US HOUSING MARKET MIXED; HOME PRICES CONTINUE TO RISE, IMPACTING HOME SALES

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1 November 4, 2016 US HOUSING MARKET MIXED; HOME PRICES CONTINUE TO RISE, IMPACTING HOME SALES 1) US housing starts in September totaled a seasonally adjusted 1,047,000, down 9.0% month over month and down 11.9% year over year. 2) New home sales and existing home sales increased by 3.1% and 3.2% month over month in September, respectively. 3) The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index showed a year-over-year gain of 5.1% in August, above July s reading and the consensus estimate of %. 4) Home prices continued to rise moderately, supported mainly by low mortgage rates and a shortage of supply, which in turn curtailed home sales. Indicator Period Actual Survey Prior Interpretation* Construction Housing Starts (MoM) Sep (9.0)% 2.5% (5.8)% Building Permits (MoM) Sep 6.3% 0.9% (0.4)% + Home Sales New Home Sales (MoM) Sep 3.1% (1.5)% (8.6)% Existing Home Sales (MoM) Sep 3.2% 0.4% (0.9)% + Home Prices S&P CoreLogic Case-Shiller 20-City Home Price Index (NSA, YoY) Median Sales Price for New Home Sales (NSA, YoY) Median Sales Price of Existing Home Sales (NSA, YoY) Aug 5.1% % % + Sep 1.9% (2.1)% + Sep 5.6% % + *+ indicates a positive signal for the country s economy, indicates a negative signal and = indicates not significantly positive or negative. Source: US Bureau of the Census/Federal Reserve Board/S&P/National Association of Realtors

2 Building permits in September were up 6.3% month over month, whereas housing starts were down 9.0%. Home Construction US building permits in September totaled a seasonally adjusted 1,225,000, up 6.3% month over month and up 8.5% year over year. The robust increase in building permits signals a rise in residential construction in the coming months. US housing starts in September totaled a seasonally adjusted 1,047,000, down 9.0% month over month and down 11.9% year over year. The September reading was lower than the expected 1,175,000 starts, which would have represented 2.5% month-overmonth growth. The drop was mostly attributed to the volatile multifamily segment, which plummeted 38.0% month over month. However, single-family housing starts bounced back in September, growing by 8.1% month over month. Figure 1. US Home Construction (Thous.) 1,50 Building Permits 1,50 Housing Starts 1,22 1, ,00 1, Single Family Mulffamily Total Source: US Bureau of the Census New home sales in the US increased by 3.1% month over month in September, exceeding the consensus estimate, which had called for a 1.5% drop. Figure 2. New Home Sales (Thous.) Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 1 Single Family Mulffamily Total Home Sales New home sales in the US increased by 3.1% month over month in September, exceeding the consensus estimate, which had called for a 1.5% drop. However, the increase was mainly due to a downward revision of August s reading, from 609,000 to 575,000, which made September s reading of 593,000 higher than the previous month s figure. New home sales declined in the West, as home prices increased and home supply inventory was tight. Sales in the South, which account for more than half of new home sales, saw a 3.4% increase, recovering from lackluster sales the previous month, due in part to poor weather conditions in August. Sales in the Northeast surged 33.3% Source: US Bureau of the Census/Federal Reserve Board 59 New Home Sales 30-year Mortgage Rate Northeast West South Midwest 2

3 Existing home sales increased by 3.2% month over month in September, to 5.47 million. Existing home sales increased by 3.2% month over month in September, to 5.47 million. Sales of single-family houses rose 4.1%, while sales of multifamily condominiums and co-ops declined by 3.2%. The rebound in existing home sales was driven by consistent job gains and record-low mortgage rates. Figure 3. Existing Home Sales (Thous.) 6,00 5,50 Total ExisMng Home Sales 5, ,50 2,00 ExisMng Home Sales By Region 2,16 5, ,50 1,00 1,32 1,25 4, ,00 Sep 13 Sep 14 Sep 15 Sep 16 Exisfng Home Sales 30-year Mortgage Rate Source: National Association of Realtors/Federal Reserve Board Sep 13 Sep 14 Sep 15 Sep 16 West Northeast Midwest South Figure 4. Months Supply of Home Sales Supply of new and existing home sales stood at 4.8 and 4.5 in September. The low level of for-sale inventories remains an obstacle to stronger home sales and a more robust recovery. Supplies of new home sales are constrained by higher construction costs and the shift toward the development of higher-end houses. Existing home supplies are scarce due to the expectation of rising home prices. 9.0 Months Supply of New Homes 9.0 Months Supply of ExisMng Homes Source: US Bureau of the Census/National Association of Realtors 3

4 The S&P CoreLogic Case-Shiller 20- City Composite Home Price NSA Index showed a year-over-year gain of 5.1% in August, above July s reading and the consensus estimate of %. Home Prices The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index showed a year-over-year gain of 5.1% in August, above July s reading and the consensus estimate of %. The index nudged up 0.2% month over month after seasonal adjustments, above the consensus estimate of 0.1%. Home prices continued to rise moderately, supported mainly by low mortgage rates and a shortage of supply. The median home price for a new house in September was US$313,500, up 1.9% year over year, and for an existing house was US$234,200, up 5.6% year over year. Figure 5. Home Prices 18 S&P/Case-Shiller U.S. NaMonal Home Price NSA Index S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index Aug 11 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16 Aug 11 Aug 12 Aug 13 Aug 14 Aug 15 Aug Median Sales Price for New Houses (US$ Thous.) Median Sales Price of ExisMng Homes (US$ Thous.) Source: US Bureau of the Census/S&P/National Association of Realtors 4

5 Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: Hong Kong: China: Esme Pau Analyst Charlie Poon Research Assistant HONG KONG: 8 th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: LONDON: Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0) NEW YORK: 1359 Broadway, 9 th Floor New York, NY Tel: FungGlobalRetailTech.com 5