Housing starts in the United States jumped 3.2 percent from a month earlier to an annualized rate of 1,256 thousand in November of 2018, beating market forecasts of a 0.2 percent drop. Starts went up in the Northeast and the South but slumped in the Midwest and the West. Housing Starts in the United States averaged 1432.19 Thousand units from 1959 until 2018, reaching an all time high of 2494 Thousand units in January of 1972 and a record low of 478 Thousand units in April of 2009.
US Housing Starts Beat Forecasts
Housing starts in the United States jumped 3.2 percent from a month earlier to an annualized rate of 1,256 thousand in October of 2018, beating market forecasts of a 0.2 percent drop. Starts went up in the Northeast and the South but slumped in the Midwest and the West.
Starts for the volatile multi-family housing segment jumped 24.9 percent to a rate of 417 thousand. On the other hand, single-family homebuilding, which accounts for the largest share of the housing market, went down 4.6 percent to a rate of 824 thousand units, the third straight monthly fall and the the lowest level since May 2017. Starts increased in the South (15.1 percent to 687 thousand) and the Northeast (37.8 percent to 134 thousand) but fell in the West (-14.2 percent to 289 thousand) and the Midwest (-19.2 percent to 156 thousand). Starts for October were revised to 1,217 thousand from 1,228 thousand.
Building permits rose 5 percent from the previous month to a seasonally adjusted annual rate of 1,328 thousand, compared to market expectations of a 0.4 percent fall. Single-family authorizations edged up 0.1 percent to 848 thousand and multi-family permits advanced 14.8 percent to 480 thousand. Across regions, permits went up in the South (10.5 percent to 708 thousand) and the West (1.6 percent to 323 thousand) while in the Northeast permits were unchanged (at 120 thousand) and in the Midwest dropped (-4.8 percent to 177 thousand).
Year-on-year, housing starts fell 3.6 percent and building permits edged up 0.4 percent.
China’s hot real estate market remains a challenge for authorities trying to maintain stable economic growth in the face of trade tensions with the U.S.
In fact, property is the country’s biggest risk in the next 12 months, much greater than the trade war, according to Larry Hu, head of greater China economics at Macquarie. He said he is especially watching whether the real estate market in lower-tier, or smaller, cities will see a downturn in prices or housing starts after recent sharp increases.
Real estate investment accounts for about two-thirds of Chinese household assets, according to wealth manager Noah Holdings. The property market also plays a significant role in local government revenues, bank loans and corporate investment. As a result, a sharp slowdown in the real estate market’s growth and drop in prices would have a negative affect on overall economic growth.
So far, the market has been hot: The average selling price for newly built non-governmental housing in 60 tier-three and tier-four cities tracked by Tospur Real Estate Consulting rose 28.1 percent from January 2016 to May 2018. That’s according to a report last week co-authored by Sheng Songcheng, a counselor to the People’s Bank of China and an adjunct professor at the China Europe International Business School, an educational joint-venture co-founded by the Chinese government and the European Union.
Domestic property prices overall have also been rising for more than three years, the longest streak since 2008, the report said, citing National Bureau of Statistics data.
Source: Wind, Macquarie Macro Strategy, August 2018
Last week, Nanjing, a tier-two city, announced a ban on corporate purchases of residential properties, following similar moves to limit speculation by Shanghai and some other cities.
That’s a good move for controlling risk, according to Joe Zhou, real estate and investment management firm JLL’s regional director for China capital markets. He said the government is not likely to loosen its policy soon and that prices could decline on average.
However, it’s unclear whether a downturn in China’s property market would necessarily impact overall growth on the same scale. The public still expects property prices to increase because the government has constantly switched between tightening and easing policies, often to prevent a drop in growth, CEIBS’ Sheng said in the report.
Analysts also generally predict authorities will counter tightening measures with stimulus in other parts of the economy such as infrastructure. In the meantime, China’s export-reliant economy also faces pressure from U.S. tariffs and rising trade tensions.
Is a combination of high rents and shifting demographics driving a move from renting to buying?
The latest data from the Census Bureau shows that may be exactly what’s happening.
On Thursday, the Census released its quarterly report on residential vacancies and homeownership. And the report had some good news and bad news, depending on which industry you’re in.
For those who make their living via home buying, the news was mostly good. Homeownership held steady at 64.2%, demonstrating that there may be some underlying strength in the recent increases in homeownership.
But the news wasn’t quite so sunny in the rental world.
While the rental vacancy rate (units that remain unrented) held steady at 7%, the number of rental households fell for the fourth straight quarter.
According to the Census estimates, there were roughly 286,000 fewer renter households during the first quarter of 2018 compared to the first quarter of 2017.
Overall, there were approximately 43 million rental households in the U.S. in the first quarter, down from 43.287 million in first quarter of 2017.
Ralph McLaughlin, chief economist and founder of Veritas Urbis Economics, noted that the decrease in rental households is sign that more renters are becoming buyers.
“The fact that we now have four consecutive quarters where owner households increased while renters households fell is a strong sign households are making the switch from renting to buying,” McLaughlin said. “This is a trend that multifamily builders, investors, and landlords should take note of.”
McLaughlin went a step further, suggesting that landlords and multifamily homebuilders should be “nervous” about the seeming shift to buying. “This could lead to less demand for rental units this year, and downward pressure on rents,” McLaughlin said.
McLaughlin also noted that demographics may be playing a role in the shift between renting and buying.
“Households under 35 – which represent the largest potential pool of new homeowners in the U.S. – have shown some of the largest gains,” McLaughlin said. “While they only make up a third of all homebuyers, the steady uptick in their homeownership rate over the past year suggests their enormous purchasing power may be finally coming to housing market.”
The downward pressure on rents may be needed, as the Census report showed that during the first quarter, median asking rents rose to the highest level since 1988, which is as far as back the Census data goes.
(Click to enlarge. Image courtesy of the Census Bureau.)
According to the Census report, the median asking rent was $954 in the first quarter, up $80 from the first quarter of last year. It’s also up $44 from the fourth quarter of 2017. The previous high was $912, which was recorded during the 3rd quarter of 2017.
Rent hit record levels in each of the four regions as well. In the Northeast, the median asking rent rose from $1,153 in the fourth quarter to $1,279 in the first quarter. In the same time period last year, the median asking rent was $1,057.
In the Midwest, the median asking rent climbed to $764, up from $725 in the fourth quarter and $716 in 2017’s first quarter.
In the South, the increase was much slighter, with rent rising from $906 in the fourth quarter to $907 in the first quarter. In the first quarter of last year, the rent was $847.
In the West, the increase was much more significant. In the first quarter, the median asking rent was $1,345, which was up from $1,210 in the fourth quarter and $1,132 in the first quarter of 2017.
In a note sent out after the report’s release, Matthew Pointon, property economist at Capital Economics, suggested that the rental data may actually be a little rosier than it appears.
“Given the number of existing homes for sale recently dropped to a record low, it is no surprise that the homeowner vacancy rate fell to 1.5% in the first-quarter, the joint-lowest rate for 24 years,” Pointon wrote.
“That has put a stop to what had been a gradual rise in the homeownership rate. It is also supporting rental demand. Despite a large rise in the number of rental apartments hitting the market over the past couple of years, the multifamily rental vacancy rate has held steady at just over 8% for the past six-months,” Pointon added.
Pointon said that the 7% overall rental vacancy rate is low by historical standards, and suggested that the news may show that multifamily housing is on firmer footing than it appears.
“At 8.2%, the multifamily rental vacancy rate is down marginally from 8.3% in the final quarter of last year, and suggests concerns about a large degree of oversupply of rental apartments is overblown,” Pointon said. “While a large number of apartments are being built, the lack of homes to buy is supporting rental demand. In turn, that argues against a sharp slowdown in rental growth this year.”
U.S. homebuilding fell more than expected in February as a plunge in the construction of multi-family housing units offset a second straight monthly increase in single-family projects.
Housing starts declined 7.0 percent to a seasonally adjusted annual rate of 1.236 million units, the Commerce Department said on Friday. Data for January was revised up slightly to show groundbreaking increasing to a 1.329 million-unit pace instead of the previously reported 1.326 million units.
Economists polled by Reuters had forecast housing starts falling to a pace of 1.290 million units last month. Permits for future home building decreased 5.7 percent to a rate of 1.298 million units in February.
U.S. financial markets were little moved by the data.
While the volatile multi-family housing segment accounted for the decline in home building last month, the broader housing market appears to be slowing.
Sales of both new and previously owned homes have slumped in recent months as a dearth of properties on the market pushed up prices, sidelining some first-time home buyers. House price gains topped 6.0 percent in December.
Mortgage rates have also risen, with the 30-year fixed-rate currently averaging 4.44 percent, not too far from a four-year high of 4.46 percent, according to mortgage finance agency Freddie Mac. But the housing market remains underpinned by a robust labor market.
There is growing optimism that tightening job market conditions will translate into faster wage growth in the second half of this year. Annual wage growth has been stuck below 3.0 percent even as the unemployment rate has dropped to a 17-year low of 4.1 percent.
Single-family homebuilding, which accounts for the largest share of the housing market, increased 2.9 percent to a rate of 902,000 units in February. Single-family home construction rose in the Northeast, South and West, but tumbled in the Midwest.
Permits to build single-family homes slipped 0.6 percent in February to a 872,000 unit-pace. With permits lagging starts, single-family home construction could slow in the months ahead.
A survey on Thursday showed confidence among homebuilders dipping in March, but remaining in strong territory. Builders were less upbeat about sales and buyer traffic over the next six months.
Starts for the volatile multi-family housing segment tumbled 26.1 percent to a rate of 334,000 units in February, the lowest level since September 2017. Permits for the construction of multi-family homes dropped 14.8 percent to a 426,000 unit-pace.
Housing completions increased 7.8 percent to a rate of 1.319 million units in February. That was the highest level since January 2008. The number of single-family houses completed last month was the highest since March 2008.
There were 501,000 single-family housing units under construction in February, the most since June 2008. This should help to alleviate some of the property shortage and probably slow the house price inflation.
Single-family homes built after the 1990s have an average of 3.1 toilets, 2.6 showers and 2.3 bathtubs, according to a recent NAHB study.
Standard tables from the Survey of Construction (SOC, conducted by the U.S. Census Bureau with partial funding from HUD) show that the share of single-family homes built with at least 2 bathrooms has increased regularly from 60 percent of homes completed in 1973 to 97 percent of homes completed in 2016. This suggests that the number of bathroom fixtures should also be on the riese, but this is not one of the things that it has been possible to investigate using SOC data.
It can be investigated, however, with data that has recently become available from the Residential End Uses of Water (REUW) study from the Water Research Foundation (WRF). The REUW is the source of information on water use in single-family homes in the recent NAHB article on the topic. Consistent with the increasing number bathrooms, the REUW data show that the average number of toilets, showers and bathtubs all increase regularly as single-family homes become newer. For example, the average number of toilets increases regularly from 1.9 in homes built before 1960 to 3.1 for homes built after 1999.
Perhaps surprisingly, the published REUW study did not show a statistical relationship between the number of bathroom fixtures and the amount of water used by a particular single-family. The WRF constructed several models from REUW data, estimating outdoor water use, total indoor use, and a number of different individual indoor uses. NAHB economists reviewed these models and judged them to be generally well constructed and a good use of the available data, and saw no obvious reason to critique them or suggest alternatives.
Although the number of bathroom fixtures does not affect water use in any of the WRF models, the presence of efficient toilets and clothes washers does. Given government standards that have been promulgated and modified since 1990, it should not be surprising that efficient fixtures were most common in the newest REUW homes. For example, of the homes built after 1999, 71 percent had toilets that averaged less than 1.6 gallon per flush, 51 percent had toilets that averaged less than 1.28 gallons per flush and 80 percent had ENERGY STAR rated clothes driers. All three of these percentages are higher than they are for homes in any of the earlier vintage categories
Estimates of total water use, as well as the amount of water used by specific features, in single-family homes were discussed in last week’s post. For a more thorough discussion of the REUW and what if finds has an impact on water used by a single-family home, please consult the full NAHB study.
The S&P/Case-Shiller and the Federal Housing Finance Agency (FHFA) released their respective home price indices for August 2017. National home prices rose at a faster annual growth rate, while local home price gains varied. Price growth in metro areas across the West region exceeded the national average.
The Case-Shiller U.S. National Home Price Index, reported by S&P Dow Jones Indices, rose at a seasonally adjusted annual growth rate of 6.1% in August, faster than a 5.8% increase in July. It was the highest seasonally adjusted annual growth rate since February 2017. Meanwhile, the Home Price Index, released by the Federal Housing Finance Agency (FHFA), rose at a seasonally adjusted annual rate of 8.3% in April, following the 4.5% increase in July, confirming the acceleration in home prices this month.
In August, local home prices grew at different rates. Many of the faster growing metro areas are located in the West region of the country.
San Diego, Las Vegas, Seattle, San Francisco, Phoenix, and Los Angeles registered annual growth rates that exceeded the national average. Among the 20 metro areas, San Diego, Las Vegas and Charlotte had the highest home price appreciation. San Diego led the way with 12.2%, followed by Las Vegas with 11.0% and Charlotte with a 10.8% increase. Nineteen out of the 20 metro areas had home price appreciation and Atlanta had home price depreciation (-2.4%). Moreover, eight metro areas had higher home price appreciation than the national level of 6.1%.
The Republican proposal to overhaul the tax code gained a powerful enemy over the weekend when the National Association of Home Builders, a trade group that been supportive until now, launched a drive to defeat it.
The decision came despite an announcement by a key House Republican, Ways and Means Chairman Kevin Brady of Texas, that a deduction for property taxes would be maintained in tax legislation that is to be unveiled Wednesday.
Lawmakers from high-tax states, including California, Illinois, New Jersey and New York, had been pressing House leaders to continue to allow taxpayers who itemize to deduct state and local taxes.
A tax framework unveiled in September by President Trump and Republican House and Senate leaders called for maintaining the deductions for mortgage interest and charitable contributions while eliminating other write-offs.
Staff from the home builders association had been meeting with Brady’s staff because of concerns that eliminating the property tax deduction, combined with a proposal to double the standard deduction, would reduce the tax benefits of home ownership.
A study commissioned by the National Association of Realtors had found that the combination would lower the value of the average home by 10%.
“Even though they’re technically not touching the home mortgage interest deduction, the reality is they’re going to gut the mortgage interest deduction,” said Gerald H. Howard, CEO of the home builders group. “Doubling the standard deduction would mean only the wealthiest homeowners would be able to take the mortgage interest deduction.”
Howard said his group was pitching a tax credit that would let middle-class homeowners reduce taxable income by 12% of what they paid in mortgage interest and property taxes. The benefit would have been capped at mortgages of $500,000 and property taxes of $5,500, and there would have been a phase-out for high-income taxpayers.
Heritage Action for America, an advocacy group working to build support for the tax plan, released a letter Monday designed to blunt the builders’ effort. Signed by 146 real estate professionals, it argued that 70 percent of taxpayers do not itemize, and they would benefit from the cut in tax rates that would come from eliminating deductions, especially the break for state and local taxes, known as SALT.
“Repealing the SALT deduction would finally put pressure on fiscally irresponsible state and local politicians, especially in California, New York and New Jersey, to lower their income and property taxes,” the letter said.
Michael Needham, chief executive officer of Heritage Action, said on Fox News Sunday that “every single corrupt force of the status quo in Washington” would be coming out to “protect their little carve out” in the tax code.
According to the U.S. Census Bureau, shipments of manufactured homes increased by 7.6% to an 85,000 seasonally adjusted annual rate in August, from 79,000 in July. This rate of growth partially reverses the 10.2% decline recorded in July, however, the number of manufactured homes in August remains 21.3% below its post-recession peak of 108,000 reached in January 2017.
Figure 1 above shows the changes in total housing strats and manufactured home shipments over the past eighteen years. Total housing starts here are defined as the sum of single-family housing starts and multifamily housing starts.
As shown in the figure, total housing starts increased by 34% to 2.27 million units from January 2002 to January 2006, and dropped sharply to 478 thousand by April 2009, a decline of 79%. Since then, total housing starts have been recovering, increasing by 147% to 1.18 million.
In contrast to total housing starts, between 2002 and 2006, shipments of manufactured homes decreased by 36% to 124 thousand. After a sharp increase in November 2005, manufactured homes fell by 77% to 49 thousand in April 2009. Since then, manufactured homes rose by 73% to 85 thousand in August 2017.
The figure above presents the level of manufactured home shipments and its share of total housing production from 2000 to the present. Total housing production includes single-family housing starts, multifamily housing starts and shipments of manufactured homes. Currently, manufactured homes accounts for 6.7% of total housing production.
Between 2000 and 2006, the pace of manufactured homes tracked its share of total housing production. As illustrated in Figure 1, the decline in manufactured homes coincided with an increase in total housing starts. Between 2000 and 2006, single-family housing starts rose by 44% while multifamily housing starts rose by 22%. As a result, manufactured homes’ share of total housing production also declined.
Since October 2006, the level of manufactured homes and its share of total housing production have moved in different directions, reflecting the boom bust cycle in total housing starts. Between October 2006 and December 2008, manufactured homes’ share of total housing production rose from 5.8% to 10.1%. Over this period, manufactured homes fell by 35% to 63 thousand. However, total housing starts fell even more. Single-family housing starts fell by 68% and multifamily housing starts fell by 61%.
Between 2009 and 2012, the level of manufactured homes rose by 4%, and manufactured homes’ share of total housing production decreased from 9.9% to 5.4%. The decline in manufactured homes’ share of total housing production reflected a large increase in total housing starts. Single-family housing starts rose by 72% and multifamily housing starts rose by 173%.
LONDON — Tests on the exterior cladding of tower blocks across Britain that use similar material found outside the building in west London where at least 79 people died in a fire have shown that some of them are “combustible,” British Prime Minister Theresa May said Thursday.
May said the tests were being carried out so that “all possible steps to ensure buildings are safe” were taken. Investigators believe that the type of exterior cladding used on the Grenfell Tower after a refurbishment last year may have caused the fire to spread more rapidly than if a different material was used. It had a plastic core.
The fire’s cause has not been established, although investigators suspect it may have started when a refrigerator exploded on one of the block’s lower floors.
There are thought to be approximately 4,000 tower blocks in Britain similar to the 24-storey residential complex in Kensington that went up in flames last week.
May said in an address to Parliament that authorities have been checking about 100 buildings a day and that the results come back within hours. Her office estimated that there are about 600 buildings in Britain that have the same type or similar cladding to that used in Grenfell Tower. However, May said it was still too early to draw conclusions about what caused the fire or why it appeared to spread so quickly.
“I urge any landlord who owns a building of this kind to send samples for testing as soon as possible. Any results will be communicated immediately to local authorities and local fire services. Landlords have a legal obligation to provide safe buildings and where they cannot do that we expect alternative accommodation to be provided. We cannot and will not ask people to live in unsafe homes,” she said.
May’s address came as the chief administrator of the neighborhood where the fire took place resigned Thursday, effectively marking the disaster’s first formal departure of a high-level official in the wake of Britain’s worst blaze in decades.
Nicholas Holgate, chief executive of the Kensington and Chelsea council, said he was asked to leave by May’s government. The initial days after the June 14 inferno were marked by chaos as authorities struggled to deal with the scope of the aftermath.
Residents who survived the tower blaze lost everything, only to get little help or information on how to secure shelter or vital supplies. Of the 600 people who lived in the tower block, many were low-income workers, recent immigrants and refugees.
Researchers at the Universite Catholique de Louvain in Belgium believe the Grenfell Tower disaster is now the deadliest fire in mainland Britain since they started keeping close records at the start of the 20th century. A fire at Bradford City Stadium in northern England on May 11, 1985, killed 56 people.
Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing the 30-year fixed mortgage rate inching lower for the third consecutive week and setting a new low for the year.
30-year fixed-rate mortgage (FRM) averaged 3.94 percent with an average 0.5 point for the week ending June 1, 2017, down from last week when it averaged 3.95 percent. A year ago at this time, the 30-year FRM averaged 3.66 percent.
15-year FRM this week averaged 3.19 percent with an average 0.5 point, the same as last week. A year ago at this time, the 15-year FRM averaged 2.92 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
Quote Attributed to Sean Becketti, chief economist, Freddie Mac.
“In a short week following Memorial Day, the 10-year Treasury yield fell 4 basis points. The 30-year mortgage rate remained relatively flat, falling 1 basis point to 3.94 percent and once again hitting a new 2017 low.”