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Residential Market Posts Big Gains

Tuesday, June 25, 2013

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U.S. home builders are more confident and they’re proving it, according to the latest economic indicators.

In May, builders applied for new permits to build single-family homes at the fastest pace seen in five years, according to Commerce Department figures released June 18.

Moreover, builder confidence hit its highest level since April 2006 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) announced June 17.

Housing Starts Up

Nationwide housing production in May rose 6.8 percent, to reach a seasonally adjusted annual rate of 914,000 total units, after declining 14.8 percent in April.

Single family construction
Dwight Burdette / Wikimedia Commons

Housing starts in the U.S. rose 6.8 percent in May. Permits declined 3.1 percent.

For the year, housing starts are up 28.1 percent, according to the Commerce Department.

By sector, single-family housing starts held at a solid, but virtually unchanged pace of 599,000 units in May, while multifamily production bounced back from an over-correction in April with a 21.6 percent gain to 315,000 units, according to the NAHB.

From a regional perspective, production activity was mixed in the month, posting gains of 17.8 percent in the South and 5.7 percent in the West and declines of 9.0 percent in the Northeast and 13.7 percent in the Midwest.

Permit Activity Mixed

Applications for building permits—a sign of future construction—declined 3.1 percent to a seasonally adjusted annual rate of 974,000 units in May. Still, the permit rate is 20.8 percent above the May 2012 estimate of 806,000.


Experts say builders are seeing better market conditions as demand for new homes increases.

May’s reduction was due to a 10.0 percent decline to 352,000 units on the multifamily side following a spike in that sector’s permits in the previous month, according to the NAHB.

Meanwhile, single-family permits inched up 1.3 percent to hit 622,000 units—the best pace recorded in five years.

Regionally, permits rose 4.0 percent in the Northeast, but declined 6.1 percent in the Midwest, 3.3 percent in the South and 3.5 percent in the West in May.

Builder Confidence Swells

Builder confidence in the market for newly-built single-family homes surged eight points to a reading of 52 on HMI for June, according to NAHB.

“Builders are experiencing some relief in the headwinds that are holding back a more robust recovery,” said David Crowe, NAHB chief economist.

Any reading above 50 indicates that more builders view sales conditions as good vs. poor.

HMI chart

The Housing Market Index was above 50 in June, for the first time since April 2006.

“This is the first time the HMI has been above 50 since April 2006, and surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases,” said NAHB Chairman Rick Judson, a home builder and developer from Charlotte, NC.

Derived from a monthly survey that NAHB has been conducting for 25 years, the HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”

Also, the survey asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”

June Survey: By the Numbers

Every HMI component posted gains in June, NAHB reported.

The index gauging current sales conditions increased eight points to 56, while the index measuring expectations for future sales rose nine points to 61—its highest level since March 2006. The index gauging traffic of prospective buyers rose seven points to 40.

Regionally, builder confidence rose in three out of four regions, with the Northeast and Midwest posting a one-point and three-point gain to 37 and 47, respectively. The South registered a four point gain to 46 while the West fell one point to 48, the NAHB reported.


Tagged categories: Economy; Good Technical Practice; Market; Market trends; National Association of Home Builders (NAHB); Residential Construction; Residential contractors; Trends

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