Housing Starts in March Down 7.8 %

Total housing starts fell nearly 8 percent in March to a seasonally adjusted annual rate of 1.960 million, though they remained 7 percent above the corresponding period one year earlier.

Housing Starts  for March 2006
DATE	CURRENT	LAST	% Change
04/18/2006	1.960 M	2.126 M	-7.8%

 

The March housing starts decline was fueled by a 12 percent drop in single-family starts, to a 1.591 million annual rate, while multifamily starts surged 16 percent to 369,000.  Total permits also declined in March, by 5.5 percent to 2.059 million, seasonally adjusted, as both single-family and multifamily declined from February levels. 

Read the full report and download data for Housing Starts and Building Permits.

You Can Bet On It: Housing Futures and Options

Do you think that the price of your home is about to fall, or that the value of a rental property you bought years ago might decline? Are you confident that house prices will continue rising in Denver, or that house values in Boston are going to flatten? Starting in April or May, you will be able to bet on it or hedge against such outcomes. 

The Chicago Mercantile Exchange (CME), the same institution that deals in the value of commodities (pork bellies, orange juice, etc.) foreign exchange (Euros, Japanese yen, Canadian dollars, etc.), and the direction of interest rates and stock prices, has recently committed to start trading index-based futures and options on futures in a item near and dear to Americans — home prices.

 

Futures and options originally were based on physical commodities. Later foreign exchange and other financial instruments were added. More recently trading has been extended to index-based futures involving no physical items or actual securities. Index-based instruments derive their value solely due to changes in an index over time.  When the future or option expires, settlement is always in dollars, and whether an index-based transaction is considered speculative or a hedge, depends only on whether the investor is increasing their exposure, or covering an existing position.

              

Starting this spring, index-based housing price futures and options on futures based on indexes depicting matched sales prices for single family residential dwellings in 10 different U.S. cities will begin trading.  Investors will be able to trade contracts based on an index of median home prices in the metropolitan areas of Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, or Washington, D.C. or in a composite index of all 10 cities.

 

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The Seiders' Report, April 2006

Highlights

• U.S. economic output (real Gross Domestic Product) is on a strong growth path in the early part of 2006, but the GDP expansion will slow to a slightly below-trend pace later this year and in 2007.
  
  
• Above-trend GDP growth is generating large increases in employment and driving the nation’s unemployment rate to cyclical lows, but the projected GDP slowdown will reduce the pace of job growth and provoke slight increases in the jobless rate.
  
  
• Tightening labor markets and historically high energy costs have not yet generated serious increases in core inflation, and the projected increase in the unemployment rate will help limit unit labor costs and keep core inflation around the upper end of the Federal Reserve’s tolerance range.
  
  
• The Fed enacted another quarter-point increase in its federal funds rate target at the March 28 meeting of the Federal Open Market Committee, and the FOMC’s public statement hinted at yet another increase in short-term rates at the next meeting on May 10 — a move that will edge monetary policy into the restrictive zone.
  
  
• Long-term interest rates have moved up a good bit in recent weeks as investors have digested the Bernanke Fed’s concerns about above-trend GDP growth and the potential inflation pressures, and rate hikes by a number of foreign central banks have added to upward pressures on long rates here at home.
  
  
• Eroding affordability and weakening house price expectations have been taking a toll on the demand for single-family homes and condo units, and our forecasts of household income, employment and the interest rate structure imply some further cooling down as the year progresses.
  
  
• Housing starts and residential construction put-in-place have been much stronger than the measures of housing demand in recent months, leading to record levels of unsold new homes and a serious upswing in the inventory-to-sales ratio. Unseasonably good weather was at least partly responsible for this early-2006 anomaly.
  
  
• A “soft landing” still is the best bet for the housing market in 2006-2007, despite the rather abrupt shift in the supply-demand balance in recent months, and we’re expecting relative strength in rental housing and remodeling to partially offset moderate declines in sales and production of single-family homes and condo units.
  
  
• The projected declines in home sales and housing production move residential fixed investment out of the GDP growth-engine category after the first quarter of this year, although ongoing increases in household wealth generated by positive (albeit slower) rates of house price appreciation will continue to provide solid support to consumer spending — whether or not housing equity is “withdrawn” via cash-out refis or home equity loans.

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Builder Confidence Declines in April

WASHINGTON, April 17, NAHB Public Affairs

Rising mortgage rates, continued affordability issues and subsiding demand from investors/speculators are prompting single-family home builders to adjust their perspectives on the new-home market, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for April, released today. The HMI declined four points from a downwardly revised reading in the previous month to hit 50 for the latest report.

"Home builders definitely view this as something of a transition period, where demand from speculators is easing off and the market is heading to a more sustainable level of activity following the record-breaking performance of 2005," said NAHB President David Pressly, a home builder from Statesville, N.C. "This process should help restore a healthier balance between supply and demand going forward."

"With mortgage rates back up to the 6.5 percent range and serious affordability issues in the highest-priced markets, today's HMI numbers are neither surprising nor alarming," noted NAHB Chief Economist David Seiders. "Indeed, a reported reduction in home buying by investors/speculators in the market for new single-family homes is a positive development.

Furthermore, we expect solid growth in employment and household income to essentially offset the minor increases in the interest-rate structure that we're projecting for the balance of this year."

Derived from a monthly survey that NAHB has been conducting for nearly 20 years, the NAHB/Wells Fargo HMI 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 either "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.

All three component indexes slipped this month, with the largest decline registered for current single-family sales. That component declined five points to 54 in April, while the component for sales expectations in the next six months was down four points to 58 and the component gauging traffic of prospective buyers declined a single point to 39.

Regionally, only builders in the West registered greater confidence in market conditions in April than in the previous month; there, a four-point gain to 70 partially offset a significant decline in March. Meanwhile, the HMI for the Northeast posted a seven-point decline to 49, the HMI for the South recorded a four-point decline to 55, and the HMI for the Midwest showed continued weakness in that region with a five-point decline to 32.

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 regarding housing statistics is also available at www.housingeconomics.com.

Calendar for Key Data Releases for May 2006

Mark your calendar for all of  the housing industry key data and primary indicators for May 2006.

Click here to print the schedule of release dates for economic indicators. (PDF)

Building Permits and Employment Data by Metropolitan Statistical Areas

Building Permits and Employment data by Metropolitan Statistical Areas (MSAs) are available for download (Excel tables).

The Multifamily Forecast: Major Shifts Underway

  Highlights

• National multifamily housing starts have remained in a narrow range since the late 1990s, but major shifts in types of units and geographic locations have been underway.
  
  
• Condo construction and conversions exploded, beginning in 2003, and a cutback in activity is inevitable, especially in the hottest condo markets.
  
  
• Accelerated rates of household formations (stimulated by job growth), higher mortgage rates, and reduced construction of multifamily rentals are raising occupancy rates and setting the stage for a rebound in rental construction.
  
  
• Multifamily construction has become more concentrated in highly-urbanized central cities, but with population moving away from such areas and suburban multifamily demand set to grow, that trend will be reversed.
  
  
• Multifamily buildings have become bigger, and are taking longer to complete, but a shift to less-urbanized areas and a shift from condos back to rentals will mean more low-rise, smaller-scale structures.
  
  
• Subsidized rental apartments, most of which benefit from low income housing tax credits, have become an increased share of overall multifamily rental production.
  
  
• New construction to replace housing destroyed by last year’s hurricanes has been delayed and will not begin in earnest until 2007. An injection of government support will contribute to a surge in multifamily construction in Gulf Coast states.
  
  
• Despite improved prospect for multifamily rental construction, the impending correction in condo building will cause a modest downturn in total multifamily starts in both 2006 and 2007.

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Executive-Level Forecast Available for Download

"The information provided by HousingEconomics.com is invaluable. Specifically, the Executive-Level Forecasts have proven to be a tremendous resource  for helping me plan strategies and tactics both nationally and locally. The site is easy to navigate and loaded with pertinent data and opinions that are both interesting and useful. "

Stuart Tyrie

Vice-President, National Builder Division

Wells Fargo

 HousingEconomics.com subscribers, download here the Executive Level Forecast (April 10,2006)

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A Behind the Scenes Look at the Remodeling Industry

This article highlights the results of the quarterly survey of remodelers, which is produced in the Remodeling Market Index. It also includes a set of special questions that focus on topics relevant to the industry. 

• Structure of the Remodeling Firm
• Plans for Growth
• Significant Problems Faced by the Remodeling Firm
• Most Significant Issue to Shape the Remodeling Industry

Subscribers  click here to read the full report.

Register Now for the Construction Forecast Conference — Only One Week 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 Thursday, April 27 at The National Housing Center, Washington, D.C. 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.

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Marketing Information & Analytical Manager

USG Corporation Chicago

Whether you advise, consult or work specifically on improving your own company’s profitability, you can rely on the premier data source for the U.S. housing industry, HousingEconomics.com.

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