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Tag Archives: Housing Industry

Housing still hoping to gain momentum

Michael J. Berens

Wednesday, August 24, 2016

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Housing still hoping to gain momentum

Slow but steady is the current prognosis for the housing industry. Housing starts are up for the first seven months of the year, but month-to-month gains have remained flat for the past four months. Meanwhile, requests for single-family permits have declined, which could mean fewer new starts in the months ahead.

Nonetheless, builders and housing experts expect the industry will continue to experience modest growth in the second half of the year.

Overall, housing showed signs of improvement in July. The U.S. Department of Commerce announced that housing starts (in number of units) rose 2.1 percent, compared to June, reaching their highest reading since February. Most of the gain was in the multifamily sector, which was up 5 percent. New single-family starts stayed positive but flat, nudging up only 0.5 percent. Applications for new permits slipped slightly (0.1 percent) but were 0.9 percent above a year ago.

Similarly, Dodge reports residential construction (in dollars) increased 3 percent in July over June. Again, the strongest gains were in multifamily, which jumped 9 percent, while single-family construction ticked up just 1 percent. Multifamily also was the strongest performer on the Architecture Billings Index for July, says the American Institute of Architects.

According to the National Association of Home Builders’ Leading Market Index for the second quarter of 2016, average economic and housing activity nationwide is now at 97 percent of “normal,” with 91 percent of markets showing year-over-year improvements. For housing, that means single-family permits and housing prices are nearly at 2000-2003 levels.

However, the boost has come mainly from rising housing prices. Permits as yet have rebounded only to 50 percent of “normal” activity. Realtor magazine relates sales of existing homes “heated up” in July, fueled by an increase in inventory (due to rising housing prices) and historically low mortgage rates.

More millennials in the 25- to 34-year-old age range were actively looking to purchase a home, as well. Qualifying for a mortgage and a shortage of affordable properties continue to be hurdles for many would-be first-time homebuyers, though. That, in turn, is driving the need for rental housing, which is pushing the demand for multifamily units.

Despite the rather mixed bag of favorable and concerning indicators, the industry outlook remains positive. Builder confidence, as measured by the NAHB’s Housing Market Index, was up two points in August, buoyed by improving employment and economic news. Builders were slightly more optimistic (up one point) about sales expectations for the next six months.

A joint forecast by economists from the Associated Builders and Contractors, AIA and NAHB predicts the industry will end the year maintaining its current level of a 10-plus percent increase over last year, and will continue to see gradual, modest growth in 2017.

In its National Residential Economic Report for the second quarter of 2016, MetroStudy forecasts the total number of residential permits will exceed that of 2015 by year’s end. For the longer term, it foresees an overall healthy housing market during the next five years, with valuations increasing and demand outpacing supply.

Unless some change occurs either in household income or home prices, affordability will remain on a drag on the industry’s efforts to accelerate growth.

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About the Author

Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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