US: Housing market on track for a solid 2018 - ING

Jonas Goltermann, Developed Market Economist, at ING, explained that US home sales improved in February while prices keep rising. He sees the housing market on track for a solid 2018. 

Key Quotes: 

“After falling for a couple of months, sales of existing homes rebounded in February, rising by 3% MoM. New home sales also did a bit better in February, falling by 0.6% on the month (and January sales were revised up to -4.7% from -7.8%). Pending homes sales, an indicator for sales in the next two months also increased by 3% on the month, indicating the improvement in sales is likely to continue into spring, though some markets may have been adversely affected by winter storms in March.”

“While we expect household income to grow robustly as the US economy expands and a tight labour market pushes wage growth higher, affordability will remain challenging (...) We think prices may struggle to rise much faster, and developers selling new homes may have to accept somewhat lower prices in order to move their inventory.”
    
“A key question for coming months is whether the outstanding supply of new homes will start to clear. That would encourage developers to increase building further, though given the affordability picture we would expect to see more focus on moderately priced homes.”

“With solid momentum in the economy, the housing market looks in good health and increasing construction should help the US reach 3% GDP growth in 2018.”