Housing & Construction March 2018

Housing Starts Rise 9.7%
Housing starts rose 9.7% in January to a seasonally adjusted annual rate of 1.33 million units after falling 8.2% in December. Single-family starts rose 3.7% to a seasonally adjusted annual rate of 877,000 units after falling to 836,000 units in December. In January, there were 499,000 single-family units under construction, a gain of almost 12% from January 2017. Multifamily starts rose 23.7% to a strong seasonally adjusted annual rate of 449,000 in January. Multifamily data tends to be particularly volatile on a month-to-month basis, but 55% of the homes under construction in December were multifamily. NAHB expects single-family starts to rise 5% this year; multifamily starts are expected to fall slightly. Regional starts were mixed. Starts rose 45.5% in the Northeast, 10.7% in the West, and 9.3% in the South. Starts fell 10.2% in the Midwest.
 
Building Permits Rise 7.4%
Overall building permit issuance rose 7.4% in January to a seasonally adjusted annual rate of 1.4 million units, which is a post-recession high. Single-family permits dropped 1.7% to 866,000 units. Multifamily permits jumped 26.5% to 530,000 units. Regional permit issuance was mixed. Permits rose 92.5% in the South and 17.1% in the West. Permits fell 2.6% in the Midwest and 21.7% in the Northeast.
 
New-Home Sales Fall 7.8%  
Sales of newly built, single-family homes fell 7.8% in January to a seasonally adjusted annual rate of 593,000 units after December sales were revised up from 625,000 to 643,000 units. It was the second consecutive month new home sales have dropped. The inventory of new homes for sale rose 2.4% to 301,000, a 6.1-month supply at the current sales pace, the highest since 2014. The increase in supply coupled with strong consumer demand could make for a busy spring selling season. Regional sales were mixed. New home sales rose 15.4% in the Midwest and 1.0% in the West. Sales decreased 14.2% in the South and 33.3% in the Northeast. NAHB says that builders report confidence in the overall market and future sales conditions, but the interest rate environment could be causing some short-term volatility. With strong consumer demand for housing, the NAHB expects sales to move forward in the months ahead. 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 3.2%
Total existing home sales fell 3.2% in January to a seasonally adjusted annual rate of 5.38 million homes from a downwardly revised 5.56 million in December. It was the largest decline on an annual basis in more than three years and left sales down 4.8% from January 2017. Single-family home sales dropped 3.8% to a seasonally adjusted annual rate of 4.76 million in January from 4.95 million in December. Unsold inventory is at a 3.4-month supply at the current sales pace, down from 3.6 months in January 2017 and the lowest level since NAR began tracking in 1999. The inventory of homes available for sale has fallen for the past 32 months. Sales fell in all regions, dropping 1.4% in the Northeast, 6.0% in the Midwest, 1.3% in the South and 5.0% in the West.
 
Builder Confidence Holds Steady
Builder confidence held steady at 72 in February after dropping from 74 in January, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). All three HMI components registered declines in January. The component scores were mixed, with the index gauging future sales expectations reaching a post-recession high of 80, the index measuring buyer traffic holding steady at 54 and the component measuring current sales conditions dropping one point to 78. Looking at the three-month moving averages for regional HMI scores, the Midwest rose two points to 72, the South increased one point to 74, the West remained unchanged at 81 and the Northeast fell two points to 56. NAHB Chief Economist Robert Dietz said that with low unemployment, favorable demographic trends and tight inventory, they expect to see builder confidence continue to rise in 2018, although builders continue to face scarcities of labor and increases in building materials prices.
 
Mortgage Rates Rise to 4.4% 
A 30-year fixed-rate mortgage (FRM) rose to 4.4% at the end of February after rising to 4.15% at the end of January.  It was the third consecutive month rates have risen. At the end of February last year 30-year rates averaged 4.16%. The increases in rates have been due to climbing Treasury yields. Nevertheless, mortgage rates remain quite low and affordable.

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