Housing & Construction June 2016
HOUSING STARTS RISE 6.6%
Housing starts rose 6.6% in April to a seasonally adjusted annual rate of 1.17 million units after falling to 1.089 million units in March. Single-family starts rose 3.3% to 778,000 units after falling to 764,000 units in April. Multifamily starts increased 13.9% to 394,000 units after dropping to 312,000 in March. Regional starts were mixed. Starts rose 22.2% in the Midwest and 14.1% in the South. Starts fell 7.6% in the Northeast and 10.0% in the West. 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 RISE 3.6%
Building permits rose 3.6% in April to a seasonally adjusted annual level of 1.12 million after falling to 1.09 million in March. Single-family permits increased 1.5% to 736,000 units. Multifamily permits rose 8% to 380,000 units. Permits rose in all regions, increasing 3% in the Northeast, 3.3% in the Midwest, 3.3% in the South and 4.7% in the West. Permits have been above the one million level for twelve consecutive months, the longest stretch in seven years.
NEW-HOME SALES RISE 16.6%
Sales of new single-family homes rose 16.6% in April to a seasonally adjusted annual rate of 619,000 units after falling to an upwardly revised reading in March. The inventory of new homes for sale fell to 243,000 homes in April, a 4.7-month supply at the current sales pace, down from a 5.8-month supply in March. In a normalized market, housing is generally at a six-month supply. Regional sales were mixed. Sales rose by 52.8% in the Northeast, 18.8% in the West and 15.8% in the South. Sales fell by 4.8% in the Midwest. NAHB Chief Economist Robert Dietz said that rising home sales combined with tight inventory will translate into increased housing production as the year progresses. 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 contract close.
EXISTING HOME SALES RISE 1.7%
Existing home sales rose 1.7% in April to a seasonally adjusted annual rate of 5.45 million after rising to 5.33 million in March. Sales were 6% higher than in April 2015. Single-family home sales rose 0.6% to a seasonally adjusted annual rate of 4.81 million in April from 4.78 million in March, and were 6.2% higher than a year ago. The increase was primarily driven by a big jump in the Midwest, where homes are most affordable. Total housing inventory at the end of April rose 9.2% to 2.14 million existing homes for sale. Inventory was 3.6% lower than a year ago, and was a 4.7-month supply at the current sales pace, up from a 4.5-month supply in March. Regional sales were mixed. Sales rose 2.8% in the Northeast and 12.1% in the Midwest. Sales dropped 2.7% in the South and 1.7% 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, down from a 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.
MORTGAGE RATES FALL SLIGHTLY
Freddie Mac reported that the average interest rate on a 30-year fixed rate mortgage (FRM) fell slightly to 3.64% at the end of May after falling to 3.66% at the end of April. At the end of May 2015 mortgage rates averaged 3.87%. Freddie Mac expects mortgage rates to rise to 4.7% by the end of the fourth quarter of 2016.
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