Despite a red-hot economy, the US housing market looks decidedly lukewarm. Unless construction picks up, slowing residential investment will start to drag on GDP growth
The market has stalled since the start of the summer
Sales of existing homes have fallen to 5.15m (annualised) in September, the lowest level for two years, down from an average of around 5.5m at the start of the year. New home sales have also been falling, with only 515,000 new homes sold in September, compared to 650,000 on average in Q1. Having said that, pending home sales in September increased slightly, suggesting sales may pick up a little in Q4.
Housing looks to be turning into a headwind for the US economy, with flat or slowing construction spending over the next year or so increasingly likely
New construction looks similarly lacklustre, with new starts stalling around 1.3m annualised since 4Q17. June and July were particularly weak for housing starts, which may be partly related to the extremely hot weather – 2018 saw the hottest summer since the 1970s. But new building permits (which are less affected by weather effects) have also flatlined in 2018, indicating construction is unlikely to pick up soon.
Residential investment slowing as pace of new starts and permits growth slows
Macrobond and ING calculations
Affordability is worsening
Average house prices are still…………………………………