Residential: Making sense of the housing market without government data

The final months of 2018 brought headlines warning of a housing slowdown. However, this month, when the mortgage industry would otherwise be gauging the state of the housing market in a new year, some worry we may have an incomplete picture because of the government shutdown. As the government reopens, the delayed data, combined with industry data that has already been released, will offer a more comprehensive snapshot of the housing market in December heading into 2019.

On December 22, 2018, when the shutdown began, federal agencies, such as the Census Bureau and the Department of Housing and Urban Development (HUD), stopped issuing economic reports. Although these reports are helpful in assessing the health of the market, reports provided by industry trade associations and the government-sponsored enterprises (GSEs) helped track an ongoing picture throughout January.

“During the shutdown we missed out on some key metrics, such as housing starts, building permits and new-home sales,” said Tim Rood, Chairman of The Collingwood Group. “However, these metrics only represent a few pieces of the larger puzzle. We continued to get data on things like builder sentiment, existing and pending home sales, and mortgage applications, which appear to show the housing market is still on steady footing.”

The shutdown held up the release of new residential construction and construction spending data for December, which includes building permits, housing starts, housing completions and residential construction spending. Analysts also missed the latest data on new residential sales for November.

“We can still get a pretty good idea of where the market is at,” said Rood. “Pending home sales saw a moderate dip in November. Existing-homes sales saw declines in December as well, but builder sentiment and mortgage applications peaked up in January.”

During the shutdown, the National Association of Realtors published pending and existing home sales data. Pending home sales fell less than 1% from October to November. The latest existing home sales data, released January 22, 2019, reported a 6.4% drop from November to December. However, during that time home prices continued to rise and inventory shrank, suggesting relatively strong demand.

On January 16, 2019, the National Association of Home Builders published January data on the Home Builders Housing Market Index. The forward-looking indicator showed a two-point increase in builder confidence, citing lower mortgage interest rates in late December and January. The Mortgage Bankers Association’s Weekly Applications Survey confirmed gaining optimism in January. The first two weeks of January saw a 23.5% and 13.5% uptick in mortgage applications.

“A lot of the government reports we’re waiting on have data on November and December,” said Rood. “These are important, but we’re already able to gauge where key metrics, such as industry sentiment, new applications and pending home sales, sat in January.”

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