Housing starts report, Housing Market Index released

Washington, D.C. — The U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced the following new residential construction statistics for January 2017:

Building Permits — Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,285,000. This is 4.6 percent (±2.0 percent) above the revised December rate of 1,228,000 and is 8.2 percent (±1.6 percent) above the January 2016 rate of 1,188,000. Single-family authorizations in January were at a rate of 808,000; this is 2.7 percent (±1.9 percent) below the revised December figure of 830,000. Authorizations of units in buildings with five units or more were at a rate of 446,000 in January.

Housing Starts — Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,246,000. This is 2.6 percent (±11.0 percent) below the revised December estimate of 1,279,000, but is 10.5 percent (±15.3 percent) above the January 2016 rate of 1,128,000. Single-family housing starts in January were at a rate of 823,000; this is 1.9 percent (±10.8 percent) above the revised December figure of 808,000. The January rate for units in buildings with five units or more was 421,000.

Housing Completions — Privately-owned housing completions in January were at a seasonally adjusted annual rate of 1,047,000. This is 5.6 percent (±8.0 percent) below the revised December estimate of 1,109,000 and is 0.9 percent (±15.0 percent) below the January 2016 rate of 1,056,000. Single-family housing completions in January were at a rate of 800,000; this is 4.3 percent (±7.5 percent) above the revised December rate of 767,000. The January rate for units in buildings with five units or more was 244,000.

“Overall, we think these numbers represent a continued sign of strength and optimism in the housing sector, particularly for single-family homes,” said PwC’s U.S. Engineering & Construction Advisory Leader, Marc Waco. “As we begin the spring selling season, we have yet to see any material housing policy impacts from the Trump administration; however, builders remain hopeful that President Trump’s pro-business approach could translate to a reduction in regulations on home builders, and an easing of credit requirements for home buyers. Without any action, we expect affordability concerns to increase as the combination of a rising interest rate environment along with a continued gap in supply and demand of new entry level housing forces some potential buyers to remain on the sideline. We are also watching how the immigration policy plays out, as it could impact an already tight labor supply for builders.”

Housing Market Index

Builder confidence in the market for newly built single-family homes declined two points in February to a level of 65 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“While builders remain optimistic, we are seeing the numbers settling back into a normal range,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “Regulatory burdens remain a major challenge to our industry, and NAHB looks forward to working with the new Congress and administration to help alleviate some of the pressures that are holding small businesses back and making homes less affordable.”

“With much of the decline this month resulting from a decrease in buyer traffic, builders continue to struggle to minimize costs while dealing with supply side challenges such as a lack of developed lots and labor shortages,” said NAHB Chief Economist Robert Dietz. “Despite these constraints, the overall housing market fundamentals remain strong and we expect to see continued growth this year as some of these concerns are addressed.”

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.

All three HMI components fell in February. The component gauging current sales conditions dipped one point to 71, and the index charting sales expectations in the next six months registered a three-point decline to 73. The component measuring buyer traffic dropped five points to 46.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 50 and the Midwest rose one point to 65. The South dipped one point to 67 and the West held steady at 79 for the third month in a row.