07/23/2021 | Press release | Distributed by Public on 07/23/2021 11:13
Key Takeaways:
June's increase in housing starts was somewhat smaller than expected, while the decline in new building permits was larger. As corroborated by the release of the July Housing Market Index, supply chain disruptions, high lumber costs, and labor scarcity appear to be continuing to hold the pace of home construction below its full potential. Permits in June fell for the fourth time in five months, with the aforementioned constraints likely leading builders to hold off on submitting new permits until these dynamics improve. Though we continue to forecast a long-run acceleration in housing starts as builders catch up with years of pent-up demand following a decade of under-building, our near-term forecast of housing starts will likely be revised downward modestly to reflect the most recent data.
While housing starts were weaker than expected, existing home sales were stronger. Given that the traffic of prospective buyers for new homes remains above pre-pandemic levels, as well as the increase in June existing home sales, homebuying demand appears to remain robust. The June increase will likely result in an upward revision of our near-term forecast of existing home-sales, though we believe home sales are still cooling from their red-hot pandemic highs, and we still expect sales will fall in Q3. While we expect that homebuying demand will likely remain elevated as interest rates dip back to near-historic lows, the lack of homes available for sale and continued construction difficulties will likely continue to exert upward price pressure, pushing some would-be homebuyers out of the market.
Ricky Goyette and Nathaniel Drake
Economic and Strategic Research Group
July 23, 2021
Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic and Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.