Housing & Construction May 2017

HOUSING STARTS FALL 6.8%

Housing starts fell 6.8% in March to a seasonally adjusted annual rate of 1.22 million units after rising to 1.28 million units in February. Single-family starts dropped 6.2% to an annual rate of 821,000 units after rising to 872,000 units in February. Multifamily starts dropped 7.9% to an annual pace of 394,000 units after falling to 416,000 units in February. Regional starts were mixed. Starts rose 12.9% in the Northeast. Starts fell 2.9% in the South, 16% in the West and 16.2% in the Midwest.
 
BUILDING PERMITS RISE 3.6%

Building permits rose 3.6% in March to a seasonally adjusted annual rate of 1.26 million units after falling to 1.21 million units in February. Single-family permits fell 1.1% in March to an annual rate of 823,000 after rising to 832,000 units in February. Multifamily permits rose 13.8% to 437,000 units after falling to 381,000 units in February.
 
Regional permit issuance was mixed. Permits rose 16.7% in the West, 15.5% in the Northeast and 6% in the South. Permits fell 22% in the Midwest. Permits have been above the one million level for nineteen consecutive months, the longest stretch in seven years.
 
NEW-HOME SALES RISE 5.8%

Sales of newly built, single-family homes rose 5.8% in March to a seasonally adjusted annual rate of 621,000 units. It was the third consecutive monthly increase in new home sales, and the second-highest monthly sales since 2008. The inventory of new homes for sale rose slightly to 268,000 in March, which is a 5.2-month supply at the current sales pace, and the third consecutive month inventory has increased. The median sales price of new houses sold was $315,100. Regional sales were mixed. New home sales increased 25.8% in the Northeast, 16.7% in the West and 1.6% in the South. Sales fell 4.5% in the Midwest. NAHB commented that the spring home buying season was off to a good start, but builders are concerned that ongoing price increases in housing materials will hurt affordability. Of particular concern was a proposal from the Department of Commerce to impose a hefty tariff on Canadian lumber. 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 4.4%

Existing home sales rose 4.4% in March to a seasonally adjusted annual rate of 5.71 million from a downwardly revised 5.47 million in February. March sales were 5.9% above March 2016 and the strongest monthly sales pace since February 2007. Total housing inventory at the end of March rose 5.8% to 1.83 million existing homes for sale, 6.6% below March 2016. Total housing inventory has fallen year-over-year for 22 consecutive months. Unsold inventory is at a 3.8-month supply at the current sales pace, unchanged from February. Regional sales were mixed. Sales rose 10.1% in the Northeast, 9.2% in the Midwest and 3.4% in the South. Existing home sales dropped 1.6% in the West. Wells Fargo noted that the relatively warm January and February may have pushed pending home sales earlier into the year and that therefore there could be risks to sales in the second quarter. Heading into the key spring season inventories remain exceptionally lean, and the median price of an existing home is up 6.8% from March 2016.
 
BUILDER CONFIDENCE FALLS TO 68

Builder confidence fell three points to 68 in March after rising to an unusually high reading of 71 in February, according to the HMI (National Association of Home Builders/Wells Fargo Housing Market Index). All three HMI components posted losses in April but remain at healthy levels. The component gauging current sales condition fell three points to 74, the index charting sales expectations over the next six months fell three points to 75 and the component measuring buyer traffic dropped one point to 52. The three-month moving averages for HMI scores rose one point in the West to 77 and one point in the Midwest to 68. The South held steady at 68, while the Northeast fell two points to 46. It was the twenty-second consecutive month the HMI remained above 50. Builders remain optimistic but face ongoing increases in building materials prices as well as hefty regulatory costs, according to the NAHB.
 
REMODELING INDEX RISES TO 58

The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) rose to 58 in the first quarter of 2017, an increase of five points from the fourth quarter of 2016 and the highest reading since 2015. The component measuring current market conditions rose five points to 58 and the index measuring future market conditions also reached 58, equaling the highest reading during 2016. Calls for bids rose significantly from 49 to 59, and the amount of work committed grew from 50 to 58. The backlog of remodeling jobs increased from 55 to 62 and appointments for proposals held steady at 54. The NAHB said that while the RMI saw broad-based improvements, remodelers face challenges meeting demand as the labor shortage continues and costs for materials, such as lumber, are rising.
 
MORTGAGE RATES FALL TO 4.03%

The 30-year mortgage rate fell to 4.03% at the end of April from 4.14% the end of March. In April last year 30-year rates averaged 3.66%. Mortgage rates have been a bit volatile of late, swinging along with yields on the 10-Year Treasury Bond.
 
CANADIAN LUMBER DUTY IMPOSED

On April 25, the Department of Commerce levied a 19.88% duty rate against Canadian softwood lumber exports to the United States. Due to “special circumstances,” the duties will be retroactive 90 days from the date that the rates are officially published in the Federal Register, likely back to the beginning of February. Five Canadian lumber producing companies will face specific duty rates, the highest of which (24.12%) will be levied on West Fraser Timber, according to Random Lengths. NAHB estimates that the annual impact of the 19.88% duty, if in effect throughout 2017, would be a loss of $498.3 million in wages and salaries for U.S. workers, $350.2 million in taxes and other revenue for governments in the U.S. and 8,241 full-time U.S. jobs.

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