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The Week Ahead: The Domino Effect of the Supply Shortage

Home Building Blocks BHIt's no secret that inventory is on the scarce side in the housing market, which is causing a domino effect of issues for homebuyers trying to purchase a home. The mortgage industry is now anticipating where new single-family home sales will fall for April after coming up short the month before. The National Association of Realtors (NAR) will release the new home sales report for April on Tuesday, May 24.

The shortage of existing homes on the market, which is now at 44 months and counting, according to the NAR's existing-home sales report released last week, could have an adverse affect on new home sales.

"If there is a shortage of existing homes, that’s where brand new homebuyers come from—selling existing homes," said David Crowe, former chief economist of the National Association of Home Builders. "If the existing homeowners are unwilling to sell for a variety of reasons, then they basically are not released to buy the new homes. The new home market is waiting on existing homeowners selling their current home to build more new homes."

What will the new home sales report for April bring? Will the shortage of existing homes continue to pull down new home sales, or will the low mortgage rates give new home sales a boost?

In March, new home sales declined by 1.5 percent down to an annual rate of about 511,000, driven by a large decline in the West (23.6 percent). The median sales price of a new home declined year-over-year in March by 1.8 percent to about $288,000.

GDP: Friday, May 27

The Bureau of Economic Analysis will release the second of three estimates for the nation's first quarter GDP growth on Friday, May 27. In the advance estimate for the first quarter released in late April, the BEA reported GDP growth to be a weak 0.5 percent. GDP growth has been weak for the last several first quarters; last year, it came in at 0.7 percent.

Housing experts have downwardly revised their economic forecasts for the full year of 2016. Last week, Fannie Mae announced its forecast for GDP growth for the year was now 1.7 percent, down from 1.9 percent the previous month and from 2.2 percent at the beginning of the year. Also last week, Freddie Mac revised its GDP forecast for the full year from 2.0 percent down to 1.8 percent.

Here is the lineup for the week:

Tuesday, May 24

New Home Sales, National Association of Realtors, 10 a.m. EST

Wednesday, May 25

House Price Index, Federal Housing Finance Agency, 9 a.m. EST

Thursday, May 26

Jobless Claims, Bureau of Labor Statistics, 8:30 a.m. EST

Pending Home Sales Index, National Association of Realtors, 10 a.m. EST

Friday, May 27

GDP, Second first quarter estimate, Bureau of Economic Analysis, 8:30 a.m. EST

 

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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