Housing & Construction October 2018
Housing Starts Rise 9.2%
Housing starts rose 9.2% in August to a seasonally adjusted annual rate of 1.28 million units after rising to 1.17 million units in July. Single-family starts rose 1.9% to 876,000 units after rising to 869,000 units in July. Multifamily starts jumped 29.3% to 408,000 annual units after rising to 306,000 units in July. Multifamily data tends to be particularly volatile on a month-to-month basis. NAHB Chief Economist Robert Dietz warned that increasing costs for building materials and the impact of recently imposed tariffs, along with gradually rising interest rates, are all of concern, and expects the market to slow in the months ahead. NAHB expects single-family starts to rise 5% this year; multifamily starts are expected to fall slightly. Regional starts were mixed. Starts were unchanged in the Northeast, and rose 19.1% in the West, 9.1% in the Midwest and 6.5% in the South.
Building Permits Fall 5.7%
Overall building permit issuance fell 5.7% in August to 123 million units after rising to 1.31 million units in July. Single-family permits fell 6.1% to 820,000 units after rising to 869,000 units in July. Multifamily permits dropped 4.9% to 409,000 units after rising to 410,000 units in July. Permits fell in all regions, dropping 19.2% in the Northeast, 1.7% in the Midwest, 2.9% in the South and 8.4% in the West.
New-Home Sales Rise 3.5%
Sales of newly built, single-family homes rose 3.5% in August to a seasonally adjusted annual rate of 629,000 units, but sales for June and July were revised down by a total of 40,000 units. Sales were up 6.9% from August 2017. The inventory of new homes for sale rose to 318,000 in August from 309,000 in July. The median sales price was $320,200. Regional sales were mixed. Sales rose 47.8% in the Northeast, 9.1% in the West and 2.7% in the Midwest. Sales fell 1.7% in the South, the nation’s largest home market. 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 Flat
Existing home sales stabilized at 5.34 million homes in August after four consecutive months of declines. Sales were 1.5% below August 2017. Single-family home sales were unchanged at 4.75 million homes in August, 1.0% below the pace a year ago. Total housing inventory at the end of August also remained unchanged at 1.92 million homes, up from 1.87 million a year ago. Unsold inventory remained at a 4.3-month supply at the current sales pace, up from 4.1 months a year ago.
Regional home sales were mixed. Sales rose 7.6% in the Northeast and 2.4% in the Midwest, but fell 0.4% in the South and 5.9% in the West. The NAR says that while inventory levels are improving they are still not at a healthy level and new home construction is not keeping up. The combination of rising interest rates, high home prices and lack of inventory continues to push entry-level and first-time buyers out of the market.
Builder Confidence Remains at 67
Builder confidence remained at 67 in September, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Component scores were mixed. Current sales conditions rose one point to 74, expectations rose two points to 74 and buyer traffic held steady at 49. The recent decline in lumber prices from record-high levels over the summer was a welcome relief, but builders still face many challenges producing competitively priced homes, especially in the face of rising wages and labor shortages. Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 54, the South was unchanged at 70, the West fell one point to 73 and the Midwest fell three points to 59.
Mortgage Rates Rise to 4.72%
A 30-year fixed-rate mortgage (FRM) rose to 4.72% at the end of September from 4.52% at the end of August. It was the fifth consecutive week that mortgage rates went up, and the highest rates have been since the end of April 2011. Last year at the end of August rates averaged 3.83%. The robust economy, rising Treasury yields and the anticipation of more short-term rate hikes are behind the increase in mortgage rates. But according to Freddie Mac, even with higher borrowing costs, purchase applications have trended higher on an annual basis for six consecutive weeks.
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