Link in to Lincoln: August 2019 Update on the South

Builders continue to report rising development and construction costs. Nevertheless, homebuilder confidence remains positive in all regions of the U.S. over the past five months.

Existing-home sales strengthened in July, a positive reversal after total sales were down slightly in the previous month, according to the National Association of Realtors. Compared to last year, July sales dropped in the Northeast and West, while experiencing modest gains in the Midwest and South. Nationally, sales are up 0.6% over last year. Sales dropped 4.3% in the Northeast, while the West experienced a less dramatic 0.8% decrease.

“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” said National Association of Realtors Chief Economist Lawrence Yun. “However, the supply of affordable housing is severely low, and the shortage of lower-priced homes have markedly pushed up home prices.”

Prices rose in every region of the country, except the Northeast, which experienced a slight dip to $305,800, down 1.0% from last year. High demand in the Midwest drove an 8.1% jump in median price to $226,300. Median price jumped to $408,000 in the West and to $245,100 in the South. Nationally, the average price of an existing home rose 4.3% to $280,800.

“Tepid home sales have caused home prices to rise at the slowest pace for the first half of a year since 2011,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Price growth continues to be faster for lower-priced homes, as first-time buyers and investors are both actively seeking entry-level homes.”

In June, CoreLogic’s Home Price Index, which measures the change in the average home price in a given area, indicated that home prices increased nationally by 3.4%.

However, homebuilder confidence in the market for new single-family homes remains strong in all regions. Homebuilders’ confidence in the South, as indicated by the Housing Market Index, reached 69 in August. Scores above 50 reflect overall optimism. The only region where optimism was higher was in the West, where the index score was 75. Confidence grew during August in the Midwest and Northeast to 59 and 57, respectively.