EYE ON THE ECONOMY
HOME PRICE GROWTH is Slowing BY: ROBERT DIETZ
T
he second half of 2021 has seen a number of housing trends cool. For example, new single-family home sales slowed at the start of the spring as builders worked on a backlog of projects. In fact, sales are now down 4.4% on a year-to-date basis. This is not because of significant weakness in underlying housing demand, but rather an unsustainable pace of sales relative to achievable production levels given the availability of lumber, labor and lots. Home prices appear to have reached a similar inflection point. While still rising, the rate of home price growth is slowing as prospective buyers are increasingly priced out of the market. The September S&P CoreLogic Case-Shiller data indicate that home prices expanded at a 15.1% annualized rate, which was slower than the 18.6% rate recorded in August. We forecast additional declines for home price growth in the quarters ahead, particularly as interest rates rise. Another trend of 2020 also appears to be normalizing: the suburban shift for home construction. The third quarter NAHB Home Building Geography Index found that the relative growth rates for home building converged somewhat over the last year. In the third quarter of 2021, exurbs were growing at a 30.8% rate, while inner suburbs of core metro areas were growing at a 21.1% rate. Although construction continues to expand at a higher rate in the suburbs, the growth gap has narrowed between these market types. In other macro data, the unemployment rate continues to fall, declining to a 4.2% rate in November. However, payroll employment data disappointed, with a gain of just 210,000 for the month. This was the smallest job gain since January. Nonetheless, home builders and remodelers added 10,300 jobs in November, yet more are needed given ongoing growth for residential construction.
December 2021
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