A shaky start to 2019 for housing

Shaky start for housing in 2019
by Team Stessa, posted in Newsletter

With so many housing slump discussions going on, it’s been a shaky start to 2019 for the housing market. This week was no different, with Katia Dmitrieva of Bloomberg reporting on the fact that new-home construction in December was at its lowest point since September 2016. Specifically, “residential starts fell 11.2 percent to a 1.08 million annualized rate after a downwardly revised 1.21 million pace in the prior month.”

Source: Bloomberg

Meanwhile, Matthew C. Klein of Barron’s reports on a University of Michigan survey that focuses on consumer sentiment towards housing, and the results aren’t great. Reportedly, only around 30% of U.S. consumers think it’s a good time to buy a house, with a marked lower average for younger Americans.

Source: Barron’s

The Real Deal weighs in on the discussion, highlighting this week that housing prices had their slowest growth in four years during 2018. The Case-Shiller Index rose only 4.7 percent by December, the slowest growth margin since 2014, and housing starts dropped 11.2 percent in December from November. The Real Deal notes that “Taken together, the declining indicators could spell out a rough 2019.”

There is a bright spot according to Jeffry Bartash of MarketWatch which could signal a rebound. Specifically, Bartash notes that building permits are less volatile and are considered a more important economic indicator than housing starts. “Permits rose for three of the last four months while starts plunged,” Bartash noted, adding that “we would expect construction growth to pick up in the months ahead.”

A week of “top” lists

It was a week of lists for real estate investors, many of which may relate to your specific market. Starting with Grant Suneson of 24/7 Wall Street who reports on the top 25 least and most affordable housing markets in the U.S. Interestingly, the 25 least affordable are located in just 4 states: Massachusetts, California, New York, and Hawaii.

Highlights from the 5 least affordable markets in order of ranking: Kings County, New York, Marin County, California, Santa Cruz County, California, Monterey County, California, and San Luis Obispo County, California.

Highlights of the 5 most affordable in order of ranking: Baltimore City County, Maryland, Clayton County, Georgia, Peoria County, Illinois, Wayne County, Michigan, and St. Lawrence County, New York.Reporting on a VeroFORECAST report, Eric Fox of HousingWire discusses the top 10 markets in the U.S. that will see the largest price decline in 2019.

These are:

  • Farmington, New Mexico -2.6%
  • Danville, Illinois -1.4%
  • Decatur, Illinois -1.0%
  • Peoria, Illinois -1.0%
  • Grand Forks, ND-MN -0.8%
  • Springfield, Illinois -0.6%
  • Cumberland, MD-WV -0.5%
  • Shreveport-Bossier City, LA -0.5%
  • Lafayette, LA -0.4%
  • Bridgeport-Stamford-Norwalk, CT -0.4%

Clare Trapasso of Realtor.com reports on ATTOM Data Solutions analytics that shows the housing markets with the highest level of flipping activity in 2018 compared to 2017. These are, in order of highest flipping activity, Boston, MA, at 33% more than the previous year; Tucson, AZ, at 27.3%; Raleigh, NC, at 24.5%; Columbus, OH, at 13.1%; and Hartford, CT, at 12.8%.

The inverted yield curve

An inverted yield curve is when long-term bonds have a lower yield than short-term bonds of similar credit quality, and it’s a leading economic indicator of a forthcoming recession. This of course, could have a dramatic impact on real estate nationwide.

This week, Fat Tailed and Happy reported that the 3 month and 5 year treasury bond spread inverted this week. Further, NASDAQ published a story this week titled The Yield Curve is Shouting “Recession”, where they report that “Stock investors may have largely moved on from day to day concerns about a pending recession, but important parts of the bond market are still signaling a downturn is coming.”

The Stessa Weekly Newsletter is hand-curated every week to bring you insightful accounts of new features, investing tips, business insights, and market trends from the real estate ecosystem.