How Long Does It Take to Build a House?

October 21, 2013

The 2012 Survey of Construction (SOC) from the Census Bureau shows that on average it takes about 7 months from obtaining a building permit to completing a new single-family home. Looking at the houses completed in 2012, houses built for sale, on average, register the shortest time from permits to completion – between 5 and 6 months. Houses built on owner’s land take longer – about 8 months if built by a contractor and more than 11 months if they are owner-built (i.e., where the owner of the land serves as a general contractor). Single-family homes built for rent take, on average, between 8 and 9 months from permits to completion.

In most cases, no time is wasted from the moment a permit is obtained and construction is started. Most homes built for sale and on owners’ land are started prior or within the same month as authorization. Houses built for rent, on average, register a slight delay of one month before construction is started.

The time from permits to completion varies across the nine Census divisions. New England and Middle Atlantic register longer times of between 9 and 10 months. Pacific and East North Central division also show above average time of 8 months to completion. Builders in the East South Central Division manage to complete a home in 7 months, on average. The rest of the country registers times between 5 and 6 months.

time_to_build

For houses built for sale, the SOC also gathers information on sales, registered at the time when a buyer signs a sale agreement or makes a deposit on the home, not the final closing. For new single-family homes sold in 2012, the average time from completion to sale is under one month. However, this average is highly skewed by a relatively small number of homes that are not sold prior or while under construction. Looking at new single-family homes completed in 2012, more than three quarters of these properties were sold before or during the completion month, including 30 percent that were pre-sold (i.e., sold before being started).  Only 6 percent of homes completed in 2012 remain unsold as of the first quarter of 2013. So, for most new single family homes there is no additional lag from completion to sale.

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Posted by Natalia Siniavskaia

Vinyl is the Most Common Siding On New Homes

October 8, 2013

The most common exterior wall material was vinyl on homes started in 2012.  Vinyl siding was used on 32 percent of the new homes started in 2012, followed by brick for 25 percent of homes. Stucco was the principal exterior wall material for at least 20 percent of the homes started according to the data from the Census Bureau’s Survey of Construction (SOC)

The SOC specifically collects data on whether the principal exterior wall material in a new home is vinyl siding (including vinyl-covered aluminum), brick or brick veneer, stucco, fiber cement siding (such as hardiplank or hardiboard), wood or wood products, stone, rock or other stone materials, and concrete block (not including stucco).

Table1ExteriorWallMaterials

The Census Bureau’s SOC data is available by the nine census divisions. Vinyl siding was the most widely used primary exterior material in 6 out of 9 census division. In the Middle Atlantic and New England region, more than one-third of the new homes started used vinyl siding.  The East and North West Central accounted for at least 62 percent while South Atlantic and East South Central accounted for 43 and 22 percent respectively.

2ndBlogChart101513

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Posted by achaluvadi

Construction Spending: Improving at a Slower Rate

September 3, 2013

Total private residential construction spending increased marginally to a seasonally adjusted annual rate of $334.6 billion in July 2013 according to Census estimates. Spending continues to improves, but remains well below the peak pace of $676.4 billion in March 2006. The current reading is 17.2% higher than a year ago.

Single-family spending registered a slight increase of 0.5% for the month, while the home improvement category increased 0.8%. The multifamily category remained nearly unchanged with an increase of 0.1% for the month.

Chart_September

In spite of the tepid month-over-month increases for July, on a 3-month moving average basis, all categories have experienced significant improvements over the course of 2013. Remodeling related spending is up 6.5% for the year-to-date. Single-family spending has increased by 11.6% and multifamily spending has increased 16.0%.

Since market low points, total private residential construction spending is up 46.4%, single-family 84.5%, multifamily 143.8%, and improvement-related spending 29%.

The data shows improvements in construction categories for all categories but at a slower month-over-month rate than experienced in recently. The slow-down comes ahead of the effects of an increase in mortgage interest rates that has slowed both new home and pending home sales.

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Posted by Joshua J. Miller

Housing Starts a Mixed Bag

August 16, 2013

Data released by the U.S. Census Bureau in conjunction with the Department of Housing and Urban Development indicates that privately-owned housing starts were at a seasonally adjusted annual rate of 896,000 in July, 6% above the upwardly revised June estimate of 846,000 and 21% above the July 2012 rate of 741,000.

The month-over-month increase in housing starts reflects sizeable gains in multifamily housing. According to the release, multifamily housing starts rose by 26% over the month of July to a seasonally adjusted annual rate of 305,000, partially offsetting the 25% decline that took place in June. On a 3-month moving average basis, which smoothes the volatility, multifamily housing starts increased by 6% to 290,000. Despite the increase, the 3-month average of multifamily housing starts remains below the 300,000 level that was recorded in the first five months of the year.

Meanwhile, growth in total private housing starts was partly restrained by a slight dip in single-family housing starts. Over the month of July, single-family housing starts fell 2% to 591,000 units. Geographically, the month-over-month declines took place in the South (-5%) and in the West (-10%), while single-family housing starts in the Northeast (+12%) and the Midwest (+10%) rose. The decline in single-family housing starts that took place in the South and in the West may partly reflect higher than average precipitation over the month of July. According to the National Oceanic and Atmospheric Administration, rainfall across the country was higher than normal in July with parts of the South and the West experiencing the most rainfall July relative to their normal levels. Despite the slight monthly decline in single-family housing starts, the underlying trend remains basically unchanged. On a 3-month moving average basis, single-family housing starts were 597,000, 0.1% below its level in June.

Presentation1

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Posted by Michael Neal

Builder Confidence and Housing Starts

July 25, 2013

The NAHB/Wells Fargo Housing Market Index is at its highest level in almost 8 years. The July level of 57 was up 6 points from June and 16 points from April. The index has been on a fairly steady rise since wandering in the teens through almost all of 2011. In percentage terms, the HMI has more than doubled between April 2012 and June 2013.

Single-family housing starts, on the other hand, have risen but not as substantially. In the same 14 month period, single-family starts are up 17% from April 2012 to 2013. During that period, starts were as high as 29% above their April 2012 level.

 
The HMI is designed to track current and future single-family housing starts. At least theoretically, the same group who responds to the HMI questionnaire is the group that actually builds the homes tracked in the starts survey conducted by the US Census Bureau and sponsored by US Departments of Commerce and Housing and Urban Development. The HMI is driven by the responses to three questions: an assessment of current sales, of expected sales over the next six months and traffic in the sales model or office. The HMI is the weighted average of the three components and the weights were chosen to best track single-family housing starts out to six months in the future.

Figure 1 shows the historic relationship between the HMI and single-family housing starts, scaling the graphs so the peaks are roughly aligned. Sympathetic trends are obvious throughout much of the history.

Figure 1

So, the logical question is why has the HMI been increasing at a faster pace than starts recently? The only other significant housing recovery cycle within the history of the HMI is the recovery of 1991-1992. The index did not exist in the 1982 recovery and the mild recession of 2001 did not involve housing.

 
From January 1991 to March 1992 (14 months) the HMI increased from 20 to 46 or 130%. During that same period, single-family housing starts increased 71%. The early stages of the 1991 housing recovery showed an even larger difference in the rates of increase between the HMI and housing starts. Between January and May 1991, the HMI doubled from 20 to 40 while single-family housing starts increased 39%. A comparison of change in percentage terms for the HMI and starts during the two 14 month periods is shown in Figure 2.

Figure 2

Another 14 month period in the late 1990s saw a similar but smaller diversion in movement between the two indexes. Between September 1997 and November 1998, the HMI increased 31% while single-family starts increased 15%. Single-family starts eventually reached over 1.5 million, which was the highest to date since the mid-1970s. An article on NAHB’s web site shows statistically that the HMI retained its ability to help predict starts during the late 1990s (as well as before and after).

 
Why the apparent differences during some periods? Housing recoveries are dynamic periods when futures remain uncertain and reassembling the housing industry’s infrastructure can be erratic. After a run of poor housing demand and just as buyers return to the market, builders begin to see the potential that existed before the collapse. While the recession of 1990-1991 was mild compared to the recent Great Recession, it was the worst the industry had seen in almost a decade and the recovery appeared and was proven ultimately to be very robust. Single-family starts did double but it took two and a half years.

 
Similarly, the delayed housing recovery from the Great Recession has taken longer to take hold and has yet to see dramatic changes. Nonetheless, single-family starts have increased 67% from the trough and are expected to double from their low point by mid-2014. The early improved confidence exhibited by home builders in the HMI is a signal just as it was in the 1991 recovery that the market will continue to improve as the infrastructure of the industry recuperates and repairs itself.

 
Builders are experiencing difficulty hiring the necessary workers with the worst shortages in framing crews and carpenters. Developed lots are in short supply, particularly those in the locations where buyers are shopping. The land development process ceased during the downturn and restarting the several-year procedure takes time. Building material prices spiked earlier this year as starts moved up but producers of building supplies took time to add capacity, workers and raw materials. Capital remains in short supply as the banks that usually lend to builders repair their balance sheets and regulators continue their clamping down on lending to the residential sector. Builders are coping with these head winds but it has slowed actual production from meeting builders’ expectations.

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Posted by David Crowe

Single-Family, Multifamily, Home Improvement Spending All Up

July 1, 2013

Total private residential construction spending increased to a seasonally adjusted annual rate of $328.6 billion in May 2013, the fastest pace of residential construction since October 2008. The reading is 1.2 percent above the positively revised April estimate and 22 percent higher since a year ago.

All three components of residential construction spending registered gains. New multifamily construction spending showed the largest increases, rising 2.5 percent since April and 51.7 percent since May 2012. It is now at a seasonally adjusted annual rate of 31.8 billion.

Res_spen_May2013

Spending on new single-family homes increased to an annual rate of $166.3 billion, the rate unseen since August 2008. On a year-over-year basis, new single-family construction spending increased 33.2 percent.

Finally breaking the decline that started in January 2013, home improvement spending also registered gains. Remodeling spending increased to an annual rate of $124.2 billion, 1.9 percent above the April reading, 7 percent above the year ago, but still below the spending rate registered during the first quarter of 2012.

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Posted by Natalia Siniavskaia

House Prices Move Higher

June 25, 2013

Nationally, house prices continued to rise in April, contributing to the overall recovery in U.S. house prices. According to the most recent release by the Federal Housing Finance Agency, U.S. house prices rose by 0.7% on a month-over-month seasonally adjusted basis in April. This is the fifteenth consecutive monthly increase for the House Price Index – Purchase Only. Since January 2012, house prices have risen by 9.9%.

The April increase in house prices was geographically widespread, increasing in every division of the country. As Chart 1 illustrates, the largest gains took place in the Pacific and Mountain divisions, regions of the country containing states, like Nevada and California, that experienced the largest price declines.

Presentation1

Meanwhile, Standard and Poor’s reported that its house price index also rose in April. According to the most recent release, the S&P/Case-Shiller House Price Index – 20-City Composite grew by 12.1% on a year-over-year not seasonally adjusted basis. Following 20 consecutive months of year-over-year declines, house prices registered their eleventh consecutive year-over-year increase in April. House price growth in San Francisco, a city in the Pacific region, and in Las Vegas, a city in the Mountain region, eclipsed house price growth in Phoenix, a city in the Mountain region. However, as chart 2 illustrates, each of these cities in addition to Atlanta experienced year-over-year house price growth greater than 20.0%. April is the eighth consecutive month that Phoenix has experienced a 12-month price increase greater than 20.0%.

Presentation2

Rising house prices for existing homes, such as those counted in the FHFA and in the S&P/Case-Shiller House Price Indices, is a net positive for the housing recovery. Recovering prices will improve conditions for builders, lead to higher inventories of new construction, and motivate potential sellers of existing houses to come back into the market. Data released jointly by the US Census Bureau and the US Department of Housing and Urban Development showed that newly constructed single-family houses sold at a seasonally adjusted annual rate of 476,000 in May, 2.1% higher than level of new single-family houses sold in April. Going forward we expect house prices to continue to rise, by 9.5% overall in 2013 and by 4.5% in 2014.

For full histories of the 20 markets included in the Case-Shiller composite, click here cs.

For full histories of the FHFA US and 9 Census regions, click here fhfa.

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Posted by Michael Neal

Weak Remodeling Activity Weighs on Residential Construction Spending

May 2, 2013

Total private residential construction spending increased 0.4% on a month-to-month basis during March 2013. After data revisions, first quarter nominal spending levels came in 2.3% lower than the final three months of 2012. With that said, private construction spending has bounced back by 33% since its cyclical low from nearly two years ago and has advanced more than 18% compared to March 2012.

Spending on new single-family housing notched its 21st month-to-month gain over the last 22 months, increasing 1.6% versus February, which itself was revised higher from 4.6% to 5.4% growth. On a year-over-year basis the new single-family category has expanded 38% and has managed to rise 78% above the cyclical low observed back in mid-2009. With the current NAHB forecast projecting growth of 26% and 28% for single family housing starts in 2013 and 2014, respectively, we expect spending activity to continue rising over the next two years.

construction spending

New multifamily construction spending registered a modest gain of 0.3% in March, but the initial estimate of a 2.2% drop for February was revised to a smaller decline of 1.4%. Despite these two lackluster months, the first-quarter average was a 12% improvement from the fourth quarter of 2012 and the nominal dollar value of spending has skyrocketed 111% in less than two years. The forecast calls for a modest decline in multifamily starts during the second quarter of 2013 after what was likely an unsustainably large increase during the first quarter (primarily in March). Multifamily starts are expected to increase in every quarter thereafter, albeit at a slower and steadier pace, which in turn will yield further growth in nominal spending levels.

While the other two categories improved, home improvement spending was a source of weakness for the residential construction sector. Remodeling expenditures have declined in each of the last five months, with the March 2013 estimate coming in at a drop of 1.4% compared to February. The 3-month moving average, which tends to smooth out the month-to-month volatility in reported home improvement spending, points to a noticeable dip in remodeling activity after a healthy surge between spring and fall of last year. The most recent forecast calls for remodeling activity to rise modestly over the remainder of the outlook period. However, this downward trend in spending data plus the latest edition of NAHB’s Remodeling Market Index point to some risk to projected home improvement activity over the near term.

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Posted by Brian Lego

Residential Construction Spending Bounces Back in February

April 1, 2013

After three consecutive months of slight declines, private residential construction spending increased 2.2% on a month-to-month basis in February. Despite the sluggish readings from the prior 3 months, nominal spending on residential construction activity remained more than 20% above its year-ago level and roughly 36% higher than the cyclical low in mid-2011.

The new single-family home category continued to show strength in February, gaining 4.3% versus January. Compared to February 2012, spending on new single-family homes has risen 34%, but perhaps more importantly, the level of nominal construction spending has surged more than 73% since bottoming out in mid-2009. Spending activity will likely expand further over the next two years as the current NAHB forecast calls for single-family housing starts to increase 23% and 29%, respectively, this year and next.

construction spending

The multifamily sector took a step back in February, with spending on new multifamily projects slipping 2.2% from January. In fact, this marks the first outright month-to-month decline for this category since September 2011. Still, the overall trend remains decidedly positive for new multifamily construction activity as the level of spending is 52% ahead of the pace in February 2012 and has more than doubled the August 2010 low point. After a likely modest retrenchment in the first quarter of 2013, the baseline forecast calls for consistent gains in multifamily starts through the end of 2014.

Home improvement spending improved slightly in February, gaining 0.5% versus the previous month and is 1.1% above the level from last year. Although this construction spending category is the most volatile and likely to be revised, the 3-month moving average suggests spending on remodeling activity has cooled over the past several months. Nonetheless, with existing home sales expected to register steady growth going forward, home improvement activity should see a similar pattern as sellers spruce up their homes for sale and/or buyers decide to make changes after they move into the home.

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Posted by Brian Lego

Confidence in New 55+ Home Sales Posts Another Year-Over-Year Gain

February 7, 2013

Builder confidence in the 55+ housing market improved the fourth quarter of 2012 compared to the same period a year ago, according to NAHB’s  latest 55+ Housing Market Indices (55+ HMIs).

There are separate 55+ HMIs for two segments of the 55+ housing market: single-family homes and multifamily condominiums.  Each 55+ HMI is based on a survey that asks if market conditions are good, fair or poor. An index number below 50 indicates that more builders view conditions as poor than good.

Although both 55+ HMIs remain below 50, both have improved significantly from a year ago.  The single-family index increased 10 points to a level of 28, the fifth consecutive quarter of year over year improvements.  Although multifamily condos remain the weakest segment of the 55+ housing market, the 55+HMI for condos also showed a substantial year-over-year increase, of six points to 19.

55+HMI 12Q4Meanwhile, the 55+ multifamily rental indices, which had already recovered substantially in 2011, remained relatively stable in the fourth quarter, although there was a slight pullback due to uncertainty about the low-income housing tax credit—the financial driver behind a significant portion of apartments built for this segment of the market. Present production dropped three points to 31, expected future production dipped one point to 34, current demand for existing units dropped four points to 38 and expected future demand fell five points to 39.

Like the overall housing market, the 55+ segment of the market is undergoing a slow but steady recovery, but there are some obstacles to a continued and stronger recovery.  While problems with tight credit conditions for buyers and obtaining accurate appraisals are still lingering, new problems like spot shortages and rising costs for labor, materials and lots are beginning to emerge.

For more information about NAHB’s 55+ HMI survey see www.nahb.org/55HMI

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Posted by Paul Emrath

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