Unexpectedly weak pending home sales in January, combined with two consecutive months of contracting housing starts, point to a slow start to 2016 for home sales according the Zillow’s February home sales forecast.
Unexpectedly weak pending home sales in January, combined with two consecutive months of contracting housing starts, point to a slow start to 2016 for home sales according to Zillow’s February home sales forecast.
Existing home sales were particularly volatile at the end of 2015 (due in part to the timing of some closings getting disrupted as new rules came into effect), but tended to hew fairly close to the narrow 5.3 million to 5.5 million-unit band where that has prevailed since mid-2015. We don’t expect sales to break out beyond this band in February, and expect a 2.2 percent decline from January to 5.35 million units at a seasonally-adjusted annual rate (figure 1). Existing home sales volumes at this level would represent a 6.2 percent gain over February 2015.
Low mortgage rates in early 2016 have failed to spur home sales to the same extent as in the past, with the persistently low number of homes for sale in most markets playing a more prominent role in driving market dynamics.
Single-family housing starts have contracted on a monthly basis in three of the past four months – including a 3.2 percent decline in December and a 3.9 percent decline in January. Texas alone accounted for 15 percent of single-family construction permits issued in 2015 (versus 6 percent for California, which has 30 percent more people), and slowing employment growth in the most energy-dependent parts of Texas (as well as in other energy dependent states) could weigh on new home construction in 2016.
Our forecast calls for a 2.4 percent increase in new home sales in February from January (figure 2), to 506,000 units (SAAR), partially offsetting a 9.2 percent decline in January. New home sales have been largely flat over the past year, and our forecast implies a year-over-year decline of 7.2 percent in new home sales.
Our long-term forecasts (table 1) suggest relatively flat home sales over the next year.
