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Affordability and Lack of Supply Put a Dent in New Home Sales

2020 was a great year for the home building and remodeling industry. More people than ever before worked from home which helped spike the demand for homes with offices. The ability to work remotely allowed people to move away from the office and into communities that were more suitable for their lifestyle. Many people fled the cities to build homes with more space - larger lots. 

Home remodeling also flourished. Whether DIY or hiring a professional company - homeowners wanted to create a space that worked for their new normal - working from home, home schooling etc.

While the current pandemic has been a boom to the housing industry there are still concerns  - lack of supply and affordability. In this recent article from the National Association of Home Builders they report that the market remains strong after taking a bit of a dip in November. Still, affordability and supply will continue to be issues in the current climate. Continue below for the full article from the NAHB.

Affordability and Lack of Supply Put a Dent in New Home Sales

New home sales dipped in November, but remained at a solid level as builders struggled to meet demand and gain access to building materials.

Sales of newly built, single-family homes in November fell 11 percent to an 841,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Despite the monthly decline, the November rate is 20.8 percent higher than a year ago.

“Though the market remains strong, the pace of sales pulled back in November as inventory remains low and affordability concerns persist as builders grapple with a shortage of lots, labor and building materials,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla.

“The home building industry saw a historic gap between the pace of new home sales and construction of for-sale single-family housing this fall,” said NAHB Chief Economist Robert Dietz. “As a result, the pace of new home sales was expected to slow to allow construction to catch up. This appears to have occurred in November as inventory of completed, ready to occupy new homes was down 43 percent compared to November 2019 at just 43,000 homes nationwide.”

A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the November reading of 841,000 units is the number of homes that would sell if this pace continued for the next 12 months.

Inventory rose slightly to a 4.1 months’ supply, with 286,000 new single-family homes for sale, 11.2 percent lower than November 2019.

The median sales price was $335,300. The median price of a new home sale a year earlier was $328,000.

Regionally, on a year-to-date basis new home sales were up in all four regions: 28.2 percent in the Northeast, 24 percent in the Midwest, 16.9 percent in the South and 20.5 percent in the West.

Builder Confidence in the 55+ Housing Market At an All-Time High in Third Quarter

Builder Confidence in the 55+ Housing Market At an All-Time High in Third Quarter

Builder confidence continues at an all time high according to this article from the National Association of Home Builders

(NAHB) 

Builder confidence in the single-family 55+ housing market was at an all-time high in the third quarter, jumping 18 points to 83, according to the National Association of Home Builders’ (NAHB) 55+ Housing Market Index (HMI) released today.

The 55+ HMI measures two segments of the 55+ housing market: single-family homes and multifamily condominiums. Each segment of the 55+ HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic).

“We saw 55+ buyers come out in force in the third quarter of this year, driving strong growth in sales at 55+ communities,” said Harry Miller III, chairman of NAHB’s 55+ Housing Industry Council and president of Regal Builders LLC in Dover, Del. “However, shortages of key building materials are contributing to affordability concerns and delayed construction schedules, although recent declines in lumber prices offer good news.”

All three index components of the 55+ single-family HMI posted gains in the third quarter and were all-time highs: present sales increased 16 points to 88, expected sales for the next six months rose 20 points to 90 and traffic of prospective buyers jumped 23 points to 69.

The 55+ multifamily condo HMI increased 20 points to 67—a record level. All three index components also posted increases from the previous quarter: present sales rose 20 points to 70, expected sales for the next six months increased 15 points to 67 and traffic of prospective buyers jumped 24 points to 63.

All four components of the 55+ multifamily rental market went up in the third quarter: present production increased six points to 62, expected future production rose seven points to 61, present demand for existing units increased 15 points to 76 and future expected demand rose seven points to 71.

“Like the broader housing market, low interest rates and the importance of home are helping to lift market sentiment,” said NAHB Chief Economist Robert Dietz. “The rebound in the stock market has also contributed to demand for the 55+ housing market.”

For the full 55+ HMI tables, please visit nahb.org/55hmi.

Single-Family Housing Continues Growth

Single-Family Housing Continues Growth

In this recent article from the National Association of Home Builders, Single-family starts continue their strong growth.

Single-Family Housing Continues Growth

(NAHB) Single-family starts showed continued growth in August but overall housing production fell 5.1 percent to a seasonally adjusted annual rate of 1.42 million units due to a double-digit percentage decline in multifamily production, according to a report from the U.S. Housing and Urban Development and Commerce Department. The pace of single-family starts in August was the highest production rate since February.

The August reading of 1.42 million starts is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts increased 4.1 percent to a 1.02 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 22.7 percent to a 395,000 pace.

“Consistent with surging builder confidence, single-family starts rose in August to meet rising buyer traffic,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Fla. “Builders continue to face concerns in terms of rising lumber prices and supply chain shortages of other building materials.”

“Total housing starts were down in August on a decline for multifamily construction, with multifamily 5+ unit permits now down 8.3 percent on a year-to-date basis,” said NAHB Chief Economist Robert Dietz. “But low interest rates and solid demand are spurring single-family construction growth, which makes up the bulk of the housing market. Single-family permits continue to rise as well, and are now up almost 7 percent on a year-to-date basis.”

On a regional and year-to-date basis (January through August of 2020 compared to that same time frame a year ago), combined single-family and multifamily starts are 13.6 percent higher in the Midwest, 5.4 percent higher in the South, 3.8 percent higher in the West and 4.5 percent lower in the Northeast.

Overall permits decreased 0.9 percent to a 1.47 million unit annualized rate in August. Single-family permits increased 6.0 percent to a 1.04 million unit rate. Multifamily permits decreased 14.2 percent to a 434,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 2.6 percent higher in the Midwest, 4.8 percent higher in the South, 8.2 percent lower in the Northeast and 1.3 percent lower in the West.

Builder Confidence Soars to an All-Time High, Lumber Risks Remain

Builder Confidence Soars to an All-Time High, Lumber Risks Remain

Although lumber prices remain high - up 170% since April - builder confidence also remains high. In fact it is as at all time high of 83. Indicating that housing continues to lead the way in this pandemic recovery. Continue reading below for the full article from the National Association of Home Builders (NAHB).

Builder Confidence Soars to an All-Time High, Lumber Risks Remain

(NAHB) In a strong signal that housing is leading the economic recovery, builder confidence in the market for newly-built single-family homes increased five points to hit an all-time high of 83 in September, according to the latest NAHB/Wells Fargo Housing Market Index (HMI) released today. The previous highest reading of 78 in the 35-year history of the series was set last month and also matched in December 1998.

“Historic traffic numbers have builders seeing positive market conditions, but many in the industry are worried about rising costs and delays for building materials, especially lumber,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. “More domestic lumber production or tariff relief is needed to avoid a slowdown in the market in the coming months.”

“Lumber prices are now up more than 170 percent since mid-April, adding more than $16,000 to the price of a typical new single-family home,” said NAHB Chief Economist Robert Dietz. “That said, the suburban shift for home building is keeping builders busy, supported on the demand side by low interest rates. In another sign of this growing trend, builders in other parts of the country have reported receiving calls from customers in high-density markets asking about relocating.”

Derived from a monthly survey that NAHB has been conducting for 35 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All the HMI indices posted their highest readings ever in September. The HMI index gauging current sales conditions rose four points to 88, the component measuring sales expectations in the next six months increased six points to 84 and the measure charting traffic of prospective buyers posted a nine-point gain to 73.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased 11 points to 76, the Midwest increased nine points to 72, the South rose eight points to 79 and the West increased seven points to 85.

HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at https://www.nahb.org/News-and-Economics/Housing-Economics-PLUS.

A Suburban Shift for Home Building

A Suburban Shift for Home Building

Coronavirus has altered the home buying and building preferences according to this article from the National Association of Home Builders. More and more people than ever before have been forced to work from home during the pandemic. When working remotely why live in the city when you can live in less densely populated areas? 

A Suburban Shift for Home Building

Evidence of a suburban shift for consumer home buying preferences as a result of the COVID-19 pandemic can be found in the second quarter National Association of Home Builders (NAHB) Home Building Geography Index (HBGI).

“The increasing demand for construction in more suburban neighborhoods is being driven in large part by the coronavirus outbreak,” said NAHB Chairman Chuck Fowke, a custom home builder from Tampa, Fla. “The growing trend for working at home is enabling more families to choose to live in lower cost, lower density communities. Moreover, persistent housing affordability challenges exacerbated by soaring lumber prices that have added $16,000 to the price of a single-family home since mid-April are adding to the need to find affordable housing in lower cost markets.”

“The county-level second quarter HBGI data shows relative growth in lower density markets that represent half of all single-family construction,” said NAHB Chief Economist Robert Dietz.“ We saw initial evidence of this trend in the first quarter, and in recent months these markets have registered faster growth for both single-family and multifamily building, as the demand for new construction shifted to more suburban and exurban communities.”

The HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single- and multifamily permits to gauge housing construction growth in various urban and rural regions.

Small metro suburbs accounted for the fastest growing geographical areas for single-family construction during the second quarter, up 10.6 percent on a four-quarter moving average basis. This was followed by small towns (9.3 percent), small metro core areas (7.5 percent) and exurbs (5.6 percent).

Other second quarter HBGI findings show:

  • In the second quarter, single-family housing starts fell by 24 percent on quarterly basis. Of the seven regional geographies, only small metro area suburbs posted a year-over-year gain in this quarter, while the others registered declines, the biggest of which occurred in large metro core areas.
  • The market share for single-family construction in low density areas (small metro core and suburbs, small towns and rural markets) increased from 47.5 percent a year ago to 48.4 percent.
  • The fastest growing geographies for apartment construction in the second quarter were found in the exurbs, small metro suburbs and rural areas.
  • The market share for multifamily construction in low density areas (exurban areas of large metro markets, small metro core and suburbs, small towns and rural markets) increased from 32.9 percent a year ago to 34 percent.

Although the year-to-year changes in single- and multifamily market shares in low density areas are seemingly small, changes in market share are usually slow to develop. This makes a one-percentage point year-over-year gain noteworthy, when compared to recent historical data.

Single-Family Starts and Permits Post Double-Digit Gains

Single-Family Starts and Permits Post Double-Digit Gains

The home building industry continues to roar back to life following the shut down. In this recent article from the National Association of Home Builders, single family starts and permits posted double digit gains in June. Fueled in part by historic low mortgage rates and an increase demand. Continue reading below for the full article.

Single-Family Starts and Permits Post Double-Digit Gains

(NAHB), Led by solid single-family production, total housing starts increased 17.3 percent in June to a seasonally adjusted annual rate of 1.19 million units, according to a report from the U.S. Housing and Urban Development and Commerce Department.

The June reading of 1.19 million starts is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts increased 17.2 percent to an 831,000 seasonally adjusted annual rate, after an upward revision from the May estimate. The multifamily sector, which includes apartment buildings and condos, increased 17.5 percent to a 355,000 pace.

“Fueled in part by record low mortgage rates, builders are seeing solid demand for housing despite the challenges of the virus and elevated unemployment,” said Chuck Fowke, chairman of the National Association of Home Builders and a custom home builder from Tampa, Fla. "Demand is growing in lower density markets, including exurbs and small metros."

"Single-family construction is expanding off April lows due to lean inventories of new and existing homes," said NAHB Chief Economist Robert Dietz. "However, builders face challenges in growing costs, particularly rising prices for lumber."

On a regional and year-to-date basis (January through June of 2020 compared to that same time frame a year ago), combined single-family and multifamily starts are 2.2 percent higher in the Midwest, 0.2 percent higher in the South, 2.9 percent higher in the West and 5.4 percent lower in the Northeast.

Overall permits increased 2.1 percent to a 1.24 million unit annualized rate in June. Single-family permits increased 11.8 percent to an 834,000 unit rate. Multifamily permits decreased 13.4 percent to a 407,000 pace.

Looking at regional permit data on a year-to-date basis, permits are 3.4 percent higher in the South, 8.8 percent lower in the Northeast, 2.3 percent lower in the Midwest and 3.9 percent lower in the West.