The gains the housing market has experienced in the spring so far mean good news for housing going forward in 2015, according to National Association of Home Builders Chief Economist David Crowe on the NAHB's Eye on Housing blog Wednesday.
For starters, new home sales spiked by nearly 20 percent year-over-year in March up to about 481,000, according to a report from HUD and the U.S. Census Bureau. It was the highest level the market has experienced since 2008 Existing home sales also jumped upward in March, by 6.1 percent, the largest monthly increase since December 2010, according to the National Association of Realtors. Also according to NAR, the pace of existing sales in March rose by 10.4 percent from March 2014 and has increased year-over-year for six consecutive months.
The NAR Pending Home Sales Index increased by 11.1 percent year-over-year in March and has been gaining momentum, meaning that existing home sales will likely increase in the coming months. In March, the index hit its highest level in nearly two years (since June 2013).
Market share for FHA-insured mortgages on new homes spiked from 10 percent in Q4 up to 16 percent in Q1. Previously, the share of FHA-backed loans had seen a general trend of decline for four years.
"This reverses a general trend over the last four years of declining shares for FHA-insured mortgages," Crowe said. "However, as more first-time buyers enter the market, this share may experience some growth, along with a decline in the cash share of new homes, which is currently 4 percent."
Despite the gains for the housing market this spring, the Census Bureau reported that homeownership nationwide had fallen to 63.7 percent in Q1, its lowest level since the 1990s, with ongoing declines happening primarily among households under age 45. By comparison, households 55 and over remained strong, as demonstrated by the NAHB 55+ Housing Market Index.
Crowe said a bright spot for housing was the gains in household formations toward the end of 2014, which came at an annualized pace of 1.5 million – a significantly high number in the post-recession housing market, according to quarterly Census Bureau data.
"While much of this increase is and will continue to be concentrated in rental housing, higher rents will encourage existing renters to transition to homeownership in the coming years," Crowe said. "Future quarters will prove to what degree this recent increase is a significant break with prior levels."