Housing & Construction May 2016
HOUSING STARTS FALL 8.8%
Housing starts fell 8.8% in March to a seasonally adjusted annual rate of 1.089 million units after rising to 1.178 million units in February. Single-family starts fell 9.2% to 764,000 units after jumping to 822,000 units in February, which had been the highest level since November 2007. Multifamily starts dropped 8.5% to 312,000 units after rising 356,000 units in February. Regional starts were mixed. Starts fell 25.4% in the Midwest, 15.7% in the West and 8.4% in the South. Starts rose 61.3% in the Northeast. Builders continue to be plagued by a shortage of lots and skilled labor. Wells Fargo expects starts to gain momentum throughout the year, ending 2016 up 11% to 1.2 million units and reaching 1.25 million units in 2017.
BUILDING PERMITS FALL 7.7%
Building permits fell 7.7% in March to a seasonally adjusted annual level of 1.09 million after falling to 1.17 million in February. Single-family permits fell 1.2% to 727,000 units after falling to 731,000 units in February. Multifamily permits dropped 20.5% to 359,000 units after falling to 436,000 units in February. Permits fell in all regions, dropping 17.9% in the Northeast, 3.1% in the Midwest, 3.2% in the South and 15.4% in the West. Permits have been above the one million level for eleven consecutive months, the longest stretch in seven years.
NEW-HOME SALES FALL 1.5%
Sales of new single-family homes fell 1.5% in March to a seasonally adjusted annual rate of 511,000 units from an upwardly revised reading in February. January sales were also revised up. The inventory of new homes for sale rose to 246,000 homes, a 5.8-month supply at the current sales pace. The increase in inventory suggests that builders are adding inventory in anticipation of future business, according to the NAHB. Regional sales were mixed. Sales were flat in the Northeast. Sales rose 18.5% in the Midwest and 5% in the South, and fell 23.6% in the West. 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 RISE 5.1%
Existing home sales rose 5.1% in March to a seasonally adjusted annual rate of 5.33 million homes after falling to a downwardly revised 5.07 million in February. Sales were 1.5% higher than in March 2015. Single-family home sales rose 5.5% to a seasonally adjusted annual rate of 4.76 million in March after falling to 4.51 million in February. Sales were 2.6% higher than in March 2015. Total housing inventory at the end of March increased 5.9% to 1.98 million existing homes, but is still 1.5% lower than it was in March 2015. Unsold inventory rose to a 4.5-month supply after rising to a 4.4-month supply in February. Sales were up in all regions, rising 11.1% in the Northeast, 9.8% in the Midwest, 2.7% in the South and 1.8% in the West.
BUILDER CONFIDENCE STEADY
Builder confidence was unchanged in April after holding steady at 58 in March. It was the fourteenth consecutive month the National Association of Home Builders/ Wells Fargo Housing Market Index (HMI) remained above 50. The component measuring sales expectations for the next six months rose one point to 62, still well off its cycle-high of 75 reached in October 2015. The component gauging current sales conditions fell two points to 63 and the component charting buyer traffic increased one point to 44. Looking at the three-month moving averages for regional HMI scores, all four regions suffered slight declines, with the Northeast falling two points to 44, the West falling two points to 67, the Midwest dropping one point to 57 and the South falling one point to 58.
REMODELING INDEX FALLS TO 54
The Remodeling Market Index (RMI) fell four points to 54 in the first quarter but remained positive. An RMI above 50 indicates that more remodelers report market activity is higher compared to the previous quarter than report it is lower. Among its four components, calls for bids dropped from 58 to 51, work committed fell to 52 from 57 and appointments for proposals dropped to 52 from 60. The backlog of remodeling jobs dropped three points to 58 after hitting a new high of 61 in the last quarter of 2015.
MORTGAGE RATES FALL SLIGHTLY
Freddie Mac reported that the average interest rate on a 30-year fixed rate mortgage (FRM) fell to 3.66% at the end of April after rising to 3.71% at the end of March. At the end of April 2015 mortgage rates averaged 3.68%. Freddie Mac expects mortgage rates to rise to 4.7% by the end of the fourth quarter of 2016. Rates may fall further in response to the Fed’s decision to leave interest rates unchanged at their April meeting.