Housing & Construction March 2019

Housing Starts Fall 11.2%
Housing starts fell 11.2% in December to a seasonally adjusted annual rate of 1.08 million units. Single-family starts dropped 6.7% to 758,000 units, the fourth consecutive month single-family starts have declined. Multifamily starts fell 20.4% to a seasonally adjusted annual rate of 320,000 units. Starts have declined in three out of the past four months. Both single-family and multifamily starts each posted a yearly gain. Single-family production was up 2.8% in 2018 to a rate of 872,800, the highest annual figure since the Great Recession. Multifamily starts rose 5.5% in 2018 to 373,700 units. NAHB noted that the drop in December correlated with the peak increase in mortgage rates and corresponding decline in builder sentiment, which caused a delay in actually starting construction on units that had already been permitted. 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 a they deal with a shortage of construction workers and a lack of buildable lots. Regional starts were mixed. Single-family and multifamily housing starts were unchanged in the Northeast. Starts fell 26.3% in the West, 13.2% in the Midwest and 6% in the South.
 
Building Permits Rise 0.3%
Building permits inched up 0.3% in December to a seasonally adjusted annual rate of 1.33 million. Single-family permits fell 2.2% to an 829,000-unit pace in December while multifamily permits increased 4.9% to an annualized rate of 497,000. For 2018, single-family permits rose 4% to 852,700 and multifamily permits edged down 0.9% to 458,000. Regional permit issuance was mixed.  Permits rose 17.1% in the West. Permits were down 6% in the Northeast, 17.6% in the Midwest and 2% in the South.
 
New-Home Sales Rise 3.7%
New Home sales jumped rose 3.7% in December to an annual rate of 621,000 units, but sales for November were revised down substantially. Sales were up 1.5% for 2018. The inventory of new homes for sale continued to rise, reaching 344,000 new homes after rising to 330,000 in November. The median sales price increased to $318,600 in December, although it is down considerably from $343,300 in December 2018. The drop is primarily due to the increasing use of price incentives and a gradual shift toward adding inventory at entry-level prices. Regional new home sales for 2018 were mixed. New home sales dropped 16% in the Northeast and 1% in the West. Sales rose 4% for the year in the South and 6% in the Midwest. 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 1.2%
Existing home sales fell 1.2% in January to a seasonally adjusted annual rate of 4.94 million units after falling 6.4% to 4.99 million in December. Sales were down 8.5% from January 2018. Single-family home sales dropped 1.8% to 4.37 million units while condo sales rebounded and increased 3.6% to 570,000 units. Regional sales were mixed. Overall sales slipped in every region except for the Northeast, where sales rose 2.9%. Sales in the West, where supply and affordability issues are the greatest, dropped 2.9%. Sales fell 2.5% in the Midwest and 1.0% in the South. Inventory levels rose 4.6% to 1.59 million homes but remain low by historical standards. January marked the 83rd consecutive month of year-over-year increases in home prices, but home appreciation has definitely moderated. The decline in sales was expected, as interest rates reached nearly 5% in November. Wells Fargo projects that there will be a modest improvement in existing home sales this year.
 
Builder Confidence Rises to 62
Builder confidence rose four points to 62 in February after rising to 58 in January, 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. All the HMI components posted gains for the second consecutive month in February.  The index measuring current sales conditions rose three points to 67, the component gauging expectations in the next six months rose five points to 68 and buyer traffic rose four points to 48. The three-month moving averages for regional HMI scores were mixed. The South gained one point to 63, the Northeast dropped two points to 43 and the Midwest and West were unchanged at 52 and 67, respectively.
 
Mortgage Rates Fall to 4.35%
A 30-year fixed-rate mortgage (FRM) fell to 4.35% at the end of February after falling to 4.45% at the end of January, marking the third consecutive month rates have declined. The 30-year FRM was 4.43% at the end of February 2018. Rates are currently hovering at approximately the same levels they were at last spring. Freddie Mac says weekly mortgage activity has been rising and pending home sales have risen, pointing to a strong spring selling season.

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