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Housing Starts, Builder Confidence Down

Nov 20, 2018
Freddie Mac has released the results of its Primary Mortgage Market Survey (PMMS), showing that the 30-year fixed-rate mortgage (FRM) dropped slightly after weeks of steady increases

Single-family housing starts in October were at a rate of 865,000, which is 1.8 percent below the revised September figure of 881,000, according to new data from the U.S. Census Bureau and the Department of Housing and Urban Development. Privately-owned housing starts were at a seasonally-adjusted annual rate of 1,228,000, which is 1.5 percent above the revised September estimate of 1,210,000, but 2.9 percent lower than the 1,265,000 rate from October 2017.
 
Single-family authorizations in October were at a rate of 849,000, which is 0.6 percent under the revised September figure of 854,000. Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,263,000, a 0.6 percent drop from the revised September rate of 1,270,000 and a six percent tumble from the October 2017 rate of 1,343,000.
 
Single-family housing completions in October were at a rate of 832,000, down 1.2 percent from the revised September rate of 842,000. Privately-owned housing completions in October were at a seasonally adjusted annual rate of 1,111,000, a 3.3 percent slip from the revised September estimate of 1,149,000 and a 6.5 percent slide from the October 2017 rate of 1,188,000.
Single-family housing starts in October were at a rate of 865,000, which is 1.8 percent below the revised September figure of 881,000
 
Reaction to the housing starts data was cautious.
 
Joel Kan, Associate Vice President of Economic and Industry Forecasting at the Mortgage Bankers Association (MBA), noted that housing markets across the South “drove much of the monthly decrease, with the pace slowing by almost 20,000 units over the month to its slowest pace since September 2017. Since August, the South has seen a 50,000 unit or 10 percent drop in housing starts.”
 
LendingTree's Chief Economist Tendayi Kapfidze blamed the dismal data on “rising rates, prices and taxes are contributing to the housing slow down. Average mortgage rates rose to 4.94 percent last week according to Freddie Mac, the highest in seven years. This has made housing about 15 percent less affordable than a year ago. As there are less buyers at each price point, the appropriate market response is a slowdown in sales and an eventual easing in price momentum.”
 
And Danielle Hale, Chief Economist for Realtor.com, observed, “Consumers are less optimistic about home buying right now, and builders are starting to notice.”
 
Indeed, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index took an eight-point plummet in November to 60 while the NAHB’s Multifamily Production Index dropped three points to 48 from the second to third quarter. The NAHB’s Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, rose two points to 47 compared to the previous quarter.
 
“We are starting to see an increase in vacancy rates, which may indicate a saturation in the luxury apartment market” said Steve Lawson, President of The Lawson Companies in Virginia Beach, Va., and Chairman of NAHB’s Multifamily Council. “Rising regulatory and construction costs are also affecting developers’ ability to build apartments for the ‘middle-income’ market where housing is greatly needed.”
 
NAHB Chief Economist Robert Dietz added that the federal government needs to put housing policy back in its spotlight.
 
“Recent policy statements on economic conditions have lacked commentary on housing, even as housing affordability has hit a 10-year low,” said Dietz. “Given that housing leads the economy, policymakers need to focus more on residential market conditions.”

 
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Published
Nov 20, 2018
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