The Week Ahead: Measuring Growth in the Housing Market

As predicted by economists, the housing market and economy are expected to see slower growth this year and there are several industry reports coming this week to see if they were indeed spot-on with their expectations for 2016. So will the slow growth housing market continue?

First, the industry will have a chance to see where builder confidence will fall for February. The National Association of Home Builders (NAHB) will release their Wells Fargo Housing Market Index (HMI) on Tuesday, February 16 at 10:00 A.M. (EST).

Home builder confidence in January 2016 changed very little from December's level, but this only means that economists were spot on with their predictions for the new year.

Last month, builder confidence in the market for newly constructed single-family homes decreased to 61 but was later revised to 60. This month, builders' confidence rests at 60 as well, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

“January’s HMI reading is right in line with our forecast of modest growth for housing,” said NAHB Chief Economist David Crowe. “The economic outlook remains promising, as consumers regain confidence and home values increase, which will help the housing market move forward."

One of the most important housing indicators comes in on Wednesday, February 17 8:30 A.M. (EST). Housing starts and building permits posted disappointing numbers in December, but year-end and year-over-year totals came in strong.

The U.S. Census Bureau and HUD reported that  housing starts were at a seasonally adjusted annual rate of 1,149,000 in December, down 2.5 percent from the revised November estimate of 1,179,000. Year-over-year, starts are up 6.4 percent from the December 2014 rate of 1,080,000.

The Bureau and HUD also reported that single-family housing starts in December were at a rate of 768,000, 3.3 percent below the revised November figure of 794,000. Approximately 1,111,200 housing units were started in 2015, 10.8 percent higher than the 2014 figure of 1,003,300.

"Given the tight inventory that we've seen in many housing markets across the country, today¹s release is a positive sign for new housing starts. The upward trend reflects upward price movements over the past year, which makes homebuilding less risky," said Ralph B McLaughlin, Ph.D, Chief Economist at Trulia.

The Federal Open Market Committee will also release the minutes from their January meeting, where they left the federal funds rate at it current level on Wednesday 2:00 P.M. February 17. The Fed cited the usual economic concerns as the reason for no change in the rate. The rough, unexpected start to 2016 has some in the industry questioning if the Fed will dial back on its December decision or ease up on the four "gradual increases" projected for this year.

Fed Chair Janet Yellen, noted in one of two testimonies last week that persistent economic headwinds have kept the federal funds target rate at a historically low level—and that future rate hikes may occur even more gradually than originally anticipated. In her second testimony, Yellen discussed the possibility of falling into a negative rate environment given the state of the economy.