Eye on the Economy: Starts and Sales Stumble


Home building data for January showed declines for new home sales and housing construction. Builder confidence also declined but remains in positive territory. NAHB’s forecast is for continued, modest growth for single-family construction and a slowing of the growth rate for multifamily development in 2016.

The NAHB/Wells Fargo Housing Market Index measure of single-family builder sentiment declined three points in February to 58 – still well above the tipping point of 50, and three points above last February, but down from a recent peak of 65 in October 2015. Builders reported more consumer concern over the price of new homes relative to existing homes as builders face higher costs for labor, land and materials.

Total housing starts fell 3.8% in January, according to estimates from the Census Bureau and the U.S. Department of Housing and Urban Development. The rate of single-family construction declined 3.9% from December to a seasonally adjusted annual rate of 731,000 units. However, there are currently 421,000 single-family homes under construction, a 15% increase from one year ago.

Multifamily starts (units with five or more properties) were down 2.5% in January to a seasonally adjusted annual rate of 354,000. But the 557,000 apartments currently in production is an increase of almost 19% on a year-over year basis.

New homes sales posted an unexpected decline in January, as consumers signed contracts to purchase new homes at an annual rate of 494,000 in January, a 9.2% decline in the rate compared to an elevated December. There was a significant decline in the West, which fell 32% compared to December. It appears that some sales accelerated into the final month of the year, resulting in December gains and January declines.

The inventory of new homes for sale continued to increase to 238,000, the highest since October 2009. The steady increase in inventory supports builders’ expectations for continued modest increases in new sales. The month’s supply increased to 5.8 months due to the fall in sales.

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