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Wednesday, May 14, 2003 Housing starts at 16-year high in January; builder confidence remains solid through early February By Chad
Floyd,
Indicating continued, solid momentum in the nation's housing market, builders began work on new homes and apartments at a seasonally adjusted annual rate of 1.85 million units in January, according to Commerce Department figures released Feb. 19. This marks the fastest pace of housing construction in 16 years, including the best single-family production in 24 years. Low interest rates and healthy house-price performance remain the most important factors behind the obvious strength that single-family housing has maintained amidst generally weak consumer confidence measures. The National Association of Home Builders' Housing Market Index was down two points to a still-healthy 62 reading in February. Derived from a monthly survey of builders that has been conducted for almost 20 years, the HMI has remained within the same relatively high three-point range since September of 2002. Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months as "good," "fair" or "poor." They are also asked to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for responses to each component are used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor. The HMI's component gauging current sales conditions for new single-family homes registered no change in February from its solid 69 reading in the previous month, while the component gauging builders' expectations of sales in the next six months registered a marginal two-point decline to 66. However, the component gauging traffic of prospective buyers fell eight points to 43 in February, possibly due to worse than usual weather conditions. These figures indicate it would be tough to maintain the super-strong building pace recorded for the past several months. But the market fundamentals remain solid, and the current level of builder optimism regarding the single-family segment reflects that. New single-family homes were constructed at a seasonally adjusted annual rate of 1.51 million units in January. This was up 2.1 percent from December's strong number and the fastest production pace since November of 1978. It also is just shy of the fastest construction pace on record 1.53 million single-family units started in December of 1977. Multifamily housing starts declined 7.6 percent to a 340,000-unit rate in January following a big jump in December. Regionally, housing starts were mixed in January. The South, which is the largest regional housing market, posted a 3.8 percent gain while the West had a nearly 10-point increase. The Northeast and Midwest posted double-digit declines of 16.7 percent and 12 percent, respectively. Following a major up tick in the previous month, housing permits a potential indicator of future building activity declined 5.6 percent to a rate of 1.78 million units in January due entirely to a 23 percent drop on the multifamily side to a rate of 366,000 units. Single-family permits were virtually unchanged at a rate of 1.42 million units. Regionally, permits rose 3.3 percent in the West in January, but fell 7.2 percent in the South, 8.4 percent in the Midwest and nearly 15 percent in the Northeast. Keep in mind that there were significant backlogs of unused permits being held by both multifamily and single-family builders in January. These could translate to additional starts activity in coming months. The bottom line is that housing is holding up very well as we head into the spring home-buying season. NAHB is projecting another solid year for our industry in 2003, with a gradual leveling off of production activity as the year progresses. NAHB's current forecast calls for 1.65 million housing starts this year, down 3.5 percent from 2002's exceptionally strong 1.71 million units. (Chad Floyd, who is with Chadwick Homes, is president of the Home Builders Association of Midwest Georgia, which serves a membership of approximately 550 builders and associate members in Fayette, Coweta, Spalding, Heard, Meriwether, Pike, Upson and Lamar counties.)
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