Demand is high but inventory is low
Written by NAHB, About Four Years Ago
Builder testifies on ways to improve how OSHA operates.
Written by NAHB, About Four Years Ago
Total housing starts posted strong gains in January, up almost 10% to a 1.33 million seasonally adjusted annual rate.
Written by NAHB, About Four Years Ago
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January Starts, Sales Tell Different Stories
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Total housing starts posted strong gains in January, up almost 10% to a 1.33 million seasonally adjusted annual rate. Single-family construction recorded a nearly 4% rise in January, with the three-month moving average near a post-recession high. The increases in construction activity mirror solid levels for the NAHB/Wells Fargo Housing Market Index, which registered a level of 72 in February — near a two-decade high. The volatile multifamily data was up 24% in January.
Contracts for sales of newly built single-family homes disappointed in January, declining by almost 8%. However, these numbers were at odds with other reports, including ongoing housing price growth and individual builder reports of sales. But the drop matched pending sales of existing homes, which dropped 4.7 in January. Though the January new home sales data will likely be revised up, current inventory of new, ready-to-occupy homes available for sale remains tight.
The median size of new homes continues to decline as the market broadens to include more entry-level homes. The townhouse market grew 7% in 2017, while at the upper end, custom homes saw a more modest growth rate of 2%. The home building and remodeling sectors should continue to expand overall in 2018, fueled by healthy labor conditions and wage gains. The improving economy and increases in income will largely help to offset the hindrance of higher interest rates on housing demand.
–NAHB Chief Economist Robert Dietz
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It can be described in one word.
Written by NAHB, About Four Years Ago
Last week's labor market report, ostensibly showing positive news in the form of 2.9% year-over-year gains for earnings, increased volatility for stock prices as investors reassessed their outlook for market risk and interest rates.
Written by NAHB, About Four Years Ago
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Rising Rates, Higher Wages: A Counterbalance on Affordability
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Last week's labor market report, ostensibly showing positive news in the form of 2.9% year-over-year gains for earnings, increased volatility for stock prices as investors reassessed their outlook for market risk and interest rates. Wage gains are good news for rental and for-sale housing demand, but income growth without improvements for worker productivity can be inflationary.
While inflation remains tame, it is showing signs of an increase. For example, the three-month moving average annual change of core CPI is now at 2.9%, the highest since August 2011. As a result, interest rates have increased significantly over the last month, with the 10-year Treasury bond near 2.9%. Higher rates for the 10-year Treasury will push up mortgage rates, with the 30-year fixed-rate mortgage now averaging above 4.3%.
Rising rates increase the cost of buying a home with a mortgage. However, higher incomes are particularly helpful for home buyers saving for a downpayment and help counter the negative effect of higher mortgage rates on housing affordability. This environment can yield overall positive outcomes for housing, provided the wage gains are accompanied by improvement for productivity in the post-tax reform economy.
–NAHB Chief Economist Robert Dietz
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Measure contains key NAHB housing tax priorities.
Written by NAHB, About Four Years Ago
The Weekly News Digest of NAHB
Written by NAHB, About Four Years Ago
Builder confidence reached a nearly 19-year high at the end of 2017, according to the NAHB/Wells Fargo Housing Market Index
Written by NAHB, About Four Years Ago
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Housing's Strong Finish in 2017
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Builder confidence reached a nearly 19-year high at the end of 2017, according to the NAHB/Wells Fargo Housing Market Index. While the first reading of 2018 wasn't quite as high, a positive level of 72 indicates a solid amount of continued optimism. Additionally, the Remodeling Market Index showed strength, coming in at a level of 60 and marking its 19th consecutive quarter in positive territory.
While housing starts dipped slightly in December, the 2017 totals for single-family construction were positive — nearly 9% above the 2016 totals. Multifamily starts, however, were down almost 10% as that market finds a balance between supply and demand. NAHB expects single-family starts to increase nearly 5% in 2018, while multifamily starts will decline slightly.
A recent NAHB survey of builders identified the top concerns for the industry. Building material prices and labor costs/availability were cited by 84% of builders as significant problems they expect to face in 2018. The next most commonly cited challenge was the cost/availability of lots, referenced by 62% of builders. Despite these obstacles, the industry continues to expand, adding 86,400 jobs over the last year as housing demand continues to rise.
–NAHB Chief Economist Robert Dietz
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Confidence among builders at the end of 2017 reached its highest measure in more than 18 years. Much of that optimism is due to tight existing home inventory, a solid economy with low unemployment, and an improving policy environment that offers hope for reduced regulatory burdens.
Written by NAHB, About Four Years Ago
January 4, 2018
Builders Start the New Year Filled with Optimism
Confidence among builders at the end of 2017 reached its highest measure in more than 18 years. Much of that optimism is due to tight existing home inventory, a solid economy with low unemployment, and an improving policy environment that offers hope for reduced regulatory burdens.
Census estimates of home construction also helped fuel the rise in builder confidence. By November, single-family starts were up 9% on a year-to-date basis, and sales of new single-family homes had increased 17.5% from the month prior — reaching the fastest sales pace in more than 10 years. Growth for residential construction is expected to continue, as a growing share of new homes are being sold from the "not under construction" class.
However, supply-side headwinds will continue to hamper housing in 2018, as will the tight labor market and rising prices for materials. The Federal Reserve will continue to increase interest rates, which will slowly reduce housing affordability, though that impact will be offset by increases in after-tax income. Some markets — particularly high-tax/high-cost markets in coastal areas — will experience some negative effects due to tax law changes. But from a national perspective, single-family construction will continue to expand.
NAHB Chief Economist Robert Dietz
Starts and Sales
New Home Sales Hit Post-Recession High in November
All regions of the U.S. reported growth, led by a 30% uptick in the Northeast.
Existing Sales Surge in November
Year-end rally leads to the most sales since December 2006.
Private Residential Spending on the Rise
Single-family construction spending increased to its highest annual rate in a decade.
Permit Volume Grows in Most States
State-by-state comparisons show Texas atop most lists of permits issued.
Strong Estimates for Single-Family Starts
The rise in starts aligns with increased builder confidence.
Industry Insights
Housing Market Primed to Expand in 2018
Builders enter year with high hopes for improved regulations.
Number of Hispanic Construction Business Owners Rises
Every age group saw growth between 2007 and 2012.
Homeownership Rate Increases
NAHB analysis shows more minorities are buying homes.
NAHB Economics Presentations to Attend at IBS
Several industry experts will offer analyses of what to expect in 2018.
Construction Trades Can Often Lead to Higher Paying Jobs
Study finds eight senior positions in home building typically filled by someone with trade experience.
Economic Indicators
Economic Growth Exceeds Potential in 3rd Quarter
It was the fastest growth rate since the first quarter of 2015.
Consumer Spending Up, Savings Rate Down
Disposable income rose for three consecutive months.
Housing Share of GDP Declined in 3rd Quarter
Home building and remodeling component held steady.
Home Prices Continue to Increase in October
Price appreciation continues to impact housing affordability.
After a mild 2016, economic growth gained momentum in 2017.
Written by NAHB, About Four Years Ago
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Housing's Growth Tempered by Tight Labor, Costly Materials
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After a mild 2016, economic growth gained momentum in 2017. New jobs continue to be produced and unemployment (4.1%) is low. While this is positive news for housing demand, the unceasingly tight labor market conditions mean increased competition among employers for a smaller number of available workers. This is one of the reasons the construction industry continues to see an elevated number of open jobs: 227,000 in October, near a post-recession high. It also implies additional wage growth in the year ahead.
Builders can also expect continued growth in the cost of building materials. Since the beginning of the year, OSB prices have jumped 30%, softwood lumber prices are up almost 15% and gypsum prices have increased almost 8%. Additional building material supply is needed as the home building sector grows. However, duties imposed on Canadian softwood lumber of almost 21% accomplish the opposite of what the industry and home buyers need. NAHB estimates that the tariff on lumber imports alone is responsible for a nearly 7% price increase and has already driven up the price of a new home by an average of $1,360.
–NAHB Chief Economist Robert Dietz
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The latest economic news from NAHB
Written by NAHB, About Four Years Ago
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Rising Starts and Sales Indicate More Gains Ahead
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October was a good month for housing. Single-family and multifamily housing starts rose by almost 14%. Single-family starts (877,000) are at a post-recession high and have grown 8% on a year-to-date basis compared to last year.
And rising home sales indicate more gains are in store for residential construction. Existing home sales expanded 2% in October, while inventory fell for the 29th consecutive month to only a 4.4 months' supply. Newly built single-family homes sales rose 6% last month, recording its strongest reading in a decade.
At this sales pace, there is only a 4.9 months' supply of new homes available. Moreover, a rising share of new home sales is coming from homes that have not yet begun construction, pointing to additional gains for construction in the near term.
–NAHB Chief Economist Robert Dietz
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Written by NHAB, About Four Years Ago
Tax and Monetary Policy Impacts on Housing
Tax reform is the big debate in Washington, and the stakes are high. Certain components of the proposals would sideline and limit the mortgage interest and real estate tax deductions — two major factors in determining the costs and incentives of homeownership. Other elements of the proposals would provide reductions in small business and corporate tax rates and, due to NAHB advocacy efforts, protect the business interest deduction for real estate development firms.
Side-by-side, the Senate plan is much better for housing. It offers more generally favorable treatment for S Corps and LLCs due its rate schedule and more usable 17.4% pass-through business income deduction, while also protecting important affordable housing policies like the LIHTC and the tax-exempt bond program.
Change is also coming for monetary policy. Federal Reserve Governor Jerome Powell has been nominated to replace Federal Reserve Chair Janet Yellen, whose term ends in February. Powell is an excellent choice for the housing sector and will likely maintain the Fed's current approach to monetary policy with gradual interest rate increases and balance sheet reductions.
Given current market challenges — highlighted by recent reports concerning ongoing labor shortages, declining housing affordability and lagging single-family construction — tax reform and monetary policy should promote economic growth while recognizing the important role the housing industry plays in the overall economy.
NAHB Chief Economist Robert Dietz
Written by NAHB, About Four Years Ago
After a slow start to the year, economic growth accelerated in the spring. According to the Bureau of Economic Analysis, GDP growth stepped up to a 2.6% annual rate in the second quarter, a significant improvement over the 1.2% rate registered for the first three months of 2017. NAHB forecasts the economy's modest growth will continue over the near term.
Written by NAHB, About Four Years Ago
Economic Growth Picks Up the Pace
After a slow start to the year, economic growth accelerated in the spring. According to the Bureau of Economic Analysis, GDP growth stepped up to a 2.6% annual rate in the second quarter, a significant improvement over the 1.2% rate registered for the first three months of 2017. NAHB forecasts the economy's modest growth will continue over the near term.
The homeownership rate is finally showing signs of stabilizing after years of decline. Census Bureau data for the second quarter showed a homeownership rate of 63.7%, after reaching a cycle low of 62.9% during the second quarter of 2016. Moreover, the Census data also showed that for two consecutive quarters, the U.S. housing market has added more home owners than renters.
Demand for owner-occupied housing will depend on the future of the labor market, which continues to be tight. Over the last two months, the economy has added an estimated 440,000 jobs. The residential construction labor force continues to expand, but at a slow pace. In the last 12 months, home builders and remodelers added 188,300 jobs. However, the count of open, unfilled construction sector jobs increased in June to 225,000 — the highest count since September 2016.
NAHB Chief Economist Robert Dietz
Industry Insights
Number of Open Construction Jobs Climbs
After declining in the previous month, unfilled jobs increased significantly in June.
Homeownership Rate Bottomed Out?
Census data show signs of stabilization after reaching a low point one year ago.
Pending Sales Break Losing Streak
Fewer investors meant first-time buyers had a better chance to enter the market.
Builder Confidence Strengthens in the 55+ Housing Market
Optimism has remained solid for three consecutive years.
Top 10 Sources of Softwood Lumber Imports
Financial incentives are growing for foreign companies to export their lumber to the U.S.
Economic Indicators
Economic Improvement Continues Across the Country
Since the first quarter of 2017, an additional 20 metro areas have achieved normal market activity.
Federal Open Market Committee Plans to Shrink Balance Sheet
Measures aim to "foster maximum employment and price stability."
Personal Income and Consumption Expenditures Flatten
The leveling off comes after six consecutive months of growth.
Solid Job Gains in July
The unemployment rate dropped back to its 16-year low of 4.3%.
Lending and Spending
Loan Officer Survey Reveals Easing Lending Standards
The recent findings can serve as reliable indicators of future economic growth.
FHA Financing of New Home Sales Dwindles
The share of FHA-backed mortgages dropped below 12% for the first time since 2014.
Mortgage Rates Tick Up on New Home Purchases
Rates are still below the peak of 4.18% recorded in February.
Private Residential Construction Spending Dips
June was the third consecutive month of decreases after a strong start to the year.
NAHB to weigh in on what rules need to be rescinded or modified.
Written by NAHB, About Four Years Ago
Despite growing supply-side concerns, housing demand continues to be sustained by healthy job creation and optimistic consumers.
Written by NAHB, About Four Years Ago
Job Growth Helps Propel Housing Demand
Despite growing supply-side concerns, housing demand continues to be sustained by healthy job creation and optimistic consumers. The Bureau of Labor Statistics reported that 220,000 jobs were created in June, with the unemployment rate increasing slightly to 4.4%. Moreover, home builders and remodelers added almost 116,000 jobs over the last 12 months.
Ongoing job creation has also helped support consumer optimism. The Consumer Confidence Index was up slightly in June, with one submeasure increasing to nearly 33% of respondents indicating jobs are plentiful. Incomes are also rising, with disposable personal income up 2.2% over the last year.
Economic challenges remain anchored on the supply side of the market, with a new softwood anti-dumping duty — in addition to existing countervailing duties — adding to builder costs. Moreover, the share of single-family home builders reporting shortages of framing lumber has increased to 21%.
For a midyear housing and economic market check, watch our construction forecast webinar, featuring NAHB's forecast and commentary from Moody's Mark Zandi and NAR's Danielle Hale.
NAHB Chief Economist Robert Dietz
Industry Insights
Builders Reporting Shortages of Framing Lumber
Ready-mix concrete and trusses are also increasingly in short supply.
Open Construction Jobs Decline in May
The labor market for construction workers remains tight as home building expands.
Lending and Spending
Residential Fixed Investment Reaches Near-Decade High
Housing's share of GDP holds strong.
Private Residential Construction Spending Declines
The drop in May was the largest in three years.
Mortgage Rates Fall Again
Rates have slipped 18 basis points during the past three months.
Economic Indicators
Employment Gains Accelerated in June
Over the last year, home builders and remodelers have added 115,600 jobs.
Steady Growth in Personal Income
Disposable income in May had the largest monthly increase in two years.
How a Home Purchase Boosts Consumer Spending
NAHB analysis compares expenditures of new home buyers to non-moving home owners.
A compilation of the week's top housing news.
Written by NAHB, About Four Years Ago
ECONOMIC NEWS
Marketplace
Tight inventory slows down housing market
Vancouver, Washington, a bedroom community across the Columbia River from Portland, Oregon, has seen its inventory of homes for sale shrink as the housing market picked up after the Great Recession and available homes got snapped up. First-time home buyers and others looking for affordable homes see the area as an alternative to Portland, where rents and home prices have soared in recent years.
HousingWire
Not even housing inventory crisis can stop homebuyers
It seems nothing can stop housing demand, which just hit a new high, according to Redfin, an online real estate brokerage.
MarketWatch
Home-price growth sizzles in May, driving a wedge in the market
Home prices remained hot in May, bolstering owners' equity but locking many would-be buyers out of the market.
CNBC
Mortgage applications rise 1.4%, defying higher rates
The math doesn't exactly make sense, but perhaps the sentiment does. More borrowers applied for home loans last week, even as interest rates made their largest five-day jump since just after the presidential election. Perhaps some thought it might be their last chance at low rates.
NPR
Why isn't the housing market booming the way experts expected?
Interest rates are near historic lows and consumer confidence is high, but the market isn't booming. One reason may be mobility: people moving from state to state is half what it was two decades ago.
AFFORDABLE HOUSING
The Washington Post
Trump's budget plans have already cut financial support for low-cost housing
The pool of private funds available to build or preserve affordable housing in the United States has shrunk by about $1 billion since November, and President Trump's tax plan is to blame — even though it hasn't been adopted yet.
NPR
Affordable housing market hurt by tax overhaul uncertainty
The prospect of Trump's tax overhaul has cut the value of low-income housing tax credits 10 to 15 percent. Funding for units across the U.S. is in question, and less housing will be built as a result.
The Washington Post
A surprising way to increase property values: build affordable housing
Despite the lawsuits, media spotlight and conventional wisdom, affordable housing developments built in poor, heavily black communities can lead to greater racial and income integration, according to new research by Stanford economists.
USA Today
Housing help for Congress? How about for people who really need it?
Just before he departed the House last week to become a Fox News contributor, Utah Republican Jason Chaffetz proposed a housing stipend for members of Congress. "I think a $2,500 housing allowance would be appropriate and a real help to have at least a decent quality of life in Washington," he said. "You shouldn't have to be among the wealthiest of Americans to serve properly in Congress."
HOUSING FINANCE NEWS
National Mortgage News
'If not now, when?' Fed's Powell on GSE reform
Federal Reserve Gov. Jerome Powell, who heads the agency's supervisory committee, called on lawmakers Thursday to move more quickly in crafting legislation to reform the government-sponsored enterprises, saying that "we're almost at a now-or-never moment here." (Subscription may be required.)
American Banker
Will housing finance reform hurt small banks?
The battle over the future of housing finance may turn on whether whatever reforms or replaces Fannie Mae and Freddie Mac will bypass small banks, delivering more market share and power to the biggest banks. (Subscription may be required.)
CNBC
Two major lending changes mean it's suddenly easier to get a mortgage
Two major changes in the mortgage market go into effect this month, and both could help millions more borrowers qualify for a home loan. The changes will also add more risk to the mortgage market.
REMODELING
U.S. News & World Report
The pros and cons of live-in home flipping
Mindy Jensen and her husband Carl have made up to $100,000 every two years by buying a house, fixing it up while living in it full time and then selling it for a profit. Call it live-in flipping.
Las Vegas Review-Journal
Universal design makes homes accessible and pleasing
In our 40s, we've accepted the aches and pains that remind us we're no longer 25. That said, the last thing we want to think about is how our health might look in our 60s and 70s, much less what living accommodations we might need to handle our changing physical abilities.
HOUSING POLICY
Politico
Why Washington can't fix the new housing crisis
Donald Trump campaigned on restoring the "American dream," a 1931 metaphor for economic success that has become political shorthand for homeownership. But as president, Trump faces a unique challenge delivering on that promise: The country is in the grip of a new kind of housing crisis that Washington has virtually no power to solve.
LABOR
Construction Dive
Labor Dept. plans revision of stalled overtime rule
The U.S. Department of Labor has asked the U.S. Court of Appeals for the Fifth Circuit to confirm that it is permitted to use salary as a factor in determining which workers are eligible for overtime before it begins a new rulemaking process to amend a pending overtime regulation, according to Bloomberg BNA.
APPRAISALS
Forbes
Appraisers may be holding back the housing market, and that might be okay
I want to warn you from the top, this is a highly speculative post in multiple directions at once. I have a theory as to what is holding back the housing market, and another theory as to why that might be a good thing. There isn't a lot of data to back up either claim, and I wouldn't elevate other above conjecture at this point. But stick with me anyway.
A tightening labor market and a desire to normalize monetary policy led the Federal Reserve's monetary policy committee to tighten financial conditions.
Written by NAHB, About Four Years Ago
Federal Reserve Policy Moves
A tightening labor market and a desire to normalize monetary policy led the Federal Reserve's monetary policy committee to tighten financial conditions.
First, the Federal Open Market Committee announced the second rate hike of 2017, increasing the target rate to a range of 1%-1.25%. NAHB expects one additional increase in 2017.
Second, the committee announced plans to reduce its balance sheet, which grew after the Great Recession as part of an accommodative policy known as quantitative easing. The balance sheet, which includes $1.8 trillion in agency debt and mortgage-backed securities, would be reduced in a "gradual and predictable" manner, creating only a slight increase in mortgage rates. The reductions in mortgage-backed securities would start at $4 billion and rise to $20 billion per month over a 12-month period and not result in a complete run-off of holdings. This process would likely begin at the end of 2017.
The Fed's actions are motivated by admittedly conflicting data. Measures of inflation remain below the Fed's 2% objective, but tight labor market conditions risk accelerating prices. For example, the unemployment rate was 4.3% in May and job openings persist at elevated levels, especially within the construction industry. The Fed's moves represent a belief that economic conditions continue to be solid and growth will continue.
NAHB Chief Economist Robert Dietz
Lending and Spending
Fed Raises Rates, Announces Balance Sheet Reduction Plan
The announced policy is intended to be "gradual and predictable."
Softwood Lumber and OSB Prices Keep Climbing
May's increase pushed the softwood lumber price index to its highest level in nearly 13 years.
Private Residential Construction Spending Slows in April
Declines largely stem from both the multifamily and home improvement sectors.
Home Equity Grows to $23.5 Trillion
More home owners are refinancing to cash out.
Mortgage Rates Fall
Though they remain above the low of 3.54% set in October 2016.
Economic Indicators
Consumer Credit Expands at a Slower Pace
Total household debt has returned to its 2008 peak level.
Pending Sales Slump
April declines were reported in all regions of the U.S. except one.
Employment Situation is Just a Little Disappointing
May's report is unlikely to alter the Fed's overall positive economic impressions.
Consumer Confidence Slightly Decreased in May
Optimism waned for the near-term outlook.
Industry Insights
Regional Patterns Emerge for Age of Construction Workers
Median ages are highest throughout the Northeast, lowest in the Midwest.
Who are NAHB's Associate Members?
Census illustrates the categories of those who are indirectly involved in home building.
Construction Job Openings Jump in April
Recent increases in quits reflect growing competition for workers.
Home Price Appreciation Slowed in March
Since November 2016, prices have been decelerating.
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