Housing starts, affordability rise
February 17, 2012
Nationwide production of new single-family homes and apartments increased 1.5 percent to a seasonally adjusted annual rate of nearly 700,000 units in January, according to newly released figures from the U.S. Commerce Department. This marks the second-best pace of overall housing production since October 2008.
"Today's solid housing starts report indicates that builders are putting more of their crews back to work, and adds to the growing field of evidence that the overall housing market is gradually but consistently moving in the right direction," said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. In addition to today's numbers, recent builder surveys have indicated steadily increasing optimism regarding market conditions while the number of improving housing markets nationwide has grown substantially over the past six months, he noted.
"The fact that the three-month moving average for housing starts has now increased for nine consecutive months and is approaching the 700,000 mark for the first time since October 2008 is indicative of a solid recovery in housing activity stemming from recent firming in employment and consumer confidence measures," agreed NAHB Chief Economist David Crowe.
"That said, housing production is still far from what would be considered normal in a healthy market, and many challenges remain for home builders in terms of tight credit conditions, difficult appraisals and the continued flow of foreclosed properties on the market - all of which are certainly slowing the pace of improvement in both housing and the overall economy."
Following significant upward revisions reported for both November and December, single-family starts held virtually flat in January with a 1.0 percent decline to a 508,000-unit rate. Together with the revised December number, this is the best pace of single-family starts since April 2010, when the home buyer tax credit was active. Meanwhile, single-family building permits, which can be an indicator of future construction activity, also held virtually unchanged, with a 0.9 percent increase in January to 445,000 units - again, the best pace since April of 2010.
The multifamily segment also continued to display greater strength in January following a 55 percent increase in starts activity in 2011 that was attributed to rising demand for rental apartments. While multifamily starts rose 8.5 percent to a seasonally adjusted annual rate of 191,000 units for the month, permits edged up 0.4 percent to 231,000 units.
The South, which is the nation's largest regional housing market, posted the biggest gain in housing starts in January with an 18.3 percent increase, while the West and Northeast also posted significant gains of 11.9 percent and 7.9 percent, respectively. The Midwest was the exception to the rule, posting a 40.7 percent decline that partially offset a dramatic gain in the previous month.
The South also posted the largest gain in permit issuance in January, with a 10.1 percent increase. Permits also rose by 4.2 percent in the Northeast, but declined 3.7 percent in the Midwest and 18.2 percent in the West.
Housing affordability at record high
Nationwide housing affordability, as measured by the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), rose to a record level during the fourth quarter of 2011, while prospective home buyers continued to feel the constraints of tighter credit standards and a soft economy.
HOI data indicated that 75.9 percent of all new and existing homes sold in the fourth quarter were affordable to families earning the national median income of $64,200, the highest percentage recorded in the 20-year history of the index.
In Youngstown-Warren-Boardman, Ohio, Pa., the most affordable major housing market in the country during the fourth quarter, 95.1 percent of all homes sold during the quarter were affordable to households earning the area's median family income of $54,900.
Also ranking at the top of the most affordable major housing markets, in descending order were Lakeland-Winter Haven, Fla.; Modesto, Calif.; Harrisburg-Carlisle, Pa.; and Toledo, Ohio.
Among smaller housing markets, the most affordable was Kokomo, Ind., where 99.2 percent of homes sold during the fourth quarter of 2011 were affordable to families earning the median income of $59,100. Other smaller housing markets at the top of the index included Fairbanks, Alaska; Cumberland, Md.-W.Va.; Lima, Ohio; and Rockford, Ill.
In New York-White Plain-Wayne, N.Y.-N.J., the least affordable major housing market during 2011's fourth quarter, 29.0 percent of all homes sold were affordable to those earning the area's media income of $67,400. This was the 15th consecutive quarter in which the New York metropolitan division held this position.
Other major metro area at the bottom of the affordability index included Honolulu; San Francisco-San Mateo-Redwood City, Calif.; Santa Ana-Anaheim-Irvine, Calif.; and Los Angeles-Long Beach-Glendale, Calif., respectively.
Ocean City, N.J., where 47.5 percent of the homes were affordable to families earning the median income of $70,100, was the least affordable of the smaller metro housing markets in the country during the fourth quarter. Other small metro areas ranking near the bottom included Laredo, Texas; San Luis Obispo-Paso Robles, Calif.; Santa Cruz-Watsonville, Calif.; and Brownsville-Harlingen, Texas.
Visit www.nahb.org/hoi for tables, historic data and details.