Lack of single-family approvals sign housing slump persists: BuildFax

While single-family construction authorizations rose for the first time on a monthly basis in 2019, they trailed three-month and annual comparisons, signs of a continuing market slump, according to BuildFax.

A decline in the maintenance activity for existing homes compounds that trend, the company found.

"The combination of declining mortgage rates, moderating home prices and peak home-buying season should help to buoy the housing market, but so far that hasn't happened," Chief Operating Officer Jonathan Kanarek said in the company's latest report. "Continued declines in maintenance and single-family housing authorizations further reinforce the ongoing housing slowdown. As we near a full year of declining activity, the question remains, how long will this slump persist?"

Single-family authorizations increased 0.46% in May over April, but when compared with May 2018, it was down by 3.5%.

The three-month trailing outlook shows a more stark comparison in the state of the current market. For May, this was down by 4.76%. For the same three months last year, the outlook increased 7.78%.

The existing homeowner maintenance volume was down 1.01% on a year-over-year basis, resuming a downward trend that was interrupted by a 2.45% annual increase in April. Remodeling volume decreased 3.94% when compared with May 2018.

Remodeling activity is a subset of maintenance, and it is important to monitor during a slowdown as it can show where the housing stock is riskiest while also highlighting cities with an active housing market, BuildFax said.

For example, year-over-year remodeling activity increased in Philadelphia by 15.2% on a 12-month trailing basis.

"From October to December 2018, when the rest of the United States was experiencing declines in housing activity, Philadelphia beat records for the number of homes sold," BuildFax said, citing published reports. "The metro's spike in activity could be attributed to increased domestic migration to the city or investment from local housing officials."

Over the same period, Chicago's remodeling activity increased by 5.06%. But during the first four months of this year, housing authorizations dropped 37.5% compared with the same period in 2018. "In this context, rising remodeling activity is a product of homeowners reinvesting in their existing properties in lieu of re-entering the housing market," the report said.