Over the last few months, we have been writing about a rising probability that economic growth will slow down on a rate of change basis. The most recent round of housing data releases provided more evidence towards that scenario.
The National Association of Home Builder’s Housing Market Index, a leading sentiment indicator for the single-family housing market, declined 12 points to 55. Excluding the pandemic slide in April 2020, this was the series’ steepest decline on record going back to 1985. All three components and all regions declined in July.
Single-family housing starts declined -8.05% month-over-month and the year-over-year pace dropped at its fastest clip since April 2020. Building permits for single-family homes came in at -7.71 month-over-month and -11.09% year-over-year, its steepest drop off since April 2020.
Existing home sales, measured by the National Association of Realtors, totaled 5.12 million in sales versus 5.41 million in the prior month. This equates to a -5.36% month-over-month decline, its fifth consecutive month of negative prints. The year-over-year comparison dropped again at -14.24%, but this could pickup as the comparison set begins to ease next month.
New homes sales are following a similar path dropping -8.10% month-over-month, marking five negative months in the last six. The year-over-year pace has been negative in eleven of the last twelve months with June coming in at -17.37%.
It was more of the same for pending home sales data, declining -8.63% month-over-month and has now been negative in nine of the last twelve months. On a year-over-year basis, pending home sales dipped -19.96%, its twelfth consecutive negative print.
The most recent round of releases further shows that housing market data is moving in the wrong direction across the board. This weakness increases the probability of an economic slowdown.
The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance. The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.
Senior Economic Analyst
Boyd Watterson Asset Management, LLC