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By David F. Seiders
NAHB Chief Economist
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Housing Starts and Building Permits Both Decline in June
Housing starts fell 5.3 percent in June to an annual rate of 1.850 million. The decline was due solely to a 6.5 percent drop in single-family production to a 1.486 million rate. Three out of the four Census regions participated in the decline, the exception being the Northeast. Building Permits declined for the 5th consecutive month in June to a 1.862 million pace, as single-family permits fell by 6.3 percent.
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Housing Starts for June 2006 |
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DATE |
CURRENT |
LAST |
% Change |
Download Housing Starts |
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07/19/2006 |
1.850 M |
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1.953 M |
- 5.3% |
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Read the full report and download data for Housing Starts and Building Permits.
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The Seiders' Report, July 2006
Highlights
 • Growth of the U.S. economy (real GDP) slowed substantially in the second quarter, and below-trend growth is likely for at least another year. This episode stacks up as a mid-cycle correction, and economic recession is not on the horizon.
• Housing is serving as a major swing factor in the economic expansion, currently transitioning from a long-standing engine of economic growth to a drag on growth in the second quarter and beyond. Fortunately, other sectors are picking up some of the slack as we move ahead.
• Payroll job growth has slowed substantially in recent months as GDP growth has decelerated, although the unemployment rate is holding at a cyclical low and growth of average hourly earnings is accelerating — a combination that can be described as the worst of both worlds.
• A three-year run of above-trend GDP growth, associated shrinkage of slack in labor markets and record-high energy costs have definitely raised inflation concerns at the Federal Reserve, even though the housing component of the core consumer inflation measures recently has been exerting strong and perverse upward price pressure.
• Citing elevated core inflation readings, the Federal Reserve enacted yet another quarter-point increase in short-term interest rates at the conclusion of the June 28-29 FOMC meeting. This adjustment lifted the federal funds and bank prime rates to the highest levels since early 2001.
• The FOMC statement of June 29 actually was less hawkish on the inflation issue than financial market participants had anticipated. As a result, long-term Treasury rates have receded a bit from pre-FOMC levels, at least temporarily.
• NAHB’s forecast assumes that the Fed will hold monetary policy steady until mid-2007, that long-term interest rates will move up only slightly from current levels, and that the entire yield structure will recede late next year as economic slack develops and inflation pressures subside.
• Recent housing data are quite a mixed bag. On balance, the evidence suggests that the housing downswing still is proceeding at a reasonably moderate and orderly pace, although downside risks to our “soft landing” scenario remain substantial.
• NAHB’s baseline (most probable) forecast continues to show gradual erosion of home sales and housing production through mid-2007, along with further slowing of house price appreciation. Rental housing and residential remodeling are relatively strong components of our 2006-2007 housing forecast.
• Our house price projections for 2006-2007 point toward slower but positive growth in housing equity, in both nominal and real terms. This positive wealth effect, on top of the huge equity position built up in recent years, will provide solid support to consumer spending even if the interest r ate structure limits the amount of equity “withdrawn” via mortgage borrowing.
 Please note: This information is available only to HousingEconomics.com subscribers. Download a free Sample.
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Mid-Year Housing Outlook Teleconference - PowerPoints Ready for Download
 Download the PowerPoint presentations from the 2006 Midyear Forecast Teleconference.
• The Housing Outlook - David Seiders' PowerPoint Presentation
• Mortgage Market Outlook - Frank Nothaft's PowerPoint Presentation
• Economic, Housing & Mortgage Market Outlook - David Berson's PowerPoint Presentation (3MB)
If you were unable to participate in the teleconference, you may listen to a full replay of the call. To access the replay, please dial (877) 344-7529 and use the replay passcode of 393071.
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Home Ownership: the Engine of Wealth Accumulation
 Home ownership is a central element of wealth accumulation for American households. In 2004, 69 percent of households owned their homes, and for half of those home owners, the value of their primary home accounted for 63 percent or more of all their asset holdings. Also for half of all home owners, equity in the home (home value minus mortgage debt) accounted for at least half of total wealth. Th is article adds to a growing literature that examines the importance of owner occupied housing as an asset on household balance sheets and as a vehicle of wealth accumulation using the Federal Reserve Board's Survey of Consumer Finances.
In February 2006 the Federal Reserve Board released the latest installment of the triennial Survey of Consumer Finances (SCF). This installment provides detailed information about household balance sheets as of the second half of 2004. The SCF is unique among household surveys and other data sources in its ability to provide periodic and timely information on household asset and debt portfolios. Data in the SCF allow examination of the financial condition of individual households by various demographic characteristics.
While the primary residence is the largest asset for most individual home owners, in the aggregate, the value of financial assets was slightly larger for homeowners in 2004. Financial assets are highly concentrated among a relatively small share of households. Table 1 shows major household balance sheet items for 2004 from the SCF. The aggregate value of financial assets was $21.1 trillion. The aggregate value of primary residences was $19.1 trillion.
Subtracting $6.7 trillion of primary home mortgage debt leaves $12.5 trillion in housing equity. The value of total assets (e.g., primary residences, other real estate, vehicles, stocks, bonds, retirement accounts, other financial assets, etc.) was $59.1 trillion. After subtracting all debt, households had a net worth of $50.2 trillion. To help put these figures in perspective, consider that US GDP in 2004 was $11.7 trillion. So total household wealth was more than four times the va lue of aggregate output, with the asset value of owner occupied housing approaching twice that amount, and housing equity was almost $1 trillion greater than the value of total output. Major categories of assets and debts are shown in Figures 1 and 2.
HousingEconomics Subscribers
 click here to read the full report.
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Key Housing Data and Primary Indicators for the Housing Industry
Discover all of the key data and primary indicators for the housing industry in one easy-to-navigate location. Source data derived from housing indicators (by type and region), Producer Price Index, Inflation indicators, demographics, GDP, and employment indicators are compiled from the Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, Federal Reserve Board, Office of Thrift Supervision, National Association of Realtors, Mortgage Bankers Association, Department of Housing and Urban Development, Coldwell-Banker, Freddie Mac, and other public and private agencies.
Housing Market Statistics offers 36 different tables, downloadable either as Excel or PDF files (updated weekly). Download Free Sample (Excel).
Instant Online Access Now!
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Building Permits and Employment Data by States and Metros
 Building Permits and Employment data by States and Metropolitan Statistical Areas (MSAs), are available for download (Excel tables).
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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 (July 06)
Please note: This information is available only to HousingEconomics.com subscribers.
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Calendar: Data Releases for August 2006
 Mark your calendar for all of the housing industry key data and primary indicators for August 2006.
Click here to print the schedule of release dates for economic indicators. (Excel)
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Does Your Company Need to Know the State Starts Forecast for 2007?
 Look ahead with the Home Builders Forecasts by region and type such as the 2007 Housing Starts Forecast. Includes Starts Forecast, Excel tables of Total, Single-Family, and Multifamily Housing Starts by Regions and States. Free Sample
Highlights
- House prices rose at a double digit pace in 2004 and 2005. Much slower price increases are forecast nationally in both 2006 and 2007.
- Higher house prices together with higher interest rates have dampened housing demand throughout most of the country, bringing demand more in line with supply.
- With housing starts forecast to decline nationally, only five states are expected to see their total starts increase in 2006. Three other states have only minimal declines.
- Three Midwest states, reflecting their heavy reliance on old-line manufacturing and domestic automakers in particular, will have large percentage decreases in housing starts. Florida is next in line in percentage decline in housing starts as the combination of higher prices and overbuilding (particularly for the condominium market) takes its toll.
- The effects of the 2005 hurricane season are still being felt in several states with rebuilding and repair proceeding slowly. Texas has seen a large influx of people from the hurricane affected areas, which will affect housing construction for the state.
- Increased energy prices are affecting states differently. The Northeast and Midwest are most likely to be adversely affected by higher energy prices. Meanwhile states with oil and natural gas reserves such as Oklahoma, Texas, and Wyoming will benefit from increased tax revenues, production, and employment.
Please note: This information is available only to HousingEconomics.com subscribers.
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