Housing Market Update: Builder Confidence Drops as Supply Improves

Anya’s Market Bites:

Sales activity in the housing market stagnated last month due to fluctuating and elevated mortgage rates. Rate volatility has lowered builder confidence to its lowest since late 2023, leading to a dip in construction activity. However, the supply of existing homes improved, with active listings increasing for the fifth consecutive month. As inflation shows signs of declining, the Fed is expected to cut rates later this year, potentially boosting market sentiment.

Housing starts fell sharply in May, with a 5.5% drop from April and a 19.3% decrease from May 2023, driven by a significant decline in multifamily development. Builder confidence also hit its lowest level since December 2023, with many pausing due to rate volatility and ongoing issues like labor shortages. Consequently, more builders are cutting prices and offering sales incentives.

Despite these challenges, California's median home price set a record high in May, reaching $908,040—a year-over-year increase of 8.7%. Strong sales in higher-priced properties contributed to this growth.

Retail sales in May rose 0.1% from April and 2.3% year-over-year, though they fell short of economists' expectations. Declines in fuel prices and overall consumer momentum suggest a slowing economy, with some sectors like furniture and restaurants seeing declines, while online sales increased. Households' borrowing capacity appears strained, indicated by rising revolving credit and delinquencies.

(Source: California Association of Realtors)

All the best,

Anya Derebenskiy

Oh, by the way…if you know of someone who would appreciate the level of service I provide, please call me with their name and contact information.