Housing Market Activity Cools

• Existing and new home sales sustained falls indicate cooling.

• Homebuilding activity slowed as demand softened.

• Affordability challenges resulted in increased rental demand.

Nationwide sales for existing homes decreased for the sixth consecutive month (-6% MoM / -20% YoY/ -11% YoY3) and softened demand caused prices to fall (-2 % MoM / 11% YoY/ 44% YoY3). In parallel, sales for newly constructed homes plummeted (-13 % MoM / -30% YoY/ -24% YoY3), albeit prices rose (6% MoM / 8% YoY/ 43% YoY3) as homebuilders struggled with elevated input costs for land, labor, and materials.

 

Homebuilders’ sentiment entered negative territory due to dwindling buyer traffic and worsening sales conditions. On top of ongoing supply chain issues, higher mortgage rates exacerbated affordability challenges amongst potential customers. More notably, sales expectations for the remainder of the year are dropping since the Federal Reserve will continue tightening monetary policy. Domestic activity slowed, as evidenced by declines in building permits (-1 % MoM / 2% YoY/ 24% YoY3) and housing starts (-10 % MoM / -8% YoY/ 17% YoY3).

Rental demand increased as homeownership became out of reach for more families. Resultantly, rents have consistently climbed (1% MoM / 12% YoY/ 22% YoY3) and contributed to inflation over the year. Within this landscape, multifamily construction grew while the single-family built-for-rent segment expanded. Although the latter comprises less than one-tenth of the rental market, its share trended upward aggressively by doubling its historical average growth rate.