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By David F. Seiders
NAHB Chief Economist
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Housing Starts in February Down 7.9 %
Total housing starts declined 7.9 percent in February to a seasonally adjusted annual rate of 2.12 million and were 4.8 percent below the same period one year earlier.
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Housing Starts for February 2006 |
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DATE |
CURRENT |
LAST |
% Change |
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03/16/2006 |
2.120 M
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2.303 M |
-7.9% |
However, the February decline was most acute in the multifamily sector, where production fell by about 30 percent to an annual rate of 320,000 following a large increase in January. Single-family starts, however, remained relatively high in February, declining by 2.3 percent to 1.800 million. Permits edged down 3.2 percent between January and February to an annual rate of 2.145 million.
Three of the four Census regions participated in the February decline, led by contractions of 23.5 percent and 11.2 percent in the Northeast (182,000) and South (1,041,000), respectively. The Midwest registered a 10.4 percent drop to 326,000, while production in the West bucked the trend by increasing 7.9 percent to 571,000.
Read the full report and download data for Housing Starts and Building Permits.
Read the NAHB Press Release, March 16, 2006.
Subscribers
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The Seiders' Report, March 16, 2006
Highlights
 • Economic growth is rebounding from a soft patch late last year, but growth should settle down to a slightly below-trend pace before long.
• Payroll employment growth is proceeding at a healthy pace, the unemployment rate is hanging around a cyclical low, and hourly compensation as well as unit labor costs are on the rise.
• Core inflation still is well-contained but upward pressures may very well come from rising unit labor costs and some pass-through of high energy costs into the core.
• The Federal Reserve is bound and determined to keep a lid on core inflation, and we’re now projecting quarter-point increases in the federal funds rate at both the March 28 and May 10 FOMC meetings.
• Long-term interest rates in the U.S. have shifted up recently as market participants have reacted to the prospects for additional monetary tightening by the Fed as well as to upward rate adjustments by foreign central banks.
• Housing affordability has been declining as house price appreciation has continued at a rapid pace and the interest rate structure has shifted upward, and further erosion is in the cards.
• The housing slowdown has provoked a significant change in the supply-demand balance, evidenced by rising inventories of new and existing homes and higher cancellations of sales contracts.
• Rising house prices have been a major factor in household sector finances in recent years, and a slowdown in price appreciation should weaken the housing wealth effect on consumer spending to some degree.
• This month’s revisions to NAHB’s forecasts show a slightly higher interest rate structure, a slightly weaker housing sector and a slightly stronger performance by nonresidential fixed investment for the balance of the 2006-2007 period.
Full Story
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Remodeling Expenditures Exceeded $200 Billion in 2005
Remodeling expenditures exceeded $200 billion in 2005. NAHB forecasts that those expenditures will more than double over the next 10 years.
 NAHB’s Remodeling Forecast issue provides an in-depth exploration of the forces driving the remodeling industry. Historical and forecast tables are presented showing real (inflation-adjusted) and nominal remodeling expenditures, divided into remodeling by owners and renters and by type of remodeling (improvements, maintenance and repairs).
Growth of residential remodeling slowed in 2005 as spending on the owner-occupied housing stock proceeded at a strong pace. But remodeling of renter-occupied housing units declined for the second consecutive year. The NAHB Remodeling Market Index fell in the fourth quarter of 2005, but our forecast assumes that this signals temporary weakness that will be reflected in the fourth-quarter remodeling numbers but is not the precursor of a systematic downturn in the remodeling market. With respect to the near-term outlook, repairs of damage from the 2005 hurricanes will push remodeling expenditures for both owner-occupied and renter-occupied housing units higher in 2006-2007.
Full Report
The following Excel tables are included:
Please note: This information is available only to HousingEconomics.com subscribers.
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Executive Level Forecast is Available for Download
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Wells Fargo
HousingEconomics.com subscribers, download here the Executive Level Forecast (March 14,2006)
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Mortgage Revenue Bonds and Mortgage Credit Certificates
 The Internal Revenue Code contains several provisions that promote homeownership. Among these are two related policy tools: Mortgage Revenue Bonds (MRB) and Mortgage Credit Certificates (MCC). MRBs reduce the monthly housing payment for a qualifying homebuyer by reducing the interest rate of the program participant’s mortgage. In contrast, MCCs provide a homeownership incentive by reducing a participant’s federal tax liability. Presently, MRBs are used much more than MCCs. This article examines the features of these two programs in an effort to assess their relative effectiveness in expanding homeownership opportunities.
Mortgage Revenue Bonds
MRBs are tax-exempt bonds that finance mortgage loans targeted to moderate-income first-time home buyers. Issued by state and local housing finance agencies (HFAs), MRB proceeds are used to purchase or originate mortgage loans at below market rates. To qualify for a mortgage financed by an MRB, the household’s income cannot exceed 115 percent of area median family income. The price of a home purchased with an MRB-financed mortgage may not b e greater than 90 percent of the average price of homes in that area. The participant must not have owned a home in the previous three years. Exceptions to these rules are made for targeted low-income neighborhoods, households with many members, or households living in certain high cost areas.
MRBs are a type of private activity bond, as defined by the Internal Revenue Code. The volume of private activity bonds that may be issued annually is limited by state volume caps, which have been adjusted for inflation since 2003. For 2006, each state’s volume cap is generally equal to $80 per capita. For 2003, HFAs had approximately $6.7 billion in MRB authority out of a total private activity bond cap of $24.7 billion.
Full Story
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Register now for the Construction Forecast Conference — only 6 weeks away!
Will the housing sector follow an orderly “simmering down” pattern for 2006, or is housing a downside risk for the economy?
Which building materials are stable, and which are subject to price hikes, supply shortages and international pressures?
This semiannual conference will take place April 27, 2006 at The National Housing Center, Washington, DC. This conference provides an outstanding opportunity to learn more about economic trends, government policies, and developments in the housing industry. Panels of nationally recognized experts will discuss the outlook for the economy and housing, the regional housing outlook, and the results from NAHB's recent surveys.
Register Now
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Building Permits by Metropolitan Statistical Areas (MSAs)
Building Permits for the month of January 2006 by Metropolitan Statistical Areas (MSAs) are available for download (Excel tables).
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The Economics of Inclusionary Zoning
 Under inclusionary zoning (IZ), a local jurisdiction requires residential developers to set aside, among the homes they build and sell, a certain percentage classified as “affordable” and sold at a restricted price. Although IZ has been in existence since the 1970s, interest in it has been gathering momentum over the past two years. Conventional explanations for this phenomenon include rising housing costs, resulting concerns about affordability, the federal government’s retreat from support for affordable housing programs, and perhaps the existence of local administrative infrastructures borne out of experience with exclusionary zoning (practices such as large lot requirements, which make it difficult or impossible to build lower-cost housing in certain neighborhoods and thereby exclude lower-income households.)
This goal of this article is to describe what IZ can be expected to accomplish and not accomplish, and under what circumstances, in light of economic theory. The article seeks to help readers attain a better understanding of IZ by leading them though the various economic implications.
In some jurisdictions, particularly in California, IZ literally mandates two prices for the same items. In other words, homes sold at the affordable price must be of the same size and quality as the homes sold at the market price in the same subdivisions. In other cases, standards are relaxed for the affordable units so they can be produced at somewhat lower costs. The relaxation may involve density bonuses, an expedited permit approval process, or size/amenity reductions in the affordable units (although even in these cases detailed design and construction standards are often specified.)
Full Story
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Calendar for Key Data Releases for April 2006
 Mark your calendar for all of the housing industry key data and primary indicators for April 2006.
Click here to print the schedule of release dates for economic indicators. (PDF)
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The News and Alerts service will be expanded to include timely text-only alerts
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