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Home price growth continued to trend lower at the start of the year. The S&P CoreLogic Case-Shiller National Home Price Index (opens in new tab) rose 3.8% in January from a year ago, down from 5.6% in the previous month. Prices have fallen for seven consecutive months on a seasonally adjusted monthly basis. While mortgage rates have started to come down and are likely to end the year around 5.5%, prices have further to fall to draw enough demand back to the housing market.
Residential construction jumped in February. Total housing starts rose 9.8% to 1.450 million annualized units in February, now down 18.4% from a year ago. Single-family starts rose 1.1%, while multi-family starts surged 24% for the month. Abnormally warm weather in the early months of the year has helped builders to continue breaking ground on new projects during the winter months. Building permits — a bellwether for future construction — rose 13.8%, with single-family permits increasing 7.6% during the month and multifamily permits rising 21.1%. After falling for much of the second half of 2022, multi-family permits have increased over the past few months. The recent strength in multi-family permits suggests that apartment and condo construction is likely to grow at a strong pace in 2023, even as the housing market overall continues to face headwinds.
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New home sales continued their modest recovery in February, rising 1.1% to a seasonally adjusted annual rate of 640,000 units. While sales are still below pre-pandemic levels, they have staged a small recovery in recent months, rising 18% from their trough in July 2022. The recent strength in new home sales reflects the generous incentives and price cuts offered by builders across the nation. The inventory of new homes fell in February but remains elevated at eight months of supply.
Receding mortgage rates sparked a resurgence in existing-home sales, which rose 14.5% in February. This is the first increase since January 2022. Existing-home sales are still down 22.6% from a year ago. Mortgages have fallen from their 20-year high of 7.2% in mid-October to 6.32% in the last week of March. Elevated mortgage rates in the near future, tighter lending standards and the growing risk of a recession in the wake of recent financial stability concerns will weigh heavily on home sales in the months ahead.
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