Housing & Construction January 2019
Housing Starts Rise 3.2%
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 Rise 5%
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 Unavailable
New Home sales for November were unavailable due to the government shutdown that began at midnight December 22, 2018. The most recent information is for the month of October. Sales of newly built, single-family homes fell 8.9% in October to a seasonally adjusted annual rate of 544,000 units, the lowest pace of sales since December 2016. However, sales numbers for the previous three months were revised up, and sales were up 2.8% from October 2017. The inventory of new homes for sale rose to 336,000 in October after rising to 327,000 in September and has risen 18% over the past year. The median sales price fell 3.6% to $309,700 as the market continues to shift to lower-priced homes. The November NAHB/Wells Fargo homebuilders’ survey noted a sharp decline in buyer traffic. Regional sales were mixed. New home sales rose 6.3% in the Midwest, 4.1% in the West, and 3.8% in the South. Home sales fell 17.1% in the Northeast. 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 1.9%
Existing home sales rose 1.9% in November to a seasonally adjusted annual rate of 5.32 million homes after rising to 5.22 million in October. Sales were 7% below November 2017. It was the second consecutive month that sales increased. The National Association of Realtors said that even though sales are down significantly from a year ago rising inventory levels have helped slow down home price appreciation, bringing more buyers back into the market. The median existing home price rose to $257,700; it was the 81st consecutive monthly increase in median prices and left prices up 4.2% from November 2017. Total housing inventory dropped to 1.74 million from 1.85 million in October, but was up 1.67 million from a year ago. Unsold inventory is at a 3.9-month supply at the current sales pace, down from 4.3 months in October and up from 3.5 months in November 2017. Regional home sales were mixed. Existing sales rose 7.2% in the Northeast, 2.3% in the South and 5.5% in the Midwest. Sales dropped 6.3% in the West.
Builder Confidence Falls to 56
Builder confidence fell four points to 56 in December after dropping eight points to 60 in November, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Despite the decline, confidence remained in positive territory, although it was the lowest reading since 2015. Component scores all declined. Current sales conditions fell six points to 61, expectations for the next six months dropped four points to 61 and buyer traffic fell two points to 43. Looking at the three-month moving averages for regional HMI scores, the Northeast dropped eight points to 50, the Midwest dropped two points to 55, the West fell three points to 68 and the South fell three points to 65.
Mortgage Rates Fall to 4.55%
A 30-year fixed-rate mortgage (FRM) dropped to 4.55% at the end of December after rising to 4.81% at the end of November. The 30-year FRM was 3.99% at the end of December 2017. Rates are currently hovering around the same level as in the early summer, which was before the deterioration in home sales. Freddie Mac said the negative headlines around the financial markets are concerning but the economy remains healthy, so the drop in mortgage rates should stem or even reverse the slide in home sales that occurred during the second half of 2018.
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