Housing Prices Continue to Cool

Housing prices continue to cool, but we look for the housing industry and the consumer to continue supporting GDP growth as manufacturing and export sectors show signs of slowing.  The S&P/Case-Shiller National Home Price Index for June 2019 showed that prices gained 3.1% year-over-year, down from 3.3% in May and from an average 5.6% in 2018.  For the balance of 2019 reasonable expectations, in our opinion, point to price hikes that will be range-bound around 3.0%-4.0%.  Certain headwinds and tailwinds can dramatically change this point of view.  From our perspective, however, a reasonable rate of growth in housing prices is healthy for the industry (and certainly does not indicate an overheated housing market).  Our assessment requires that we monitor several leading industry supply and demand indicators.  Inventory levels, which appear normal, indicate a 4.2-month supply of existing homes for sale. The average range is 3.5-5.5 months.  New home sales, according to the U.S. Census Bureau are running at a 635,000 per year rate through July, down 13% month to month but up 4.3% year over year.  You may recall pre-recession, new home sales per year stretched beyond 1,000,000 units.  Adding to our outlook, building permits continue to show improvement, surging in July to the highest level this year. Low inventory supports this increase.  Finally, borrowing costs have decreased in recent months as bond yields fell and the Federal Reserve started a multi-step lowering of rates.  There is much to consider on the housing front and how it effects our economy.  For example, any change in the Fed’s easy money policy could change our outlook.  For now, we conclude that housing growth remains intact and should continue quantifiable support of growing GDP. Talk to an OmniStar Advisor today if you have questions about your planning needs in regard to the housing market.