Weekly Economic Update - Down is Up

Construction permits posted another bad month in August, but housing starts rose by a gratifying amount. At least until a closer look revealed the near double digit gains from July were almost all in multi-family housing. Single-family starts rose to only a small degree and remain behind August of last year.

Existing home sales for August were almost eerily flat. Inventories, total sales, single family and condo sales were all unchanged from July. What are the odds?

Finally, the amount buyers are plunking down reached a record high in the 2nd quarter and it seems like at least some buyers are putting down more than required.

The median size of a downpayment hit a record in the second quarter of this year, $19,900, an 18% increase from the median of $16,750 a year earlier. The increase wasn’t just a reflection of rising home prices either; the percentage buyers put down also rose, from 6.6% of the median purchase price in Q1 to 7.6%.

Another stat from ATTOM Data System’s Mortgage Origination Report was the increase in the number of loans made to co-buyers, that is where multiple non-married buyers are listed on the deed. Nationwide 17.6% of sales involved co-buyers and those loans tended to have much higher downpayments than other loans, $63,117 compared to $41,749 and 16.3% of the purchase price vs. 8.1%.

Perhaps not surprising, the largest average down payments were in California ($305,000 in San Jose, $114,300 in Thousand Oaks) and San Jose and San Francisco topped the list of cities with co-buyers at 49% and 39%, respectively.

Sales Plateaued

Builders continue to lag behind both expectations and perceived demand when it comes to single-family houses. The Census Bureau’s Residential Construction Report for August disappointed analysts with a 5.7% decrease in permits compared to July and a 6.1% decline in those authorizing single-family houses. Total permits trailed those from last August by 5.5% while those for single-family houses held on to a 2.1% gain.

The results for housing starts were much better, with gains of 9.2% for the month and 9.4% on an annual basis. However, a huge chunk of those starts were for multifamily units. Starts in buildings with five or more units, which have been overwhelming built as rentals in recent years, rose 27.3%. Single-family starts were up by only 1.9% and were 0.2% lower than those last August.

August might never have happened if you go by the National Association of Realtors’ Existing Home Sales Report. Sales were unchanged from July at 5.34 million units and remained behind the same month in 2017 to the same degree as in July down 1.5%. Single family home and condo sales were also flat, and inventories didn’t budge. At least sales didn’t move lower as they had in each of the previous four months. In the words of NAR’s chief economist Lawrence Yun, sales seem to have “plateaued.”

09.21.2018

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