Housing & Construction February 2019
Housing Starts Delayed
Housing starts rose 3.2% in November to a seasonally adjusted annual rate of 1.26 million after rising to a downwardly revised reading in October. Year-to-date starts are 5.1% above November 2017. Single-family starts fell 4.6% to 824,000 units after falling to 865,000 units in October. It was the third consecutive monthly decline for single-family starts. Multifamily starts rose 22.4% to 432,000 units after rising to 363,000 units in October. Multifamily data tends to be particularly volatile on a month-to-month basis. NAHB Chief Economist Robert Dietz said that builders are reluctant to add inventory because housing affordability concerns are causing consumers to delay purchases. Nevertheless, 2018 construction volume should be the best since the Great Recession. Regional starts were mixed. Starts rose 11% in the West and 5.3% in the South. Starts fell 1.9% in the Midwest and 0.8% in the Northeast.
Building Permits Delayed
Overall building permit issuance rose 5% in November to 1.39 million units after falling 0.6% in October. Single-family permits inched up 0.1% to 848,000 units and multifamily permits rose 14.8% to 480,000 units. Regional permit issuance was mixed. Permits rose 8.2% in the South and 3.2% in the West. Permits fell 2.7% in the Midwest and 2.8% in the Northeast.
New-Home Sales Delayed
New Home sales jumped 16.9% in November to a seasonally adjusted annual rate of 657,000 units after falling to an upwardly revised 544,000 units in October. Sales were down 7.7% from November 2017. The inventory of new homes for sale rose to 330,000 in November after October inventory was revised down. Inventory has risen 18% over the past year. The median sales price dropped to $302,400 after falling to $309,700 in October as the market continues to shift to lower-priced homes. Regional sales were mixed. New home sales rose 20.6% in the South, 30.5% in the Midwest and 100% in the Northeast. Sales fell 5.9% in the West. Over the past year, the median price of a new home has fallen 11.9%, which equates to $41,0000. 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 Fall 6.4%
Existing home sales fell 6.4% in December to a seasonally adjusted annual rate of 4.99 million after rising to 5.32 million homes in November. Sales were 10.3% below December 2017 and at the slowest pace since November 2015. The combination of rising home prices and higher mortgage rates caused sales to lose momentum throughout 2018. Sales fell in every region during December, dropping 11.2% in the Midwest, 6.8% in the Northeast, 5.4% in the South and 1.9% in the West. Inventory levels fell 12.3% to 1.55 million but were up 6.2% from December 2017. Homes are staying on the market slightly longer, which gives buyers more negotiating room. The partial government shutdown that began December 22 did not have much impact on sales in December but may have caused delays in the mortgage underwriting process, which could have impacted January sales.
Builder Confidence Rises to 58
Builder confidence rose two points to 58 in January after falling four points to 56 in December, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The gradual decline in mortgage rates helped stabilize builder confidence. All the HMI components posted gains in January. The index measuring current sales conditions rose two points to 63, the component gauging expectations in the next six months increased three points to 64 and the index charting buyer traffic edged up one point to 44. The three-month moving averages for regional HMI scores all declined, with the Northeast dropping five points to 45; the Midwest and South both falling three points to 52 and 62, respectively; and the West dropping one point to 67.
Mortgage Rates Fall to 4.45%
A 30-year fixed-rate mortgage (FRM) fell to 4.45% at the end of January after dropping to 4.55% at the end of December. The 30-year FRM was 4.15% at the end of January 2018. Rates are currently hovering at approximately the same levels they were at last spring. Freddie Mac says weekly mortgage activity was strong in January despite the government shutdown and expects the decline in home sales to stabilize or even reverse over the next few months.
Remodeling Index Drops to 57
The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) fell one point to 57 in the fourth quarter but has remained solidly in positive territory since the second quarter of 2013. According to the NAHB, the overall remodeling market remains strong, but remodelers are concerned about rising labor and input costs and are dealing with home owners who expect lower bids. Among the index’s three major components, major additions and alterations remained steady at 56, minor additions and alterations decreased one point to 56 and the home maintenance and repair component fell one point to 59. The future market indicators dropped three points from the previous quarter to 56. Calls for bids remained at 57, the amount of work committed for the next three months decreased seven points to 52, the backlog of remodeling jobs fell three points to 59 and appointments for proposals decreased four points to 55.
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