The Headlines: September 22, 2017

Ten Home Building industry stories we have read recently:

• Senior loan officer survey as a barometer of the economy (it shows an easing of lending standards). Eye on Housing.
• NAHB applauds President Trump's order rescinding overreaching flood standard.  NAHB Now. 
• Why Americans are shunning new homes and opting to stay put, renovate instead (average length of home ownership up from 6 years to 15 years).  Chicago Tribune.
• Home equity used to start seven percent of U.S. businesses.  Eye on Housing.
• New single-family homes getting smaller (down to 2,388 square feel).  NAHBNow.
• New silica rules go into effect September 23.  NAHBNow. 
• Home sales on the rise in the Upstate (July to August, Greenville is up 7.8 percent, Spartanburg is up 12.3 percent).  GSA Business. 
• EPA waives lead pain requirements for certain renovations (emergency renovations after a disaster).  NAHBNow.
• New generation of young home buyers is tiptoeing into the market.  Los Angeles Times.
• More floods are coming, but smarter policies can limit costs, damage (op ed by former Charleston Mayor Joe Riley).  Miami Herald.

Did you know?  According to Greenville County administration, 96 subdivisions defaulted on their stormwater permits during the real estate crisis.

September 22, 2017

The Headlines: September 14, 2017

Ten Home Building industry stories we have read recently:

• New FHA multifamily mortgage insurance applications halted in Texas disaster areas (expect delays in processing applications across the country). NAHBNow. 
• How local housing regulations smother the U.S. economy (and affordable housing). New York Times.
• Co-borrowing to afford a home is gaining popularity.  Who's doing it and why?  MarketWatch.
• Hurricanes Irma, Harvey boost call for flood insurance (renewal of the program).  Orlando Sentinel.
• 70 percent of Harvey residential flood damage not covered by insurance.  National Mortgage News.
• A devastating hurricane season exposes America's flood insurance problem (Senator Tim Scott is quoted).  Time.
• Labor shortage could hamper Harvey reconstruction.  Houston Chronicle.
• The last big piece of unfinished business from the Great Recession (Fannie and Freddie).  The Washington Post.  
• Top ten sources of softwood lumber imports (in short, Canada laps the field).  Eye on Housing.
• Baby Boomers who refuse to sell are dominating the housing market (55 percent of owner-occupied housing is owned by people 55 years and older, the highest in history).  Bloomberg.

Did you know?  25 percent of all flood insurance policies in the U.S. are written in the state of Florida.

September 14, 2017.

The Headlines August 18, 2017

Ten Home Building industry stories we have read recently:

• Affordable housing shortage challenges working-class Spartanburg residents.   Spartanburg Herald-Journal.
• How other cities are tackling affordable housing.  Spartanburg Hearld-Journal.
• Home building slowed as cities try to tame growth.  USAToday.
• Mauldin among the easiest places in South Carolina to sell a home.  SmartAsset.
• Lumber shortages encumber more builders.  NAHBNow.
• A Conversation with Grover and Tonya Martin, Owners, ProSource.  UpstateBizSC.
• Builders starting to report shortages of framing lumber.  Eye on Housing.
• Mortgage rates fall again.  Eye on Housing.
• How a home purchase boosts consumer spending.  Eye on Housing.
• NAHB Chair elected to Federal Home Loan Bank of Dallas Board.  NAHBNow.

August 18, 2017.

The Headlines: July 27, 2017

Ten Home Building industry stories we have read recently:

• When builders and Postmasters disagree. NAHBNow.
• Treasury examines burdensome tax regulations with eye to repeal. NAHBNow.
• New home sales rise by 2.9 percent in May. Reuters.
• Existing home sales rebound in May despite record-low supply. MarketWatch.
• Five years ago, Trump made a prediction on Twitter about housing. He nailed it. The Washington Post.
• More than half of U.S. renters can't afford a mortgage. MarketWatch.
• Could the housing market meltdown happen again? Investors Business Daily.
• Community banks account for nearly half of residential construction loans. Eye On Housing.
• Want a $1 million paycheck? Skip college and go to work in a lumberyard. Bloomberg.
• Top 5 mobile apps for Home Builders. NAHBNow.

July 27, 2017

More Slab Foundations, Two-Story Homes Still Dominate

 Information obtained from the public-use microdata files provided by the U.S. Census Bureau’s Survey of Construction and tabulated by the National Association of Home Builders, shows that there is a greater share of two or more story homes completed than one story homes. In addition, the greatest share of two or more story homes are in divisions along the coasts of the country. Analysis of the data shows that the Northeast region has a significantly higher proportion of two or more story single-family home completions compared to its counterparts across the country. Similarly, the Pacific Division, a component of the West Region, also has a noticeably higher proportion of two or more story homes completed.

The Survey of Construction is a monthly and annual report released by the US Census Bureau that records valuable information related to the home building industry. This information includes variables such as start and completion dates, sales price, square footage and number of bedrooms. Survey of Construction data is used by the Department of Housing and Urban Development to evaluate housing programs as well as by the Federal Reserve Board to determine the state of the economy as a whole.



Nationwide, the majority of single-family homes completed in 2015 were two or more stories, 58%, the rest, 42%, were one story. The data show that the Northeast has the largest proportion of completed two or more story single-family homes. The distributions between one story and two or more story completed homes are similar in the South and the West. In the South, 57% of completed single-family homes were two or more stories and 43% were one story while in the West, 59% of completed single-family homes were two or more stories and the rest, 41%, were one story. The Midwest was the only region of the country where the majority of single-family completed homes were one story.

In contrast to the nationwide distribution between one story and two or more story completed homes, arecent National Association of Home Builders report chronicling consumers’ housing preferences finds that most, 64% of all buyers, would prefer a single-story home, however it is important to point out that this result is driven primarily by older buyers that may be exhibiting a preference for single-story homes due to aging-in-place concerns. According to National Association of Home Builders' Housing Preferences of the Boomer Generation, 75% of boomers and 88% of seniors want one floor living, but fewer than half of millennials, 35%, and generation X’ers, 49%, prefer a one story home.



Looking deeper, the similarities between the West and the South mask differences between the Census divisions that compose each region. While overall, 59% of single-family completed homes in the West were two or more stories, 69% were two or more stories in the Pacific Division while fewer than half, 47% were two or more stories in the Mountain Division. Similarly, while 57% of single-family completed homes were two or more stories across the entire South region, 66% of completed homes in the South Atlantic were two or more stories. In contrast, fewer than half of completed homes in the West South Central division were two or more stories. In the East South Central 58% of homes were two or more stories.

The map below illustrates how two or more story homes account for the largest portion of completed homes in coastal divisions of the country, New England, Middle Atlantic, South Atlantic, and Pacific. The high share of two or more story completed homes in the Northeast, encompassing the New England and Middle Atlantic divisions, may partly reflect expensive lot values. Recent National Association of Home Builders analysis found that median lot values in the New England and Middle Atlantic divisions far surpasses lot values elsewhere in the country. At the same time higher density and land constraints may also have contributed to a higher proportion of two or more story homes across coastal divisions.

Lots in 2015 are Smallest on Record

The median lot size of a new single-family detached home sold in 2015 dropped under 8,600 square feet for the first time since Census Bureau’s Survey of Construction started tracking the series.

An acre is 43,560 square feet, so the current median lot size is just under one-fifth of an acre. In 2014, Paul Emrath used a football field analogy to help visualize the median lot size that proved to be very popular. So using a football field as a measuring stick, 5.6 median lots would fit between the goal lines of a football field in 2015.

While nation’s lots are getting smaller on average, the regional differences in lot sizes persist. Looking at single-family (attached and detached) speculatively built (or spec) homes started in 2015, the median lot size in New England exceeds half an acre. This is 2.6 times larger than the national median lot.

New England is known for strict local zoning regulations that often require very low densities. Therefore, it is not surprising that more than half of single-family spec homes started in New England are built on some of the largest lots in the nation, with more than half of the lots exceeding half an acre.

The East South Central Division comes as a distant second with the median lot occupying less than a third of an acre. The Pacific division where densities are high and developed land is scarce has the smallest lots, with half of the lots being under 0.15 acres. The neighboring Mountain and West South Central Divisions also report typical lots smaller than a national median, 0.17 and 0.16 acres, respectively.

The analysis above was limited to single-family speculatively built homes. Custom homes built on owner’s land with either the owner or a builder acting as the general contractor do not involve the work of a professional land developer subdividing a property. Therefore, in case of custom homes, lots refer to owner’s land area rather than lots in conventional sense. Nevertheless, the SOC reports lot sizes for custom homes and shows that they tend to have larger lots. The median lot size for custom single-family homes started in 2015 was exactly one acre.

For this analysis, the median lot size was chosen over average since averages tend to be heavily influenced by extreme outliers. In addition, the Census Bureau often masks extreme lot sizes and values on the public use Survey of Construction dataset making it difficult to calculate averages precisely but medians remain unaffected by these procedures.

Builders Build More Homes

Good news for those in the home building industry--NAHB's Eye on Housing blog reports that home building continues to grow.

Housing starts for the month of September rose 6.5% to an eight year high of 1.206 million units on a seasonally-adjusted annual basis. The increase was all in the multifamily sector, rising 18.3% to 466,000. Single-family starts were virtually unchanged at 740,000. This is the first month total starts passed the 1.2 million mark since October 2007.

The trends in both are more apparent on a quarterly or year-to-date basis that smooths some of the monthly irregularities inevitable in sample data. Single-family starts averaged 746,000 for the third quarter, up 5.7% from the second quarter. Multifamily starts averaged 418,000 for the third quarter, down 7.3% from the second quarter. On a year-to-date basis, both increased: single-family starts are up 11% from the same period in 2014 and multifamily starts are up 13.8%. These averages provide a clearer picture of the steady increase in housing construction that we have been experiencing for several years.

Permits were down 5% but that change was also due entirely to the multifamily sector. Single-family permits were virtually unchanged at 697,000 while multifamily permits fell 12.1% to an annualized rate of 406,000. Multifamily permits accelerated in June as builders drew permits to beat new regulatory deadlines and builders are working off that inventory. On a year-to-date basis, the trends are more informative with single-family increasing 9.4% and multifamily up 18.8%.

The smoothed trends tell the same story: single-family production continues to move forward at a modest pace as more current home owners feel comfortable selling their existing home and buying a new one. Younger, newly formed households continue to move out of their parents or roommate living arrangements and rent an apartment driving up the demand for more rental units. NAHB expects this same trend to continue into 2016.

Americans Spent $150 Billion on Home Improvements and Repairs in 2013

U.S. home owners have significantly cut down on the amount of money they spend improving and repairing their homes, reports NAHB economist Rose Quint in a recent Eye on Housing blog post.

Home owners spent about $150 billion on home improvements and repairs in 2013, according to NAHB analysis of the most recent data from the American Housing Survey(AHS). The AHS is conducted every other year by the Census Bureau and sponsored by HUD.

The $150 billion in total remodeling expenditures in 2013 was 34% less than in 2007 ($227 billion), 19% less than in 2009 ($186 billion), and 16% less than in 2011 ($178 billion).

The AHS data also reveals total expenditures by job type. View the Eye on Housing blog post for full details.

Home Construction Rebounds in July

After a disappointing June report, housing starts rebounded to an annual rate of 1.093 million for a 15.7% increase over the upwardly revised June level. The substantial June dip, caused by a fall in single-family construction in the South, was eliminated as single-family construction rose 8.3% with increases in three of the four regions. Midwest single-family starts were down 6.8% to a 109,000 rate, but remain at about the same level as the second quarter average.

The Census and HUD data also indicated that multifamily starts increased to a 437,000 annual rate, the highest since February 2006. This increase was also spread across three of the four regions. Rental demand should continue to be strong, with recent CPI data and NAHB calculations showing inflation-adjusted rents up 1.4% over the last 12 months.

July’s home construction rebound mirrored rising home builder confidence. The August NAHB/Wells Fargo Housing Index rose two more points to 55, approaching the 2014 high in January of 56. All three index subcomponents also increased. Expectations for the next six months increased by two points to 65, the highest since August 2013 and the index for traffic rose three points to 42, the highest since December 2013. The current sales index rose two points to 58.

A key question going forward is the degree to which the mix of buyers may change. The share of first-time home buyers remains weak, with a May NAHB survey showing only a 16% market share, compared to 25% to 28% between 2001 and 2007.

One consequence of this mix of buyers has been a rising trend in new single-family home size. However, this increase appeared to cool during the second quarter. Census data and NAHB analysis indicate that the median new single-family home size was 2,478 square feet, unchanged from the first quarter but 18% higher than cycle lows. More first-time buyers in the future will hold back growth in median new single-family home size.

Builder confidence in the single-family 55+ housing market was up again on a year-over-year basis in the second quarter, according to NAHB’s 55+ Housing Market Index. Compared to the second quarter of 2013, the 55+HMI for new single-family housing increased three points to 56–the highest second-quarter reading since the inception of the index in 2008 and the 11th consecutive quarter of year-over-year gains. One of the factors contributing to the positive outlook for new single-family 55+ housing is the slow but steady increase in existing home sales in the last three months.

The NAHB/First American Leading Markets Index advanced one point in the second quarter of 2014 to .89 from a June level of .88. The index measures the nation’s and 351 metropolitan markets’ proximity to normal economic and housing market activity. A value of one or more means the market is back to or above a normal level with an average of three components at or above one: single-family housing permits, house prices and employment levels. Over one-third (36%) of the metropolitan areas measured improvement since June and 78% of them improved since August 2014.

Consumer debt positions continue to improve, which should be a net positive for housing demand. Mortgage Bankers Association data indicate that mortgage delinquencies decreased to a seasonally adjusted rate of 6.04% at the end of the second quarter, 92 basis points below a year prior. And while total consumer credit, including auto and student loans, has expanded (by $62 billion in the second quarter), consumer debt service ratios remain low despite disappointing income growth.

However, home price gains, which improved consumer balance sheets, have taken a small toll on housing affordability. The NAHB/Wells Fargo Housing Opportunity Index reached a level of 62.6 for the second quarter, meaning 62.6% of new and existing homes sold during the quarter were affordable to a family earning the U.S. median income of $63,900—down from the first quarter reading of 65.5.

Besides housing demand concerns, recent industry headwinds have included rising building material prices and scarcity. July producer price index data from the Bureau of Labor Statistics reveal that softwood lumber prices declined from June but remain above late 2013 prices. OSB prices dipped in July and added production capacity has kept price pressures in check. Gypsum prices are below 2014 highs but remain above their 2006 housing boom peak.

This more positive news concerning material prices matches a July NAHB industry survey that shows that shortages of key building materials have eased in 2014. Only 15% of builders reported some or serious shortages of trusses or clay bricks, the highest incidence among the more than 20 materials builders were asked about. Fourteen percent reported shortages of windows and doors, gypsum wall board, and cabinets.

Nonetheless, other headwinds persist. The count of unfilled construction sector jobs increased in June to 127,000, the fourth highest tally since the end of the recession. The number of job openings has grown significantly since 2011 as the housing industry has recovered. Since the point of peak job losses during the recession, the industry has added more than 301,000 jobs and the unemployment rate has fallen from 22% to 8.8% in July.

In analysis news, NAHB economists recently examined some of the consequences and factors determining homeownership for immigrant households. Analysts also looked at Census data concerning how people commute to work. The estimates show that from 2000 to 2012, the largest increases in total commuting were for driving alone, with working at home coming in second. Carpooling was down. Finally, NAHB examined recent global home price data.

Housing Production on Upswing, Tops 1 Million in July

Fueled by strong single- and multifamily growth, housing starts rose 15.7% to a seasonally adjusted annual rate of 1.093 million units in July, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is the highest number since November 2013.

“A return to production levels over one million confirms consumer confidence continues to improve,” said Kevin Kelly. “Propelled by a healthier economy, more and more people are feeling ready to buy a home.”

Single-family housing starts were up 8.3% to a seasonally adjusted annual rate of 656,000 units in July, while multifamily production jumped 28.9% to 437,000 units. Multifamily production has not been this high since February 2006.

Regionally in July, combined single- and multifamily housing production rose in the Northeast, South and West, with respective gains of 44 percent, 29 percent and 18.6 percent. Total production fell by 24.8 percent in the Midwest from an unusually high June level.

Issuance of building permits registered an 8.1 percent increase to a seasonally adjusted annual rate of 1.052 million units in July. Multifamily permits rose 21.5 percent to 412,000 units while single-family permits increased by 0.9 percent to 640,000 units.

The Northeast, South and West registered overall permit gains of 18.8 percent, 9.6 percent and 7.2 percent, respectively, while the Midwest posted a 0.6 percent loss.

Average Impact Fee in South Carolina: $6,555

Did you know that the average impact fee assessed on a new home in South Carolina is $6,555?  Read the full article at Eye On Housing by clicking here.  According to NAHB, most of that fee is assessed for water and sewer services.  Click here to read the full report.

Economic Outlook - January 2014

Economic Outlook is a monthly review of economic and housing statistics and housing policy issues. It is a digest of selected posts from Eye on Housing, a blog featuring news and analysis from NAHB Chief Economist David Crowe and Senior Economist Joshua J. Miller.

Recent economic and housing market data suggests the long-run recovery is back on track after a brief pause. Many indicators show improvements over the prior month data which was impacted by a partial government shut-down. Moving into 2014, consumers and builders expect conditions to improve while uncertainty persists in the labor market.

Although new home sales declined slightly from an unusually high October, housing starts bounced back in November. According to the Census Bureau and HUD, single-family starts rose to 727,000, the highest level since December 2007. Multifamily starts increased 26.8% over October. The Census Bureau’s latest release shows the number of homes under construction has now increased for 27 months in a row.

Pending home sales ticked up in November. According to the National Association of Realtors (NAR), the Pending Home Sales Index (PHSI) ticked up 0.2% in November. The month-over-month increase in the PSHI follows two months of decline.

Broader economic indicators also showed improvement. The Bureau of Economic Analysis (BEA) revised upward the annual seasonally adjusted real GDP growth rate to 4.1%, the highest reading in seven quarters. The unemployment rate declined to 7.0%, although the result was likely skewed by the misclassification of furloughed federal government workers in October.

Builders expressed confidence in buyers returning to the market after a drop in October and November. Builder confidence rose by four points in December to 58. An index above 50 indicates more builders see improvement than not.

Although builders remain optimistic, concerns persist as skilled labor remains in short supply. The number of construction sector job openings reached a five year high in October at 124,000. The inability of home builders to hire qualified labor remains a top concern.

The Federal Housing Finance Agency (FHFA) reported a decline in mortgage interest rates for both new and existing homes. According to the FHFA’s Monthly Interest Rate Survey (MIRS), the November data shows a 6 basis point decline in the average contract interest rate on loans to purchase newly-built homes.

The decline in mortgage interest rates may be short lived. The Federal Open Market Committee (FOMC) concluded the December meeting announcing it would begin winding down its asset purchase program. The decision to slow the asset purchase program should pass through to longer-term mortgage rates.

In analysis news, our economists examined the implications for builders of another tax proposal published by Senate Finance Committee. The most recent proposal proposes changes tax code rules concerning energy production and energy-efficient improvements. The proposal would replace most existing energy tax incentives with two credits favoring energy production at the expense of energy conservation and retrofitting.

Our economists also examined the impact of a decline in loan limits for mortgages back by the Federal Housing Administration (FHA). Stimulus legislation set to expire January 6, 2014 reduces the cap from $729,750 to $625,500 and the factor translating local home prices to an applicable limit from 125% to 115%. NAHB’s analysis indicates 408 counties will experience a loan limit decrease in excess of 10% if the legislation is allowed to expire. NAHB joined a number of other housing industry groups to extend the deadline.

Additionally, our economists examined the top reasons for moving in 2013. For the third straight year the number and share of movers doing so to own rather than rent a home increased. Between 2012 and 2013, approximately 2.1 million or 5.4% of all movers did so to own rather than rent. This represents an increase of 596,000 movers from the reading between 2010 and 2011. Overall, the new Census data shows household mobility decreased from the prior year. However, the reasons for moving are promising in that the most common reason for moving was to obtain new or better housing, followed by those wishing to establish their own household.

For the full story, check out these Eye on Housing posts.

With the Bump in Interest Rates Behind Us, Sales are Returning to Normal
The Pending Home Sales Index (PHSI), a forward-looking indicator based on signed contracts, ticked up 0.2% in November to 101.7 from a downwardly revised 101.5 in October. With the PHSI essentially flat at the end of the year, it is expected that existing home sales will remain roughly level at least during the first few months of 2014.Posted Dec. 30.

Rates on New Home Loans Join Downward Trend
On Christmas Eve, the Federal Housing Finance Agency (FHFA) reported a 6 basis point decline in the average contract interest rate on loans to purchase newly-built homes, from 4.32 to 4.26 percent. Posted Dec. 26.

Senate Finance Staff Discussion Draft: Energy Tax Incentives
The Senate Finance Committee released a draft proposal to change tax code’s rules concerning energy production and energy-efficient improvements. Under the draft proposal, most existing energy tax incentives would be eliminated or otherwise allowed to sunset and replaced by two credits favoring energy production. Posted Dec. 23.

Existing Sales Down
November existing home sales decreased 4.3% in November, and were down 1.2% from November 2012. All regions declined in November, ranging from an 8.5% decrease in the West to a 2.4% decrease in the South. Posted Dec. 19.

Homes Under Construction: A Good Sign of Recovery
The Census Bureau’s latest release shows that the seasonally adjusted number of homes under construction has now increased for 27 months in a row, going from 413,000 in August of 2011 to (a preliminary estimate of) 685,000 in November of 2013. The increases have come from both single-family and multifamily construction. Posted Dec. 18.

Home Building Passes the One Million Mark
November housing starts and permits reported by Census and HUD were over the one million mark in November. Single-family starts rose to 727,000, a 20.8% increase over October and the highest since December 2007. Multifamily starts rose to 364,000, a 26.8% increase over October. Posted Dec. 18.

Construction Sector Job Openings Reach 5-Year High in October
The number of unfilled construction sector positions (124,000) reached a five-year high, according to the October BLS Job Openings and Labor Turnover Survey. Posted Dec. 10.

New Home Sales in Recovery

After dipping during the “pause” in September, new home sales rebounded in October. Some slowdown in housing was expected due to declines in consumer confidence and the uncertainty produced by the partial government shutdown. However, the October data add more evidence that the recovery for housing will continue into the new year.

For the economy as a whole, job creation continues to be positive, although weaker than hoped. The Bureau of Labor Statistics reported that November payroll employment grew by 203,000, plus an additional 8,000 for prior month revisions. The job openings rate continues to rise, as jobs are posted but not filled. This is particularly true in construction. In October, there were 124,000 unfilled positions in construction firms – the highest level since May 2008.

Gross domestic product growth surprised on the upside for the third quarter, coming in at 3.6%. This was higher than the earlier estimate of 2.8%, but the bump in growth largely came from inventory investment: for 1.7 percentage points or nearly half the 3.6% total. As a result, your Home Builders Association expects growth to slow sharply in the final quarter of the year.

Against this economic backdrop, October new home sales showed strength after a weak September. Rising 25% from the September pace, the annualized rate for October came in at 444,000, reaching a level established earlier in the year. Months' supply totaled 4.9, the lowest inventory measure since the second quarter. In fact, for October the total inventory of completed, ready-to-occupy newly built homes remains low, at only 42,000 nationwide.

With respect to new home financing, Census data show that the cash share of new home sales totaled 7.37% during the third quarter, near the recent high of 7.89% of the third quarter of 2011. FHA-insured mortgages came in at 17% of the market for the third quarter. But interest rates remain low by historic standards. Data from the Federal Housing Finance Agency indicate that the average contract interest rate for October for newly built homes was 4.32%.

Looking at individual markets, the NAHB/First American Leading Markets Index rose slightly to a value of 0.86 in December, up from 0.85 in November. The index measures progress for employment, home prices, and home building based on normal market conditions. So the 0.86 measure indicates that nationwide, housing markets are operating at 86% of normal conditions. In December, 54 metros were at or above a value of one, meaning those markets had returned to or were above their last normal levels of activity. These markets were dominated by energy and agriculture states and smaller markets that did not see rapid declines in production and prices in recent years.



In the Upstate, Greenville's index is .87.  However, building permits are lagging at 55 percent of normal while home prices have soared to 114 percent of normal.

In other positive news for home builders, lending conditions for acquisition, development and construction (AD&C) loans continue to improve, although a considerable lending gap between demand for AD&C and current loans persists. Survey data by the National Association of Home Builders indicate that for the third quarter, only 9% of those surveyed reported that lending conditions deteriorated, with 28% noting improving conditions. And FDIC data show that the stock of outstanding AD&C loans grew nearly 5% during the second and third quarters of the year.

Overall, total private residential construction spending was up 17.8% from a year ago, a useful measure of the progress the housing recovery has made recently. Since market lows in June 2009, single-family construction spending is up almost 87%, multifamily 164%, and remodeling-related improvement spending 17%. Over the course of 2013, single-family spending is up 14%, multifamily 22%, and remodeling 3%.

In analysis news, economists at your Home Builders Association recently examined how comprehensive tax reform could affect business-related advertising and tax accounting, with a focus on construction firms. Additional analysis examined average electric utility bill by state and geographic breakdown of residential trade contractor employment after the Great Recession.

Source: Eye on Housing

NAHB: Construction Spending Continues to Improve

Total private residential construction spending increased to a seasonally adjusted annual rate of $340.2 billion in August 2013 according to Census estimates. The August data for construction put in place data was released today after a delay of three weeks due to the government shutdown. The current reading is a 1.2% increase from the prior month and 18.7% higher than a year ago. After a tepid July, the pace of growth in construction spending improved in August.

Total private residential construction spending is at its highest level since August 2008. Since market low points, total private residential construction spending is up 48.9%, single-family 88.5%, multifamily 146.6%, and improvement-related spending 30.7%. Spending continues to improve for all categories, but remains well below their respective peaks.

Single-family spending registered an increase of 1.6% for the month, while the multifamily category saw a healthy increase of 3.2%. The home improvement category remained relatively flat with an increase of just 0.2% for the month.

For August, on a 3-month moving average basis, all categories continued to experience significant improvements over the course of 2013. Remodeling related spending is up 8.4% for the year-to-date. Single-family spending has increased by 12.9% and multifamily spending has increased 15.8%.

The data show improvements in construction for all categories. However, the government shutdown had yet to occur and is not reflected in the August data. A revised schedule posted by the Census indicates that September data for construction put in place will also be delayed one month. The September and October data are scheduled for release on the same date – December 2. This release should provide us with a better picture of construction spending moving forward.

NAHB: More Buyers Purchasing Homes Still Under Construction

In a recent Eye on Housing blog entry, NAHB's economists describe a significant shift in the marketplace whereby greater numbers of buyers are purchasing homes that are still under construction or not yet started versus newly completed homes that are part of a builder's inventory.

The experts attribute this emerging trend to several factors, including, for example, smaller inventories of completed homes (which have limited buyers' choices in that area) and also builder credit constraints that have led to a surge in construction-to-permanent financing. In any case, our economists note that the recent shift has been quite dramatic.

Whereas completed homes were half of all new-home sales in 2008, by mid-2013, that average had fallen to just 29 percent. In the same period, the share of homes sold but not yet started went from 21 percent of sales to 37 percent and the share of homes sold that were under construction went from less than a quarter of the total to more than one-third currently.

One likely explanation for what seems to be a long-term trend in favor of sales of unfinished homes is the rise in concentration of larger building companies, which can hold an inventory of models and available lots for buyers to choose from without having to risk building ready-to-occupy homes that might not fit buyers’ preferences.

NAHB: Mortgage Interest Deduction overwhelmingly benefits families earning less than $200,000 per year

According to a new report by NAHB, the vast majority of taxpayers claiming the mortgage interest deduction, 91 percent, earn less than $200,000 per year.

 In South Carolina the percentage is higher: 94.1 percent. 

Higher cost states, like New York and California, have lower home ownership rates and therefore lower use of the mortgage interest deduction.  The highest percentage of claimants earning less than $200,000 and using the mortgage interest deduction can be found in Idaho, at 95.4 percent.  The lowest percentage of claimants is in Connecticut, at 87.4 percent.

Read the complete report at Eye on Housing by clicking here.

NAHB publishes survey on the cost of constructing a single family home

Every home builders gets the question.  So does their HBA.  "How much per square foot does is cost to build a house?"  The answer is in a report by NAHB: $80 per square foot plus the cost of the land, and other non-construction expenses.

According to NAHB's report, the average price of a new single-family home in 2011 was $310,619, down from $377,624 in 2009.  The cost of construction accounted for 60 percent of the final sales price, and the cost of the finished lot accounted for 22 percent of the final sale price.  The average size of a new single-family home in 2011 was 2,311, down from 2,716 in 2009.

Think home builders are making a lot of money building homes?  The average profit per house was 6.8 percent of the final sales price in 2011.

Read the entire report at Eye One Housing by clicking here.

Eye on the Economy: Home Builder Confidence Reaches Five-Year High

Recent economic data indicate that the overall economy has entered a slow growth period. Nonetheless, during this period economic indicators have generally suggested that housing, and home building in particular, is an important source of economic growth. The question is whether the building recovery in housing will be affected by the slowing of the rest of the economy. In general, while NAHB expects occasional ups and downs for housing, the forecast calls for continued improvement for housing markets.

Housing starts data for the month of July offer a good illustration.Construction of new homes slowed slightly in July to an annual rate of 746,000, down 1.1% from the revised June rate of 754,000, which was a seven-year high. The decline was concentrated in the single-family sector where starts fell 6.5% to an annual rate of 502,000, again down from an elevated rate of 537,000 in June, which was the highest since the end of the home buyer tax credit in 2010.

However, the decline in single-family starts is more likely an adjustment to a very healthy June rate, than it is a sign that the budding housing revival is in trouble. NAHB expects the annual rate of housing starts in the third quarter to be 765,000 or about a 15% increase over the third quarter of 2011.

Recent survey data of single-family home builders provide supporting evidence. The August NAHB/Wells Fargo Housing Market Index (HMI) reached a five-year high of 37, with all three components (present conditions, six-month forward-looking conditions and prospective traffic of buyers) of the index at similar highs. The expectation component of the index increased to 44, the highest since March 2007 when it was at 50, a level where equal numbers of builders foresee a good market as see a poor market.

Similarly, the NAHB’s 55+ HMI survey, which reports builder confidence in the market for new 55+ single-family homes, increased significantly in the second quarter of 2012. Compared to the same period a year ago, the 55+HMI has more than doubled from 13 to 29. The present sales measure more than doubled, while both the components for expected sales for the next six months and traffic of prospective buyers rose.

The survey results suggest buyers are returning to the 55+ housing market as home prices begin to improve, helping to unlock some of the pent-up demand from 55+ consumers. Additionally, the 55+ multifamily rental indices recovered substantially last year, and are now holding steady.

While single-family starts were down in July, multifamily construction continues to expand. Housing starts of units in buildings with five or more apartments came in at 229,000 seasonally adjusted annual rate, up 9.6% from the revised figure for June. The three-month moving average has been very stable, hovering between 205,000 and 210,000 for the past quarter. On a year-over-year basis, housing starts for 5+ units are up strongly, 30% since July of 2011.

Existing home sales increased 2.3% from June, and are up 10.4% from the same period a year ago. The National Association of Realtors reported July 2012 total existing home sales were at a seasonally adjusted rate of 4.47 million combined for single-family homes, townhomes, condominiums and co-ops. That compares to 4.05 million units from the same period a year ago.

The total housing inventory at the end of July increased 1.3% from the previous month to 2.4 million existing homes for sale. At the current sales rate, the July 2012 inventory represents a 6.4-month supply which is down from a 6.5-month supply in June, and very much improved from the 9.3-month supply of homes a year ago.

Supporting economic conditions for housing continue to be mixed however, offering both good and bad news. For example, the NAHB/Wells Fargo Housing Opportunity Index (HOI) fell slightly in the second quarter of 2012, down to 73.8, from the all-time record high of 77.5 recorded in the first quarter of the year. Firming home prices in most metro areas – in general, a good thing for the economy– contributed to the small decline in affordability. The HOI is the share of new and existing homes sold in a quarter affordable to a family earning the median income. An HOI of 73.8 means that 73.8% of all homes sold during the second quarter were affordable to families earning national median income ($65,000).

The Mortgage Bankers Association’s National Delinquency Survey revealed a surprising increase in the seasonally adjusted delinquency rate during the second quarter of 2012. The total share of first-lien residential mortgages with past due payments increased 18 basis points to 7.58%. In addition, all three delinquency buckets registered increases compared to the first quarter, with the largest quarter-to-quarter jump occurring among loans 90+ days past due (3.06% up to 3.19%).

Foreclosure starts were unchanged or lower compared to the first quarter of 2012 in 31 states, but a handful of states registered very large quarter-to-quarter increases in foreclosure actions. In total, five states (Florida, California, Illinois, New York and New Jersey) account for just above half of the nation’s foreclosure inventory, but represent less than 32% of all serviced loans in the U.S.

Inflation remains in check. The Bureau of Labor Statistics reported thatthe Consumer Price Index for All Urban Consumers (CPI-U) held steady in July. Overall, the CPI-U has remained either unchanged or declined in each of the last four months. Energy prices slipped 0.3% in July, putting more downward pressure on topline CPI. The next couple months of readings on overall CPI will likely be stronger, however, as gasoline and natural gas prices have surged in recent weeks.

The shelter index, which serves as a rough measure of overall housing costs, rose for the 28th consecutive month; however, each of those increases have been modest (including the 0.1% gain in June), leaving the shelter index only 2.1% above its year-ago level. To more closely assess trends in rental housing costs, NAHB constructs a real rent index from the CPI for rent of primary residences and overall CPI. This metric has registered four consecutive month-to-month increases, with the latest gain coming in at 3.3% on an annualized basis.

Finally, NAHB economists examined issues related to the age of the housing stock, and its implications for future demand for both remodeling and new home construction. One analysis took a look at the quality of insulation, as reported by households. The survey findings indicate that overall, nearly 39% of occupants of single-family homes consider their homes well insulated. Households reporting the highest level of satisfaction with the insulation of their homes were those who occupied homes built after 2004, for whom 67% reported that their home was well insulated.

Related to these research findings, another analysis examined the geographic distribution of the median age of the housing stock.For the typical housing unit, the oldest homes are found in the Northeast. With the exception of the District of Columbia, the state with the highest median age is New York, at 57 years. Rhode Island is next at 56. The newest housing is present in the southern parts of the nation, where population growth has been the highest in recent decades.

NAHB: 25 percent of new home starts occured in the South Atlantic region

Did you know that 25.7 percent of all single-family starts in 2011 were in 8 states extending from Delaware to Florida?  Seven of those states touch the Atlantic Ocean.  The South Atlantic's share of new homes is up from 23.1 percent in 2009.  The question is whether the South Atlantic is growing faster than the rest of the country, or has it just fallen off less than the rest of the country?  Read the complete report at Eye On Housing by clicking here.

Greenville MSA Featured in Eye on Housing

The Greenville Metropolitan Statistical Area (MSA), which covers Greenville, Pickens, and Laurens counties, is the latest market to join NAHB's Improving Markets Index.  The index identifies markets that are improving based on three measures: 1) rising housing prices, 2) rising building activity, and 3) rising job creation.

NAHB featured Greenville last week on its blog, Eye on Housing.  Featured in the report were comments from HBA of Greenville President Elect Rick Quinn and Director Matt Vaughn.  Vaughn made note of a key issue that may impact home building as the housing market improves: "What’s scary is that unless there is some quick large-scale development I’m afraid we will run out of finished lots by the end of 2013."

Read the entire report at Eye on Housing by clicking here.

Click here for a video of NAHB Chief Economist David Crowe discussing the Improving Markets Index.

Note that the last factor causing Greenville to join the Improving Markets Index was house prices.  Housing prices in Greenville, while relatively stable, were not improving sufficiently until now to put our market on the list.  Now that demand is catching up and surpassing supply, housing prices have been steadily rising in the Greenville area for the last six months.