New home sales are surging. New construction is on the upswing. And home prices are bouncing back. The trifecta of datapoints is enough for one economist to say the housing market has bottomed.
"So it appears to me that after about a year of some slowdown in general — in housing activity and disinflation and home prices — that we're now seeing a floor and then a potential rally," Brad Dillman, Chief Economist at Cortland, told Yahoo Finance Live (video above).
The biggest case for a rebound is coming from the new construction market.
Limited inventory in the resale market has prompted more buyers to flock to the new homes market. Sales of newly built single-family homes rose for the third month in a row in May, up 12.2% from April – and a 20% gain over last year, according to the government data released last week.
As a result, there were 428,000 new homes for sale by the end of May, which represented 6.7 months of supply at the current sales rate.
"That corresponds with some of the activity that we've seen in housing starts, in general," Dillman said. "The last housing starts print was very, very strong."
Data from the Census Bureau showed new construction for both single and multi-family units climbed 21.7% to a seasonally adjusted annual rate of 1.631 million units in May. That’s a 5.7% gain compared to a year ago and above the 1.4 million units economists polled by Bloomberg estimated. Permits to build also jumped 5.2% to an annualized rate of 1.491 million units in May from a revised 1.417 million the previous month.
"The new housing starts data would tell us that it's increasing again close to 1.7 million housing units under construction, that's enough to rebuild every house, every home in Connecticut, and then half of Wyoming," Dillman said.
The mass of homes under construction comes as homebuilders are staying ahead of the game, polishing their outlook for the year.
Source: Yahoo Finance
