December 19, 2006

By David F. Seiders
NAHB Chief Economist

 
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Housing Starts Rebound in November
Total housing starts rebounded from a weak October performance by rising nearly 7 percent in November to a seasonally adjusted annual rate of 1.588 million. Both the single and multifamily sectors contributed to the increase, the former jumping 8 percent to 1.281 million. However, building permits fell for the 10th consecutive month, contracting by 3 percent in November to an annual rate of 1.506 million.

Housing Starts and Building Permits for November 2006
 
DATE
CURRENT
LAST
% Change
Download Starts and Permits
Starts
12/19/2006
1.488 M
+6.7%
Permits
12/19/2006
1.553 M
-3.0%

Read additional information and download data (Excel) for Housing Starts & Permits.

The Seiders' Report: Buyer Demand May Be Stabilizing

 Highlights

•  The U.S. economy is performing remarkably well in the face of ongoing corrections in the housing sector. The contraction in home sales and housing production will continue to detract from GDP growth and payroll employment for a few more quarters and the unemployment rate most likely will gravitate upward. But outright recession is not in the offing.

• The Federal Reserve held monetary policy steady at the December 12 meeting of the Federal Open Market Committee. The FOMC reiterated concerns about core inflation while tempering its view of the economic expansion--focusing heavily on “substantial cooling” in the housing sector. Another “no-change” decision in virtually inevitable at the next FOMC meeting (January 31).

• Long-term interest rates have been subject to downward pressures since mid-year as the economic expansion has slowed and the chances of near-term Fed tightened have dwindled. Bond and mortgage rates are likely to remain close to current levels for some time, despite a prolonged but slight inversion of the Treasury yield curve.

• Broad economic and financial market conditions, including the retreat of energy prices from record highs, are supportive of housing demand. Against this background, a variety of indicators suggest that home sales now are stabilizing. That’s the first step toward regaining balance in the housing markets.
 
• NAHB’s forecast now places the trough for home sales in the final quarter of this year. Were looking for a bottom in housing starts during the first quarter of 2007 and a low point for residential construction activity in the second quarter. National average house price appreciation is bound to slow further from recent rates, and some negatives may very well appear in 2007.
 
• Although housing production should become a positive force in the economy by the second half of next year, the strength of housing and the economy will be tempered by the true dimensions of the current supply-demand imbalance, a weakening housing wealth effect and the aftermath of overly aggressive mortgage lending practices during the earlier boom period.

• The supply-demand imbalance in the markets for new and existing single-family homes actually is worse than portrayed by standard data systems. The true size of the current and potential inventory overhang will keep downward pressure on house prices for some time and temper the projected recovery of new housing production.
 
• The Federal Reserve’s balance sheets for the household sector of the economy show a record level of homeowner equity at the end of the third quarter. However, the third quarter gain was negligible, primarily reflecting the slowdown in house price appreciation and the falloff in home sales, and the ratio of mortgage debt to the market value of homes moved up to some degree--trends that are likely to continue for some time.

• Mortgage payment performance deteriorated to some degree in the third quarter, particularly for subprime adjustable-rate mortgages made during the earlier housing boom. Delinquency and foreclosure rates are likely to rise somewhat further in coming quarters but remain a manageable factor in the overall economic and housing market picture.

 
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Key Indicators for the Housing Industry

Housing Market Statistics

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Housing Starts

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 Manufactured Homes 

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Executive-Level Forecast Available for Download

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Wells Fargo

 

NEW! This report now includes a forecast of the OFHEO House Price Index and the Core PCE Price Index. Look for them in the Executive-Level forecast (Sample).
 
 HousingEconomics.com subscribers, download here the Executive Level Forecast (December 2006).
 
 Please note: This information is available only to HousingEconomics.com subscribers.
 

 

Building Permits & Employment October Data for States and Metros

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

Also Available for HousingEconomics.com subscribers:

 

Calendar: Data Releases for January 2007

Mark your calendar for all of  the housing industry key data and primary indicators for January 2007.

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

To see the 2007 release date calendar, please click here. (Excel)

Residential Land Use in the U.S.

 In May 2006, two of the services operated by the U.S. Department of Agriculture (USDA) released land use studies. The Economic Research Service (ERS) released Major Uses of Land in the United States, 2002, a study that is published every five years. The Natural Resources Conservation Service (NRCS) released National Resources Inventory: 2003 Annual NRI, which used to be published on a five-year cycle but shifted to an annual schedule in 1997 with a reduction in the number of sample sites surveyed.

Although both studies contain useful information on the nation’s 2.26 billion acres of land (1.89 billion acres in the contiguous 48 states), some of the information can be difficult to interpret; at the same time, the data sources used to generate the studies vary in quality. The ERS study combines information from a variety of sources, including several surveys, not all of which are compatible with one another. The NRCS study is based on a survey of conditions in several nonfederal sample sites, which, by definition, are subject to sampling error.
 
The ERS and NRCS studies employ terms such as urban, developed, built-up, and residential to describe land cover. Whichever term is used, it pertains to a relatively small percentage of the nation’s total land area. Indeed, lack of precision in the estimates can make it difficult to identify nationwide trends based on changes affecting small acreages over a short period of time. Over a longer period, however, it is clear that the amount of land in urban or residential use has increased substantially, but whether that growth has coincided with a reduction in other important land uses, such as natural resource conservation or agriculture, is less clear. Answers often depend on the time frame of interest and the definitions used.
 
In addition, given that USDA studies understandably focus on agriculture, they do not explore all possible topics related to residential land cover. For example, a large amount of residential land is associated with single-family housing units sited on 10-acre-plus non-farm lots, suggesting that the country has substantial capacity to absorb further residential development without exp anding beyond the boundaries of already established urban areas.
 
HousingEconomics.com Subscribers  click here to read the full report.
 
 

Do You Know How Housing Impacts Your Local and State Economies?

NAHB does. Look ahead with the Home Builders Forecasts by region and type such as:

  • State and Metro Forecasts — Includes Starts Forecast, Excel tables of Total, Single-Family, and Multifamily Housing Starts by Regions, States, and the Top 100 Metropolitan areas (See free samples).
  • Executive-Level Forecast — Monthly forecast of economic activity, inflation, interest rates, and housing activity; the Executive-level forecasts contain an executive summary, in-depth detail, and historical data with annual and quarterly forecasts for all indicators (Sample).

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