Popular Economics Weekly

Housing made somewhat of a comeback in July and taking into account wet weather on the East coast should be taken as stronger than face value.  Housing starts in July rebounded 5.9 percent after falling 7.9 percent in June, according to the National Association of Home Builders.  The July starts annualized level of 0.896 million units was up 20.9 percent on a year-ago basis.

And builder confidence in the market for newly built, single-family homes rose three points to 59 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released today. This fourth consecutive monthly gain brings the index to its highest level in nearly eight years.

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Graph: Econoday

“Builders are seeing more motivated buyers walk through their doors than they have in quite some time,” said NAHB Chairman Rick Judson. “What’s more, firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market.”

“Builder confidence continues to strengthen along with rising demand for a limited supply of new and existing homes in most local markets,” noted NAHB Chief Economist David Crowe. “However, this positive momentum is being slowed by the ongoing headwinds of tight credit and low supplies of finished lots and labor.”

Nationwide housing starts rose 5.9 percent to a seasonally adjusted annual rate of 896,000 units in July as multifamily construction rebounded from a dip in the previous month, according to newly released figures from HUD and the U.S. Census Bureau. Meanwhile, single-family construction recorded a modest decline from a rate that was upwardly revised for the previous month.

“Builders are making every effort to keep up with the rising demand for new homes and apartments, and construction in both sectors is running well ahead of the pace we saw at this time last year,” noted Rick Judson. “However, ongoing issues with accessing credit and limited supplies of finished lots and labor are making it tough to do that, particularly for single-family builders.”

“Today’s report is in line with our forecast for continued, gradual strengthening of housing starts and permit activity through the rest of the year,” said NAHB Chief Economist David Crowe. “The double-digit bounce-back on the multifamily side was in keeping with typical month-to-month volatility in that sector,” he noted, “while the sideways movement in single-family was a result of unusually wet weather in the South and West.”

Regionally, combined housing starts activity posted solid gains of 40.2 percent in the Northeast, 25.4 percent in the Midwest and 7.2 percent in the West, respectively, in July, while the South posted a 7 percent decline.

Issuance of building permits, which can be an indicator of future building activity, rose 2.7 percent to a seasonally adjusted annual rate of 943,000 units in July. Single-family permits dipped 1.9 percent to 613,000 units from a strong pace in the previous month, while multifamily permits gained 12.6 percent to 330,000 units.

Interest rates will help determine if home construction continues to improve, however. They are up more than 1 percent, with 30-year fixed rate mortgage rates now 4.25 percent with a 1 point origination fee, and 30-year fixed High Balance conforming rates at 4.375 percent for 1 point.

Harlan Green © 2013

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