Two reports on new residential construction came out on Tuesday
- one of which showed a slowing in new home construction and the other revealing
a growing unease among home builders about the near term future of their industry.
The U.S. Census Bureau released its monthly joint report with the U.S. Department
of Housing and Urban Development on March numbers of both building permits issued
and actual housing starts. These were substantially below revised figures for
February although still running higher than March 2005 numbers.
On a seasonally adjusted annual basis there were 2,059,000 privately-owned
housing units permitted during March compared to the revised February total
of 2,179,000, a drop of 5.5 percent but still 1.9 percent above the March 2005
estimate of 2,021,000. Single family authorizations were at a rate of 1,542,000,
6.9 percent lower than last month while permits for units in buildings containing
five units or more totaled 436,000 (annualized) compared with 432,000 the previous
month. The report does not include two-to-four family units as available statistics
do not meet the agencies' reliability standards.
Housing starts in March were down 7.8 percent from the revised
February estimate at 1,960,000 units. This figure was still 6.9 percent above
the same month in 2005. Multiple family units were started at an annualized
rate of 334,000 compared to 283,000 in February and 249,000 one year ago.
Housing completions which reflect a market view that is several months old
were at a seasonally adjusted annual rate of 2,218,000, 7.8 percent higher than
in February and a whopping 23.4 percent higher than in March 2005.
The number of housing units permitted but not started increased from 215,100
in February to 235,600 in March. The March figure in 2005 was 221,200. The agencies
do not offer an opinion as to whether this reflects growing builder caution,
problems with construction financing, or just a normal timing thing.
Also on Tuesday the National Association of Home Builders released their Housing
Market Index for April. The Index, a joint effort of NAHB and Wells Fargo measures
the perceptions of home builders about both current single-family
home sales and their expectations for the following six months as either "good,"
"fair," or "poor" and the traffic of potential buyers on a scale of "high to
very high," "average" or "low to very low." Responses in each of these categories
are used to calculate a seasonally adjusted index. Any number over 50 indicates
that more builders view sales conditions as good rather than poor. The index
was at 67 one year ago.
The most recent HMI declined four points to 50 from a downwardly revised combination
score in March. The index for current single-family sales slipped five points
while still remaining in the positive at 54 for April. Sales expectations for
the next six months were also down four points to 58 and the measurement for
traffic of prospective homebuyers (the number of people looking) slipped to
39 from 40 the previous month.
Home builders in the West were more optimistic about market
conditions this month than they were in March, scoring a four-point gain in
confidence to 70 after a significant decline in March. Builders in the Northeast
were most pessimistic about the short-term future of the market; their HMI score
dropped seven points to 49.
NAHB posts a strong disclaimer on its website about the index stating that
it "is strictly the product of NAHB Economics and is not seen or influenced
by any outside party" prior to its publication. It will be interesting
to see how or if April's index of homebuilder attitudes correlates with
housing and permit starts over the next few months.