent to the performance for all of 2002.
Housing starts retreated by 6.8% in April, prompting speculation about fundamental problems emerging in the heretofore resilient housing sector. But most of this decline was in the volatile multifamily sector. Furthermore, issuance of building permits was up for both single-family and multifamily housing, and the backlog of unused permits rose substantially in both components of the market, providing a strong foundation for starts in May.
To top things off, NAHB’s Housing Market Index for May showed a healthy rebound in the attitudes of single-family builders, particularly with respect to the prospects for home sales in the future.
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