Housing & Construction March 2017
HOUSING STARTS FALL 2.6%
Housing starts fell 2.6% in January to a seasonally adjusted annual rate of 1.246 million after unexpectedly rising more than 10% in December. Single-family starts rose 1.9% to 823,000 units after falling to 795,000 units in December. Multifamily starts fell 10.2% to 423,000 units after jumping 57% to 431,000 units in December. Regional starts were mixed. Starts rose 55.4% in the Northeast and 20.0% in the South. Starts fell 17.9% in the Midwest and 41.3% in the West, where builders were dealing with torrential rain and heavy snow after years of drought. January is traditionally one of the slowest months for homebuilding each year and the reported numbers are heavily influenced by seasonal adjustment. Wells Fargo continues to look for modest gains in homebuilding this year and expects overall starts to rise 6.3% to a 1.24 million-unit pace. Single-family starts should rise 10.1%.
BUILDING PERMITS RISE 4.6%
Building permits rose 4.6% in January to a seasonally adjusted 1.285 million units after falling to 1.21 million units in December. Single-family permits fell 2.7% to 808,000 units after rising to 817,000 units in December. Multifamily permits rose 19.8% to 477,000 units after falling to 393,000 units in December. Regional permit issuance was mixed. Permits rose 29.6% in the Northeast, 9.9% in the South and 5.3% in the Midwest. Permits fell 13.2% in the West. Permits have been above the one million level for eighteen consecutive months, the longest stretch in seven years.
NEW-HOME SALES RISE 3.7%
Sales of new single-family homes rose 3.7% in January to a seasonally adjusted annual rate of 555,000 units after falling to 563,000 units in December. Sales for the previous three months were revised down by a total of 27,000 units. The downward revision left new home sales for 2016 up 12% to 561,000 units. The inventory of new homes for sale rose to 265,000 in January after rising to 259,000 in December, a 5.7-month supply at the current sales pace, down from a 5.8-month supply in December. Regional sales were mixed. Sales rose 15.8% in the Northeast, 14.8% in the Midwest and 4.3% in the South. Sales fell 4.4% in the West. NAHB says sales are generally in line with their forecasts for steady, gradual growth, but may be hampered by problems on the supply side, including shortages of lots and labor. 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 3.3%
Existing home sales rose 3.3% in January to a seasonally adjusted annual rate of 5.69 million homes after falling to an upwardly revised 5.51 million units in December 2016. Sales were up 3.8% from January 2016, and the strongest pace of sales since February 2007. Total housing inventory at the end of January rose 2.4% to 1.69 million existing homes for sale, 7.1% below January 2016. Total housing inventory has dropped year-over-year for 20 consecutive months. Unsold inventory is at a 3.6-month supply at the current sales pace, unchanged from December 2016. Tight housing supply is impacting affordability and driving up rents as well. Regional sales were mixed. Sales rose 5.3% in the Northeast, 3.6% in the South and 6.6% in the West. Sales dropped 1.5% in the Midwest.
BUILDER CONFIDENCE DROPS TO 65
Builder confidence fell two points to 65 in February after dropping to 67 in January, according to the HMI (National Association of Home Builders/Wells Fargo Housing Market Index). All three HMI components fell in February, with current sales conditions dropping one point to 71, the index charting sales expectations over the next six months falling three points to 73 and the component measuring buyer traffic dropping five points to 46. The three-month moving averages for HMI scores fell two points to 50 in the Northeast and one point to 67 in the South. The three month moving average held steady in the West at 79 and rose one point in the Midwest to 65. It was the twenty-first consecutive month the HMI remained above 50. Builders remain optimistic that a new Congress and administration will help create a better climate for small businesses and streamline and reform the regulatory process.
MORTGAGE RATES FALL SLIGHTLY
The 30-year mortgage rate fell slightly to 4.16% at the end of February after falling to 4.19% at the end of January. In February last year 30-year rates averaged 3.62%.
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