Housing & Construction April 2019

Housing Starts Rise 18.6% 
Housing starts rose 18.6% in January to a seasonally adjusted annual rate of 1.23 million units from a downwardly revised reading in December. Single-family starts jumped 25.1% in January to 926,000 units after dropping to 758,000 units in December. The big increase ended four consecutive months of declines. Multifamily starts rose 2.4% in January to a seasonally adjusted annual rate of 304,000 units after falling to a downwardly revised reading in December. NAHB expects single-family production to be relatively flat in 2019 and also expects multifamily starts to level off. Housing affordability will be the biggest challenge facing builders as they deal with a shortage of construction workers and a lack of buildable lots. Regional starts were mixed. Single-family and multifamily housing starts jumped 58.5% in the Northeast, 29.3% in the West and 13.8% in the South. Starts fell 5.7% in the Midwest.
 
Building Permits Rise 1.4%
Building permits rose 1.4% in January to 1.35 million units after inching up to a seasonally adjusted annual rate of 1.33 million in December. Single-family permits fell 2.1% to 812,000 units, the lowest level since August 2017. Multifamily permits rose 7.2% to 533,000 units. Regional permits were mixed. Permits rose 33.1% in the Midwest and 26.4% in the Northeast. Permits fell 8.9% in the West and 3.5% in the South.
 
New-Home Sales Rise 4.9%
New Home sales rose 4.9% in February to a seasonally adjusted annual level of 667,000 units and January sales, which were initially reported as dropping to 607,000 units, were revised to show an 8.2% increase in sales. The inventory of new homes for sale was 340,000, a 6.1-months’ supply at the current sales pace, a number that has remained fairly steady since December. The median sales price dropped to $315,300 in February, and has been dropping since December as more activity has been occurring in the $200,000 to $400,000 price range. Regional new home sales were mixed. New home sales were flat in the West. Sales rose 26.9% in the Northeast, 28.3% in the Midwest and 1.8% in the South. 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. Sales analysis for both January and February was delayed by the government shutdown.
 
Existing Home Sales Rise 11.8%
Existing home sales rose 11.8% in February to a seasonally adjusted annual rate of 5.51 million units after falling to 4.94 million units in January. Sales were down 1.8% from February 2018. Single-family home sales rose 13.3% in February to a seasonally adjusted rate of 4.94 million; sales of condos and
co-ops were unchanged.  Regional sales were mixed. Sales were unchanged in the Northeast. Sales rose 9.5% in the Midwest, 14.9% in the South and 16.0% in the West. Inventory levels rose 3.2% from February 2018 to 1.63 million homes but remain low by historical standards. Unsold inventory is at a 3.5-month supply at the current sales pace, down from 3.9 months in January but up from 3.4 months in February 2018. February marked the 84th consecutive month of year-over-year increases in home prices, but the pace of home appreciation has definitely moderated, and homes are remaining on the market longer.
 
Builder Confidence Steady at 62
Builder confidence held steady at 62 in March after rising in January and February, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The gradual decline in mortgage rates and strengthening job market are both positive signs for future sales. Builders report that sales are stabilizing and that demand for homes at lower price points remains very strong, but those types of homes are in short supply and buildable lots remain scarce. Scores for the HMI components were mixed. The index measuring current sales conditions rose two points to 68, the component gauging expectations in the next six months rose five points to 71 while buyer traffic gave back February’s gains and fell four points to 44. The three-month moving averages for regional HMI scores were mixed. The Northeast rose five points to 48, the South was up three points to 66 and the West increased two points to 69. The Midwest fell one point to 51.
 
Mortgage Rates Drop to 4.06%
A 30-year fixed-rate mortgage (FRM) fell to 4.06% at the end of March after falling to 4.35% at the end of February, marking the fourth consecutive month rates have declined. The 30-year FRM was 4.44% at the end of March 2018. Rates dropped a full quarter-point the last week of March, the biggest one-week decline in a decade, leaving rates at the lowest average they’ve been since January 2018. Rates have been declining along with the yield on the 10-Year Treasury note. Many lenders have been advertising rates below 4%, and both mortgage applications and refinancing applications have jumped. Housing analysts speculate that the drop in rates may result in a burst of activity that will lead to a strong spring selling season.

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