Housing & Construction August 2016
HOUSING STARTS RISE 4.8%
Housing starts rose 4.8% in June to a seasonally adjusted annual rate of 1.19 million units after falling to 1.16 million units in May. Single-family starts rose 4.4% to a seasonally adjusted annual rate of 778,000 units in June after being little changed at 764,000 units in May. Multifamily starts rose 5.4% to 411,000 units after dropping to 400,000 units in May. Regional starts were mixed. Starts rose 46.3% in the Northeast and 17.4% in the West. Starts fell 5.2% in the Midwest and 3.4% in the South. However, single-family starts were up in all regions. Analysts noted that results easily beat expectations, and that single-family completions have jumped 17.9% over the past year, which should give new home sales, which have been held back by supply, a big boost.
BUILDING PERMITS RISE 1.5%
Building permits rose 1.5% in June to a seasonally adjusted annual rate of 1.15 million units after rising to a downwardly revised 1.14 million units in May. Single-family permits rose 1.0% to a rate of 738,000 units. Multifamily permits rose 2.5% to 415,000 units. Regional permit issuance was mixed. Permits increased 9.4% in the Northeast and 8.3% in the South. Permits dropped 2.8% in the Midwest and 10.1% 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 3.5%
Sales of new single-family homes rose 3.5% in June to a seasonally adjusted annual rate of 592,000 units from an upwardly revised May reading. The inventory of new homes for sale remained at 244,000 in June, a 4.9-month supply at the current sales pace. In a normalized market, housing is generally at a six-month supply. Regional sales were mixed. Sales rose 10.9% in the West and 10.4% in the Midwest. Sales fell 0.3% in the South and 5.6% in the Northeast. New home sales are at their highest pace in more than eight years and are up 9.3% in the second quarter of this year compared to the first quarter. 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 1.1%
Existing home sales rose 1.1% in June to a seasonally adjusted annual rate of 5.57 million from a downwardly revised 5.51 million in May. Sales were up 3.0% from June 2015 and remained at the highest annual pace since February 2007. Total housing inventory at the end of June fell 0.9% to 2.12 million existing homes for sale, 5.8% lower than in June 2015 and a 4.6-month supply at the existing sales pace. Regional sales were mixed. Sales fell 1.3% in the Northeast. Sales were unchanged in the South, and rose 3.8% in the Midwest and 1.7% in the West. Wells Fargo noted that in the short-term home sales may get a boost from still-low mortgage rates. Following Great Britain’s unexpected vote to leave the European Union, the yield on U.S. 10-year Treasury notes fell sharply, pulling down 30-year fixed mortgage rates. However, analysts expect that impact to be short-lived. Low levels of inventories remain a challenge and are considered one of the biggest obstacles to a robust housing recovery.
BUILDER CONFIDENCE SLIPS TO 59
Builder confidence fell one point to 59 in July after rising to 60 in June. It was the sixteenth 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 dropped three points to 66. Commentary notes that the drop coincided with rising political uncertainty both abroad and at home. The component gauging current sales conditions fell one point to 63 and the component charting buyer traffic fell two points to 45. The drop in the HMI was primarily due to ongoing builder frustration with the availability of lots and the development process. The three-month moving averages for regional HMI scores were mixed. The South fell four points to 57; the Midwest, Northeast and West recorded modest gains. The Northeast remained the only region below 50.
MORTGAGE RATES REMAIN LOW
The 30-year mortgage rate remained at 3.48% at the end of July, the lowest level rates have been since May 2013 and only 17 basis points above the all-time low recorded in November 2012. In July of last year 30-year rates averaged 3.98%.
REMODELING MARKET DOWN SLIGHTLY
The Remodeling Market Index (RMI) fell one point to 53 in the second quarter. Nevertheless, it was the 13th consecutive quarter the RMI remained above 50, the level that indicates that more remodelers report market activity is higher compared to the prior quarter than report it is lower. The current market conditions index dropped one point to 54 with major additions and alterations dropping three points to 52, minor additions and alterations dropping one point to 53 and maintenance and repairs remaining unchanged at 56. Remodelers’ expectations for the future were unchanged at 53. NAHB says that the overall RMI is in line with their forecast for continued steady growth this year.
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