Real Estate Demand Rebounds, but Is Housing Supply Lagging?

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Economic Report Monitor #43
June 17th, 2020


A relatively quiet day in the market, the S&P 500 bouncing from gains to a -0.36% loss, saw just a few economic reports. Most of them continued to frame the real estate market that continues to signal its strength. MBA Mortgage Application index continued its rampage upwards as the composite index grew 8.0% with both purchasing and refinancing indexes rising 4.0% and 10.0%. Low-interest rates have certainly had an impact on the movement of this data point, but the consistent strength seen weekly likely points towards a resurgence in demand viable at cheaper borrowing prices. Single-family home demand has already seemingly recovered to pre-COVID-19 levels according to a CNBC chart.

Housing start data was also released as a set of indicators posted mixed results. Housing starts lagged the most up just 4.3% as single-family home starts stalled at 0.1%. Year-over-year the indicator is still off -23.2%. Housing authorizations and building permits were stronger, growing 5.2% and 14.4% respectively. In these two readings, single-family home data kept pace with multi-family home data bolstering the stronger recovery. Housing starts and completions, both at near-term bottoms, will need to rebound if real estate demand continues to recover to pre-COVID-19 levels. In those normal times, housing supply was tight, especially for single-family homes, and prices were steadily rising in January and February. If construction can't keep pace with buyers, that trend may resume at a faster rate.

To end the day of reports, the EIA reported on another week of drilling. The headline of the data was a large drop in production, down -600k b/d to 10,500 million b/d, the first time production has been below 11 million b/d since July 2018. Stockpiles only grew mildly, up 2.9 million barrels with 1.7 million barrels headed towards the SPR. Measures of demand were mostly flat. Refinery inputs grew 116k b/d, still well below the typical summer levels. The same can be said for product supplied, down just -283k b/d on the week and well below typical summer levels. Prices have rebounded to the $35 to $40 range but still price out a lot of expensive drilling in the US.




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