The housing market takes center stage in a light week of economic news, with reports on new construction and existing home sales. The strengthening manufacturing sector will also be tested in the latest reading on industrial production.
Housing starts rose to a four-month high in February despite higher mortgage rates, driven by the strongest pace of single-family home building since 2007. But that performance was likely inflated by unusually warm winter weather that pulled forward starts to early in the year. Some offsetting weakness, as well as much lower temperatures and snowstorms that hit the Midwest and Northeast, were expected to hamper new residential construction in March. Economists estimate the Commerce Department will report Tuesday that housing starts fell 2.2% last month to a seasonally adjusted annual rate of 1.26 million.
On Friday, the National Association of Realtors releases its latest report on existing home sales. Sales retreated in February after hitting a 10-year high the previous month. Low home supplies and rising prices and mortgage rates have tempered sales in many regions of the country, says Nomura economist Lewis Alexander. But demand remains strong as a result of healthy job and income growth and a large crop of Millennials who are itching to move out of their parents’ basements. Pending home sales, which often foreshadow future transactions, advanced strongly in February and mortgage applications for home purchases also rose, Alexander notes. And the bad March weather appeared to have only a limited negative impact, he says. Economists estimate the Realtors group will record a 1.3% rise existing home sales to a seasonally adjusted annual rate of 5.6 million.