Housing Starts Rise in January

“Builders are starting to see the positive impacts of home buyer tax credits and other favorable buying conditions in terms of consumer demand, and are cautiously increasing production to meet that demand,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich.

“As our latest home builder surveys have indicated, today’s excellent home buying conditions — including the availability of tax credits for first-time and repeat buyers, very favorable mortgage rates and stabilizing home values — are helping drive potential buyers back to the market,” said NAHB Chief Economist David Crowe. However, he said, “A continuing shortfall in available credit for building projects is still producing a drag on new construction and slowing the progress of recovery in housing and the overall economy.”

The overall gain in housing starts was reflected on both the single- and multi-family side this January. While single-family starts posted a 1.5% gain to a seasonally adjusted, annual rate of 484,000 units, multifamily starts posted a 9.2% gain to 107,000 units.

Meanwhile, overall permit issuance, which can be an indicator of future building activity, fell 4.9% to a rate of 621,000 units in January. This was due entirely to a 23% decline to 114,000 units on the multifamily side, which offset a big gain in that sector the previous month. Single-family permits held virtually even, with a 0.4% gain to 507,000 units.

Combined single- and multifamily housing starts rose in three out of four regions this January. The South and West each registered a third consecutive month of improvement, with 1% and 8.9% gains, respectively, and the Northeast also posted a 10% gain. The Midwest saw a 3.2% decline in overall housing starts.

Conversely, permit issuance declined in three out of four regions this January. The West was the only region to post a gain, of 8.5%, while declines of 17.8%, 20.2% and 1.3% were registered in the Northeast, Midwest and South, respectively.

Housing Affordability Hovers Near Record-High Level for Fourth Consecutive Quarter
Nationwide housing affordability, bolstered by favorable interest rates and low house prices, closed out the year near its highest level since the series was first compiled 18 years ago, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) released today.

The HOI showed that 70.8% of all new and existing homes sold in the final quarter of 2009 were affordable to families earning the national median income of $64,000, slightly higher than the previous quarter and near the record-high 72.5% set during the first quarter of 2009. Affordability during the final quarter of the year was up from 62.4% during the fourth quarter of 2008.

“Favorable mortgage rates and sliding house prices that have now started to stabilize nationally have both contributed to a record year for housing affordability in 2009,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “With interest rates still hovering at low levels and the economy beginning to rebound, the federal housing tax credit will encourage even more first-time and repeat home buyers to enter the market and help further stabilize housing and the economy by creating new jobs, stimulating home sales and reducing foreclosures.”

Indianapolis again was the most affordable major housing market in the country during the fourth quarter, a position the metro area now has held for four and a half years. More than 95% of all homes sold were affordable to households earning the area’s median family income of $68,100.

Also near the top of the list of the most affordable major metro housing markets were Detroit-Livonia-Dearborn, Mich.; Dayton, Ohio; Youngstown-Warren-Boardman, Ohio-Pa.; and Akron, Ohio.

Five smaller housing markets posted even higher affordability scores than Indianapolis, with Kokomo, Ind., which historically has had a favorable income-to-house price ratio, outscoring all others. In Kokomo, 98% of homes sold during the fourth quarter of 2009 were affordable to median-income earners. Other smaller housing markets near the top of the index included Monroe, Mich.; Flint, Mich.; Lima, Ohio; and Bay City, Mich., respectively.

New York-White Plains-Wayne, N.Y.-N.J., continued to lead the nation as its least affordable major housing market during the fourth quarter of 2009. The New York metro area has occupied this position for seven consecutive quarters. Slightly less than 20% of all homes sold during the final quarter of 2009 were affordable to those earning the New York area’s median income of $64,800.

The other major metro areas near the bottom of the affordability scale included San Francisco; Honolulu; Santa Ana-Anaheim-Irvine, Calif.; and Los Angeles-Long Beach-Redwood City, Calif.

San Luis Obispo-Paso Robles, Calif. was the least affordable of the smaller metro housing markets in the country during the fourth quarter. Others near the bottom of the chart included Santa Cruz-Watsonville, Calif.; Ocean City, N.J.; Napa, Calif.; and Santa Barbara-Santa Maria-Goleta, Calif.

Please visit www.nahb.org/hoi for tables, historic data and details.

Builder Confidence Improves in February
Builder confidence in the market for newly built, single-family homes rose two points to 17 in February as favorable home buying conditions and signs of healing in the job market helped boost the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.

“Continued low interest rates, very attractive home prices that appear to have stabilized in many markets, and the availability of the home buyer tax credit make this an opportune time for potential purchasers,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “As a result, builders are slightly more optimistic that the housing recovery is finally beginning to take root.”

“Builders are just beginning to see the anticipated effects of the home buyer tax credit on consumer demand,” said NAHB Chief Economist David Crowe. “Meanwhile, another source of encouragement is the improving employment market, which is key to any sustainable economic or housing recovery. That said, several limiting factors are still weighing down builder expectations, including the large number of foreclosed homes on the market, the lack of available credit for new and existing projects, and inappropriately low appraisals tied to the use of distressed properties as comps.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

The HMI for February gained two points to 17, its highest level since November of 2009, with two out of three of its component indexes also rising. The component gauging current sales conditions rose two points to 17, while the component gauging sales expectations in the next six months rose a single point to 27. Meanwhile, the component gauging traffic of prospective buyers remained flat, at 12.

Regionally, February’s HMI results were mixed. While the Midwest and South each registered two-point gains, to 13 and 19, respectively, the Northeast and West each registered one-point declines, to 19 and 14, respectively.

Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be accessed online at: www.nahb.org/hmi. More information on housing statistics is also available at: www.housingeconomics.com.

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