Housing & Construction February 2018
Housing Starts Fall 8.2%
Housing starts fell 8.2% in December to a seasonally adjusted annual rate of 1.19 million units after rising to 1.3 million units in November. Single-family starts fell 11.8% to a seasonally adjusted annual rate of 836,000 units after rising to an upwardly revised 948,000 in November. For all of 2017, single-family starts rose 8.5%. Multifamily starts rose 1.4% in December, but were down 9.8% for the year. NAHB expects single-family starts to rise 5% this year; multifamily starts are expected to fall slightly. Starts fell in all regions, dropping 0.9% in the West, 2.2% in the Midwest, 4.3% in the Northeast and 14.2% in the South, the nation’s largest housing market.
Building Permits Fall 0.1%
Building permits overall fell 0.1% in December to 1.302 million units from 1.303 million in November. Single-family permits rose 1.8% in December to a post-recession high of 881,000, in line with the NAHB forecast of 5% growth this year for single-family construction. Overall permits were up 2.8% from December 2016. Single-family permits ended 2017 up almost 9% from 2016. Regional permit issuance was mixed. Permits rose 43% in the Northeast, 8.7% in the Midwest and 1.7% in the West. Permits declined 11.1% in the South, led by a drop on the multifamily front.
New-Home Sales Fall 9.3%
Sales of newly built, single-family homes fell 9.3% in December to a seasonally adjusted annual rate of 625,000 units after rising to 733,000 units in November. Despite the monthly decline, new home sales rose 8.3% overall in 2017 to 608,000 units. The inventory of new homes for sale rose to 295,000 in December, a 5.7-month supply at the current sales pace. New home sales fell in all regions, dropping 2.4% in the Northeast, 9.5% in the West, 9.8% in the South and 10% in the Midwest. Sales of new homes are tabulated when contracts are signed and are considered a more timely barometer of the housing market than purchases of previously-owned homes, which are calculated when a contract closes.
Existing Home Sales Fall 3.6%
Total existing home sales fell 3.6% to a seasonally adjusted annual rate of 5.57 million units in December from a downwardly revised 5.78 million in November. Despite the decline, sales were up 1.1% for the year to 5.51 million units, making 2017 the best year for sales in 11 years. Single-family home sales fell 2.6% to a seasonally adjusted annual rate of 4.96 million in December after rising to 5.09 million units in November. Unsold inventory fell 11.4% to 1.48 million existing homes available for sale, 10.4% lower than in December 2016. Unsold inventory is at a 3.2-month supply at the current sales pace, down from 3.6 months in December 2016 and the lowest level since NAR began tracking in 1999. The inventory of homes available for sale has fallen for the past 31 months. Sales fell in all regions, dropping 7.5% in the Northeast, 6.3% in the Midwest, 1.7% in the South and 1.6% in the West.
Builder Confidence Falls to 72
Builder confidence fell two points to 72 in January after jumping five points to 74 in December, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The December reading was the highest level for builder confidence in more than 18 years. All three HMI components registered declines in January. The component measuring buyer traffic fell four points to 54, the index gauging current sales conditions dropped one point to 79 and the index charting sales expectations in the next six months fell one point to 78. Looking at the three-month moving averages for regional HMI scores, the West rose two points to 81, the South increased one point to 73, the Midwest rose one point to 70 and the Northeast jumped five points to 59. NAHB Chief Economist Robert Dietz said that with low unemployment, favorable demographic trends and tight inventory, they expect to see builder confidence continue to rise in 2018.
Remodeling Index Rises to 60
NAHB’s Remodeling Market Index (RMI) rose three points to 60 in the fourth quarter of 2017. It was only the second time since 2001 that the reading has reached 60. The RMI has been at or above 50, the level that indicates activity is higher than in the previous quarter, for 19 consecutive quarters. Current market conditions increased four points from the third quarter to 60. Among its three major components, major additions and alterations jumped seven points to 60, minor additions and alternations increased three points to 59 and the home maintenance and repair component rose three points to 61.Calls for bids dropped two points to 56 and the backlog of remodeling jobs jumped six points to 66. NAHB said that the RMI is consistent with strong growth in home improvement spending, although the surge in backlog most likely reflects supply-side challenges, including shortages of skilled labor and rising material prices.
Mortgage Rates Rise to 4.15%
A 30-year fixed-rate mortgage (FRM) rose to 4.15% at the end of January after rising to 3.99% at the end of December. At the end of January last year 30-year rates averaged 4.19%. The increase in rates followed a surge in Treasury yields. Nevertheless, mortgage rates remain quite low and affordable.
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