Housing Economics - 06/20/2006 (Plain Text Version)By David F. Seiders, NAHB Chief Economist
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E-mail Our Editor Housing Starts Rise, But Building Permits Fall in MayTotal housing starts rebounded from a 13 month low by increasing 5 percent in May to an annual rate of 1.96 million units. Both single-family and multifamily starts participated in the increase while regionally construction was up in 3 out of the 4 Census regions, the exception being the Midwest. Building permits, meanwhile, slipped 2.1 percent to an annual rate of 1.93 million units.
Read the full report and download data for Housing Starts and Building Permits. Just released: The 2007 State Housing Starts ForecastBy most measures 2005 was a good year for the economy and an excellent year for residential construction. It marked the fourth year of expansion following the 2001 recession with real (inflation-adjusted) gross domestic product (GDP) increasing 3.5 percent. National non-farm payroll employment exceeded its pre-recession peak and continued to grow. Housing construction benefited from the growth in employment and income and relatively low interest rates. Single-family housing starts set a record for the third year in a row while total housing starts were at their highest level in over 30 years.
Key Housing Data and Primary Indicators for the Housing IndustryDiscover 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! [return to top] The Seiders' Report, June 2006Highlights
• Core inflation has been firming up as the expansion has matured and labor markets have tightened, and high energy costs have been leaking into the core through business cost structures. Core inflation now is colliding with the upper bounds of various Federal Reserve “tolerance ranges.”
• Economic growth is coming off the first-quarter surge and a period of below-trend GDP growth lies ahead —an adjustment process that should help extend the life of the current economic expansion for at least several more years.
• Employment growth is slowing down with the growth in economic output (real GDP), and this process should restore some slack to labor markets before long —an essential element of an extended economic expansion with low inflation. • Recent statements by Chairman Bernanke and other Federal Reserve officials show much greater concern about upward pressures on core inflation than about the evolving economic slowdown, even though much of the core inflation issue can be traced to a highly controversial housing component. It’s now virtually inevitable that the Fed will enact yet another quarter-point rate hike at the conclusion of the next FOMC meeting on June 29, and further increases can’t be ruled out.
• The Fed’s display of anti-inflation resolve, combined with similar positions taken by various foreign central banks, have put heavy hits on U.S. and global stock markets while lowering longer-term inflation expectations among financial market participant —fostering a modest decline in long-term interest rates during the past month.
• The “moderate” and “orderly” housing slowdown appears to be on track, marked by systematic declines in mortgage applications, home sales and housing starts as well as by a slowdown in house price appreciation, and this process should extend well into next year as long as our broad economic and financial market forecasts stay on track.
• The projected “soft landing” for housing in 2006 and 2007 certainly will have some geographic rough spots, including previously “high-flying” markets as well as “earthbound” markets where economies have yet to stage meaningful lift-off following the 2001 recession.
• On a national basis, housing production now is transitioning from a strong engine of economic growth to a drag on GDP growth; indeed, the projected contraction in residential fixed investment is the key component of the evolving and projected slowdown in growth of real GDP.
• Support to the economy provided by large capital gains on housing and associated stimulus to personal consumption expenditures undoubtedly will wane as time passes, but this shift will not be abrupt; indeed, equity in owner-occupied housing displayed solid growth in the first quarter despite the slowdown in price appreciation and ongoing borrowing against housing equity.
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Local Use of the Mortgage Interest and the Real State Tax Deductions
The mortgage interest deduction and the real estate tax deduction are two of the most important preferences for home-owners in the federal income tax code. The deductions promote homeownership and reduce tax liabilities for home-owning taxpayers. Moreover, as this article demonstrates, the deductions are used widely and expansively across the nation. Based on the most recent (2003) IRS data, this article estimates the number of taxpayers who claim these deductions, the average deduction, and the aggregate amounts of mortgage interest and real estate taxes deducted by state and congressional district.
Mortgage Interest Deduction
Itemizing taxpayers may deduct interest on acquisition and home equity loans for a qualified residence. In general, qualified residences include the principal residence of the taxpayer and one other home. Taxpayers may deduct interest on acquisition loans on balances up to $1 million and home equity debt up to $100,000. Points on a home mortgage loan of a principal residence are deductible as mortgage interest. The Congressional Joint Committee on Taxation estimates that the value of the mortgage interest deduction to taxpayers, that is, its tax expenditure, is equal to $69.4 billion for 2006.
HousingEconomics Subscribers
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Building Permits and Employment Data by States and Metropolitan Statistical AreasBuilding Permits and Employment data by States and Metropolitan Statistical Areas (MSAs), are available for download (Excel tables). [return to top] 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 (June 06)
Calendar; Data Releases for July 2006Mark your calendar for all of the housing industry key data and primary indicators for July 2006. Click here to print the schedule of release dates for economic indicators. (Excel) [return to top] "When Time is Critical, HousingEconomics.com has the Data, Statistics and Trends""NAHB's HousingEconomics.com is an important destination for housing and construction industry statistics and trends. With a wide variety of information easily accessible in a single location, it's ideal for searches when time is critical.” Sylvia Kellogg 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. State and Metro Forecasts are some of the favorites materials our subscribers look for. Including Starts Forecast, Excel tables of Total, Single-Family and Multifamily Housing Starts by Regions, States, and the Top 100 Metropolitan areas. The NAHB Economics Group has provided research and analytical solutions to member companies, professional economists and the media (WSJ) since 1970. This kind of editorial excellence and in-depth analysis can only be found at www.HousingEconomics.com.
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