August was a good month for the U.S. housing market: new and existing-home sales increased, housing starts jumped, the unemployment rate dropped and mortgage rates decreased.
Single-family existing home sales increased 1.2% in August compared with July to reach an annual rate of 4.9 million, according to the Federal Reserve Bank of New York’s monthly U.S Economy in a Snapshot report.
That’s up 2.9% compared with August 2018.
Sales of single-family new homes increased 7.1% in August compared with July to reach an annual rate of 713,000 units. That’s up 18% compared with a year earlier.
Although payroll growth was only “moderate” in August, the unemployment rate ticked down to 3.5% – the lowest it’s been since 1969.
The strong labor market, combined with low mortgage rates, “could continue to provide support to housing,” the Fed notes in the report.
“Favorable labor market conditions and a substantial decline in mortgage interest rates continue to act as positive forces,” the Fed notes in the report. “Inadequate inventories in affordable price ranges continue to be a drag on sales and to fuel home price increases.”
However, housing starts are starting to improve. Total housing starts (single family and multifamily) increased 12.3% in August compared with the previous month to reach an annual rate of 1.364 million units. That’s the highest level of production since June 2007.
“It appears that single-family starts are finally beginning to respond to the steep decline of mortgage interest rates that has occurred over the past year,” the Fed says in the report. Single-family housing starts rose 4.4% in August, the third consecutive monthly increase, and are now up 3.4% on a year-over year basis.”
“Multifamily housing starts, which are notoriously volatile from month to month, rose 32.8% in August to 445,000 units,” the report states. “Moreover, multi-family permits increased a cumulative 34.5% over July and August to 550,000 units. This suggests that further increases in multifamily starts are in the pipeline.”