With our Housing Market Seminar for the Greater DC and Baltimore area right around the corner on September 28th, we decided to take a look at how the region’s economy and housing market stack up against the rest of the country.  The nation’s capital has long been a stable employment market due to its political clout, high levels of education, and government and government-related industries.  So it should come as no surprise that the Washington D.C. metro area is outperforming national trends in just about every housing metric, especially in recent months.

In data released just today, the S&P Case Schiller home price index showed that Washington, D.C. was one of the only two cities in the 20-city index to experience year-over-year price appreciation.  According to data from Housing IntelligencePro, new and resale home closings have been showing positive gains in recent months.  Median home prices in both the new and existing home markets also appreciated in the region, performing better than the national average.  And foreclosures are down significantly in the area from year-ago levels while also outperforming national trends.  For more in-depth insight on the Greater DC housing market, please join us at the Bethesda Marriott Suites on September 28th, we look forward to seeing you there!

The nationwide new home market didn’t have a great August, but it wasn’t as bad as it was characterized in some outlets.  Yesterday the Commerce Department released the Census New Home Sales Survey data and some media were jumping on reported numbers as showing a decline where we would say they were largely in line with analyst expectations of flat volume.  The results were within the margin of error of the survey, and essentially were unchanged from the prior month.

The lagging S&P Case Schiller home price index for July released today showed that prices continued to stabilize which is a positive sign for the housing market.  This is the fourth consecutive month that the index has increased although prices are still down 4.1% year-over-year.  Housing data released last week also showed that overall housing conditions are gradually improving.  Existing home sales picked up in August while building permits also increased.  Although housing starts declined, some of that can be attributed to Hurricane Irene which devastated the Eastern seaboard in mid-late August.  The increase in permit activity suggests that residential construction should pick up in the coming months.  With the economic turmoil in the U.S. and Europe, mortgage rates have been pushed to new all-time record lows which make it an opportune time to buy.  However, continued declines in the Mortgage Bankers Association’s Purchase Index show no such occurrence.  The Purchase Index fell to its lowest levels since late February in its most recent release.  But falling mortgage rates and low home prices remain a catalyst for the housing market and will keep housing affordability at or near record highs for homebuyers.

Final second quarter estimates for second quarter GDP is set to be released on Thursday and data on personal incomes and personal spending are on deck for Friday which will all be market movers to watch towards the end of the week.  The G-20 meetings over the past weekend provided no clear approach to solving the European debt crisis.   The Eurozone has been at the center of the current crisis.  The possible default in Greece along with how the rest of the Eurozone responds to its debt problems will be the key determinant on the market’s course in the near-term.

The Economy
After plunging in August, consumer confidence inched up slightly remaining almost relatively unchanged from the previous month in September.  The consumer confidence index increased to a reading of 45.4 from an upwardly revised August figure of 45.2.  The consumer confidence was at its lowest levels since April 2009 last month before September's marginal gain.  Weak employment conditions domestically along with the European debt crisis are currently the biggest drags on confidence.

The leading index increased in August to a reading of 116.2 which is a 0.30 point increase from July levels.  The index is up 2.70 points from its levels six months ago when it stood at 113.5 in February.  This is the fourth straight month that the leading index has increased.  The pace in which the leading index is increasing has slowed in recent months which suggest that economic growth will continue albeit at a slower rate.  The leading index is up 2.4% from its levels six months ago which is the weakest increase over a six-month period for any month since October 2010.  Only four out of ten components in the leading index recorded monthly gains while five out of ten posted increases compared to their levels six months ago.

Initial jobless claims reversed its recent upward trend this past week.  First-time unemployment claims declined by 9,000 to a seasonally-adjusted figure of 423,000 in the week ended September 17th from an upwardly revised figure of 432,000 in the previous week.  Jobless claims were at their highest levels since the end of June before last week’s decline.  This is the sixth consecutive week that initial jobless claims have come in above the 400,000 level.  Claims remain at elevated levels that will make it difficult for any improvement in the U.S. unemployment rate and overall labor market.

Housing Market
As we reported yesterday, new home sales in August were essentially flat from the previous month to a seasonally-adjusted annual rate of 295,000 units.  While still a lackluster pace, new home sales for the previous three months were revised higher by 6,000 units.  New home sales are still 6.1% higher than they were this time last year but it is important to keep in mind that demand this time last year was depressed due to increased activity in the early part of the year because of the federal homebuyer tax credit.

Falling mortgage rates and lower home prices in August pushed new home affordability to its highest levels since October 2010.  The new home affordability increased to a reading of 62.7% last month.  This is the second straight month that new home affordability has increased.

New home inventory on a seasonally-adjusted basis continued to decline in August to record-low levels.  Seasonally-adjusted new home inventory declined to 162,000 units in August from a July figure of 164,000 units.  But due to weaker sales activity, months of new home inventory increased slightly in August.  Seasonally adjusted months of new home inventory increased to 6.6 months in August from 6.5 months in July.  This is the most months of new home inventory on the market since March.

Existing home sales rebounded in August following July’s drop.  The seasonally-adjusted annual sales rate of existing homes increased 7.7% from July levels to 5,030,000 units last month.  In July, existing homes reached their lowest levels since November before recovering in August.  Existing single-family home sales increased 8.5% from last month to 4,470,000 units while condo and co-op sales increased 1.8% from July levels to 560,000 units.  Compared to the same time last year, existing home sales are up 18.6% from the 4.24 million seasonally-adjusted annual sales that were recorded in August of last year.  However, that increase is significantly overstated since it is being compared to artificially low levels last August caused by the expiration of the federal homebuyer tax credit.

Stronger demand in August did not help support existing home prices.  The median sales price of an existing home decreased to $168,300 in August from $171,200 in July.  Median existing home prices reached their highest levels in June since August 2010 but have since declined for two consecutive months.  The median existing home price is 5.1% lower than the same time last year when the median price was $177,300.  Existing home prices have now recorded nine straight months of year-over-year declines.

The decline in home prices along with falling mortgage rates pushed existing home affordability higher last month.  Affordability based on 30-year fixed mortgage rates increased to 70.5% in August from a revised reading of 69.2% last month.  This is the second straight month that affordability has increased and the highest it has been since March.

Existing home inventory continued to improve in August.  The number of existing homes for sale declined 3.0% to a preliminary 3.577 million units.  Resale inventory has declined for two straight months and is now at its lowest levels since March.  At the current sales pace, there are 8.5 months of existing home supply on the market compared to 9.5 months in July. This is the first month since March that months of inventory has declined.

Although construction activity in August remained sluggish, an increase in building permits suggests that construction activity should pick up in the months ahead.  The total number of homes started for the purpose of residential construction fell 5.0% from the previous month to a seasonally-adjusted annual rate of 571,000 compared to a downwardly revised 601,000 units in July.  This is the second straight month that housing starts have declined and the lowest they have been since May.  Both single and multi-family starts declined in August.  Single-family housing starts declined by 1.4% from August to a seasonally-adjusted annual rate of 417,000 units.

Total building permit activity increased 3.2% from the previous month in August to a seasonally-adjusted annual rate of 620,000 units.  The gains were supported by increased activity in both the single and multi-family segments.  Single-family permit issuance increased 2.5% from the previous month to a seasonally-adjusted annual rate of 413,000 units.  This is the highest annual rate for single-family permit activity since January which is a positive sign for the residential construction market in the months ahead.

National average mortgage remained unchanged from the previous week at 4.09% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on September 22nd.  The average rate on a 30-year fixed mortgage remains at all-time record lows.  These rates have not recorded a weekly gain in the past four weeks.  Rates have now averaged under 5.0% for 31 straight weeks.

In the week ending September 16th, the MBA’s seasonally-adjusted purchase index declined 4.7% from the previous week.  This is the lowest the purchase index has been since the end of February.

For additional market-level data and analysis please visit our website at http://www.housingintelligence.com.  For more detailed information on  these and other indicators, please visit the following links: