What I Saw Last Week

The NAHB Housing Market Index fell two points to 64 in July from a downwardly revised 66 for June (I had forecast no change) and the index now stands at its lowest level since November 2016.


Builders are increasingly concerned over rising material prices – especially lumber – and this is hurting affordability, therefore slowing the market.

Among the sub-indexes, the current sales conditions index fell two points to 70 and the index measuring prospective buyer traffic edged down one point to 48. Meanwhile, the sales expectations index fell two points to 73.

The NAHB noted that the current sales conditions index has been at 70 or above for eight straight months, indicating strong demand for new homes; however, given the latest lukewarm numbers, the association suggested that builders need to manage supply-side costs to keep home prices competitive.

The survey includes a set of “special” questions on a topic of current interest to the housing industry which is worthwhile discussing as the June special questions asked builders about the supply and price of developed lots.

The data suggested 64% of builders reported that the overall supply of developed lots in their areas was low to very low (the same share as seen in May 2016), but up from a cyclical low of 43% seen in September 2012. This is noteworthy as it represents the largest share of builders reporting low to very low lot supply since the NAHB began periodically asking the question in 1997.

The takeaway here is that the continued low supply of developed lots is a hindrance to a faster housing recovery.

U.S. Building Permits rose 7.4% to a seasonally adjusted annual rate of 1.254M units (I had forecast an increase to 1.196M) from an unrevised 1.168M in May. Additionally, the May figure was revised higher to 1.122M from 1.092M.


Single-family permits were up in all regions: Northeast (+11.5%); Midwest (+11.1%); South (+1.8%); and the West (+3.3%).

It is noticeable that permits are now at the highest level seen since March and that single-family permits rose 4.1% following 3 months of declines.

U.S. Housing Starts jumped 8.3% in June to a seasonally adjusted annual rate of 1.215M – I had forecast an increase to 1.160M units – after being revised up to 1.122M (from 1.092M) in May.


Single-family starts increased in all areas except for the Midwest (-3.6%). They were up 9.3% in the Northeast, up 7.2% in the South, and up a whopping 10.6% in the West.

The takeaway from this report is that there was solid growth in both single-family starts (+6.3%) and permits for single-family homes (+4.1%), both of which are important given the supply constraints in the housing market that have crimped affordability for many prospective home buyers.

What to Watch for This Week

U.S. Existing Home Sales rose 1.1% to an annual rate of 5.62M units in May. Unfortunately, I see supply constraints negatively impacting the June number – expect it to come in at around 5.58M units.

The Case Shiller Index rose 5.7% year-over-year through April and I anticipate the May number coming in up 6.2%.

Consumer Confidence in June was measured at 118.9 and the July figure is likely to show a drop back to 116.8.

U.S. New Home Sales were running at an annual rate of 610,000 units in May.  Look for the June number to match the prior month.

The Federal Reserve meets this week and I expect that they will decide not to raise the Fed Funds Rate at this meeting; however, I still anticipate one more rate increase this year.

On Friday, we get the first estimate of US GDP in the second quarter of the year.  I think that we will see growth in the quarter come in at 2.8% – up from the 1.4% seen in Q1.

The final Consumer Sentiment number for July should match the early month figure of 93.1.