Eye on the Economy: February Construction Holds Steady

As the unusually cold winter continued in many parts of the country, March builder confidence remained steady. The NAHB/Wells Fargo Housing Market Index came in at a level of 47, one point lower from February’s 46. Ongoing weather challenges and increasing concern among builders about supply chain issues have held builder confidence down in recent months.

Census reported housing construction starts were virtually unchanged from slightly upwardly revised January figures. Total housing starts were 907,000 on a seasonally-adjusted annual basis, nearly identical to 909,000 in January. Single-family starts were 583,000, up 2,000 from January.

Regionally, single-family starts remained well below 2013 totals in the Northeast and Midwest, while above last year’s in the South and West. The regional differences match the location of the worst below-average temperatures and above-average snow falls and support the explanation of a weather effect rather than a shift in the housing market.

The pace of multifamily starts came in at a 324,000 annualized rate in February, down 4,000 from January but above the one-year average of 313,000. Other multifamily market data indicate that this sector continues to have room to grow. According to Consumer Price Index data, real, inflation adjusted rents have increased 1.2% from last year. And three-month apartment absorption rates for for-sale and for-lease unit rates remain near post-recession highs.

Local conditions remain positive for housing across the country. The March NAHB/First American Leading Markets (LMI) Index remained unchanged in March at .87 from February, but the number of markets considered at or above their last normal periods increased from 58 to 59 from February to March and from 47 to 59 year over year. In addition, the number of markets doing better than the national market rose from 147 to 152 month over month.

The LMI measures proximity to a normal market by comparing the last 12 months of activity in three indicators (single-family permits, home prices and employment levels). The gradual, persistent increase in the number of markets improving is further indication of the slow but steady process of resolving the economic and housing problems that developed during the Great Recession.

NAHB survey data suggest that in addition to the weather, lots, labor and building material costs remain top industry challenges. For example, recent Bureau of Labor Statistics data indicate that there were 156,000 unfilled construction sector positions in January of 2014, the second highest count since May 2008. Overall employment growth remains lackluster, with the economy creating only 175,000 jobs in February after disappointing reports in January and December. And recent Producer Price Index data show that in February softwood lumber prices rose 2.2%, OSB prices declined 0.7%, and gypsum prices rose 4.1%.

In housing market analysis news, NAHB recently published information regarding housing preference among various ethnic groups. The study examines breakdowns of preferred housing items among these groups, as well demographic and income differences.

In addition, NAHB economists also examined local variations of homeownership rates and counts of owner-occupied homes. This review used data from the 2012 American Community Survey.

Finally, with respect to housing policy, NAHB’s Economics group published three summaries of key advocacy efforts underway on behalf of the home building sector: worker shortages, housing finance reform, and the prospect for comprehensive tax reform. Each one analyzes the data and draws economic conclusions in connection with ongoing efforts by NAHB and its membership.



Tags: , , ,