Positive Power
Latest Data Indicates that Gradual Recovery Continues
by NAHB and Jessica Sinnott Original articles may be found on the NAHB website.

A s home builders look forward to continued improvement of the economy and prospects for their industry, new information and data released from NAHB show positive change and a relatively unchanged builder outlook for 2016.

Single-Family Starts Reached Seven-Year High in November

Nationwide housing starts rose 10.5 percent to a seasonally adjusted annual rate of 1.173 million units in November, according to newly released data from the U. S. Department of Housing and Urban Development and the Commerce Department. Singlefamily production increased 7.6 percent to a seasonally adjusted annual rate of 768,000 units, its highest reading since January 2008. Multifamily production rose 16.4 percent to 405,000 units.

“The November gains in both single-and multifamily starts show that the overall market continues to move forward,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, MO. “As builders anticipate more consumer demand for housing, they should continue to add inventory.”

“Single-family production this month has reached levels last seen before the Great Recession, an indicator that we are making gradual headway back to a normal housing market,” said NAHB Chief Economist David Crowe. “As we close out the year, we can see that the housing sector has made headway in 2015, and we expect the recovery to continue at a modest pace.”

Combined single-and multifamily starts rose in the South and West, with respective gains of 21.3 and 6.3 percent. The Midwest was unchanged and the Northeast fell 8.5 percent.

Overall permit issuance rose 11 percent to 1.289 million units in November. Multifamily permits rose 26.9 percent to a rate of 566,000 while single-family permits increased 1.1 percent to 723,000, the highest level since December 2007.

Regionally, the South posted respective permit gains of 5.6 percent.

Sales of New Homes Also Rise

Another piece of good news to take into the New Year is the increase of sales. Sales of newly built, single-family homes rose 4.3 percent to a seasonally adjusted annual rate of 490,000 units in November, according to newly released data from HUD and the U. S. Census Bureau. Sales rose 4.5 percent in the South.

“It is encouraging to see new-home sales continue to tick upward,” said Woods.

“Limited gains in new-home sales can be attributed to a weak existing sales report,” said Crowe. “People who already own a house comprise most of the new residential construction market, and they often must sell their existing home before making another purchase.”

The inventory of new homes for sale was 232,000 units in November. This is a 5.7-month supply at the current sales pace.

Builder Outlook Positive Overall

The combination of better times, more starts and higher sales resulted in relatively stable Builder confidence in the market for newly constructed single-family homes.

Derived from a monthly survey that NAHB has been conducting for 30 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.

In December, Builder Confidence dropped one point to 61. In the South, a three-month average of Builder confidence also experience a one-point drop, but was higher than the national meter, at 64.

“Overall, builders are optimistic about the housing market, although they are reporting concerns with the high price of lots and labor. Builders are also increasing their inventory even as they face difficulties accessing lots and labor.” said Woods.

“For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” added Crowe. “With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.” o