Lift in Housing Starts Indicates Inventory Relief

Housing starts neared their postrecession high in October, with expectations that the new-home market will soon provide much-needed inventory relief, the Commerce Department reports.

Starts, which reflect combined totals within the single-family and multifamily sectors, jumped 13.7 percent in October to a seasonally adjusted annual rate of 1.29 million. That’s the highest reading for new-home production since October 2016, when starts had reached a high of 1.33 million.

Starts for single-family homes in October increased 5.3 percent last month, reaching a seasonally adjusted annual rate of 877,000. They are now up 8.4 percent from a year ago. Multifamily starts surged nearly 37 percent, reaching 413,000 units in October after a weak September production report.

 

Source: National Association of Home Builders

Most Popular Exteriors on New Homes

Vinyl is the most widely used exterior on new single-family homes, according to the latest Census Bureau data. Vinyl (which includes vinyl-covered aluminum) was used for siding material on 27 percent of new homes nationwide in 2015, followed by stucco at 25 percent, brick or brick veneer at 22 percent, and fiber cement siding at 19 percent. Wood or wood products accounted for 5 percent.

The materials used can vary drastically from region to region. For example, stucco was the most popular siding material in the Pacific and Mountain regions, at 57 percent and 55 percent, respectively. In the East and West South Central regions, at least 55 percent of new single-family homes last year used brick or brick veneer.

View map from the National Association of Home Builders to see the most popular siding materials by region at: “Vinyl Is the Most Widely Used Exterior on New Homes,” National Association of Home Builders’ Eye on Housing blog (7/7/16)

Survey Reveals Top Remodeling Projects

Bathroom remodeling edged out kitchens as the most popular type of remodeling project, according to a new survey by the National Association of Home Builders.

Through 2009 kitchens dominated home remodeling projects as the most common, that trend switched in 2010 and then again in 2014 as bathroom remodeling takes the throne.

Bathroom remodeling was cited as the most common remodeling project in 2014 by 78 percent of remodelers, just barely edging out kitchen remodels at 77 percent, NAHB reports. Other types of remodeling projects trail kitchens and baths by a wide margin.

Source: “Remodeling Jobs – Baths Edge Kitchens Again for Top Spot,” National Association of Home Builders Eye on Housing blog (May 1, 2015)

Fannie Mae Predicts ‘Cheap Loan Rates to Remain’

Mortgage financing giant Fannie Mae dropped its mortgage rate forecast for next year about two-tenths of a percentage points from its prior forecast, projecting 30-year fixed rates will remain lower than initially thought, at about 4.3 percent next year.

This will cheapen the borrowing costs for home buyers and refinancers, helping to make home ownership more affordable. However, with the forecasted rate drop, Fannie Mae economists didn’t adjust the forecast for total home sales for 2015.

“The housing market continues to grind its way upward, but we don’t expect a breakout performance in 2015 as the fundamentals remain somewhat muted,” says Doug Duncan, Fannie’s chief economist. “We believe that mortgage activity in 2015 will be very similar to 2014.”

But will another year of low rates spur more home buying?

“The relatively lower rates after the spikes of the early 80s did stimulate buying,” says David Crowe, chief economist at the National Association of Home Builders. “This time around, the low rates are still not as low as they [recently] were so the relative advantage is not as great. … [Also] the current situation is much more driven by the availability of mortgage credit than the cost.”

Source: “Fannie Cuts Mortgage-Rate Outlook, But Home Buyers May not Bite,” MarketWatch (Nov. 20, 2014)

Why Buyers Are Annoyed With New Homes

An increasing labor shortage among homebuilders reportedly is causing more new homes to be delivered late, and buyers say they’re getting frustrated that builders don’t come back to fix common issues such as sticky doors and loose floor tiles.

“Builder tardiness” is a growing problem because the economic downturn drove hundreds of thousands of craftsmen and laborers away from housing and into other industries — and they’ve yet to return to construction, the Los Angeles Times reports. The labor shortage has become “substantially more widespread” since last year, according to the National Association of Home Builders.

“The incidence of reported shortages is now surprisingly high relative to the current state of new-home construction,” NAHB economist Paul Emrath noted in a recent report.

About two out of every three builders report paying higher wages due to the labor shortage. Nearly as many say they’ve had to raise home prices, too. Builders report that their direct labor or employee costs have risen 2.9 percent over the last six months, while subcontractor costs have increased 3.8 percent, according to NAHB.

On average, single-family builders employ about 25 trades when constructing a residential house, and more than half of builders subcontract at least 75 percent of the construction work, according to NAHB. Builders report the greatest shortages in carpenters and framing contractors.

Source: “Housing Labor Shortage Turning More Severe, Boosting Home Prices,” Los Angeles Times (July 26, 2014)

‘Built-to-Rent Homes’ Come Down Off Highs

The market for single-family homes that are built to be rentals is showing signs of declining from its post-recession highs, according to the National Association of Home Builders.

The market share for built-to-rent single-family homes stood at 3.3 percent in the first quarter of 2014. That remains higher than historical averages of 2.8 percent but has dropped from its 5.8 percent share a year ago, NAHB’s analysis shows.

During the recession, the share of built-to-rent homes soared while the foreclosure and financial crises forced more Americans to become renters.

But “it appears the market is returning to historical averages after recent peaks in this form of construction,” according to NAHB’s Eye on Housing blog.

About 20,000 built-to-rent homes were started nationwide in the last four quarters.

Source: “Single-Family Built for Rent Market Remains Off Recent Market Highs,” National Association of Home Builders’ Eye on Housing Blog (May 26, 2014)

Lot Shortages Make Building Costs Higher

Homebuilders who did not buy up land during the housing downturn are facing much higher costs today — and that may get passed on to home buyers.

“Builders waited so long to buy land that, when the recovery happened, it was very strong and they got caught short,” Tobias Welo, a portfolio manager at Fidelity Investments.

The cost of land is nearly 22 percent of the final sales price of a new home, and 100 percent of that cost usually gets passed down to the buyer, the National Association of Home Builders has said in the past.

Some builders used the housing downturn as a time to snatch up land at lower costs. For example, Lennar, the nation’s third-largest builder, and Toll Brothers, the largest luxury builder, ramped up their land banks with several low-cost land acquisitions during the 2008-10 economic downturn, Reuters reports. Toll Brothers has one of the largest land banks — has enough to last more than 12 years compared to the 7.4-year average among the top five U.S. homebuilders, according to data from Tri Pointe Homes Inc.

Due to the land shortage, builders have been raising prices. D.R. Horton saw its average sales price increase 10 percent to $275,600 during the three-month period ending Dec. 31. PulteGroup’s revenue jumped 13 percent because of a rise in its average sales price, despite the builder slowing the pace of construction, Reuters reports.

“The run-up in land prices has been huge. What someone paid for land last year may not even work today,” says Scott Laurie, chief executive of privately owned California-based builder Olson Homes. Laurie says his company plans to spend at least 25 percent more on land purchases this year compared to last year.

Some big builders are responding by buying smaller, privately owned builders who may own more land but have limited access to finance construction. Ryland Group Inc. plans to purchase other homebuilders to ramp up its land bank. Tri Pointe and Toll Brothers have been acquiring smaller builders to gain more developed lots in California.

Source: “Scarce Land Could Blunt Recovery for U.S. Homebuilders,” Reuters (April 15, 2014)

Recovery Spreads Beyond Energy States

“It’s a promising sign to see areas like Los Angeles and San Jose joining the top ten largest [metros] showing a recovery,” says NAHB Chief Economist David Crowe. “We still expect 2014 to be a strong year for housing and to aid in the overall economic recovery. The job market continues to mend and, with that, we will see a steady release of pent-up demand of buyers.”

The index shows that 59 of the 350 metro markets tracked by the index have returned to or exceeded their last normal levels of economic and housing activity.

The index examines current housing permit, price, and employment data to see how close markets are performing at their historical normal levels.

Also, 28 percent of metro areas tracked had their score rise this month. Eighty-three percent have shown an improvement over the past year as well.

“Things are getting slowly better overall,” says NAHB Chairman Kevin Kelly. “And with the housing market now entering the spring buying season, the fact that the nation’s economy is headed in the right direction is a very promising sign.”

Source: National Association of Home Builders

Home Owners Love Their ‘Green Homes’

How satisfied are home owners who bought a green-certified home? A recent survey finds that the majority love their homes and would even buy another green home.

According the report from GuildQuality, a customer surveying company for residential real estate, 94 percent of home owners who purchased a National Green Building Standard (NGBS) certified green home built within the past three years said they would recommend a green home to a friend, and 92 percent said they’d go green again in their next home purchase. Home owners were most satisfied with their low utility bills, energy efficiency, and better insulation, according to the survey.

The report, commissioned by the National Association of Home Builders, found that 71 percent of respondents believe that green homes are, overall, of higher quality, and 90 percent were satisfied knowing they “did the right thing” in buying a green home.

“Historically, studies have focused on interest in green among buyers in the market or on trends as reported by industry professionals,” said Matt Belcher, Co-Chair of NAHB’s Energy & Green Building Subcommittee and a builder from Wildwood, Mo. “While that’s certainly important information for all those in the industry, it doesn’t always get to the heart of what new buyers want to know, which is: ‘How satisfied are green homeowners with their decision?’ This data provides groundbreaking information that can be of value to the general public as well as the industry.”

Source: “National Green Building Standard Certified Homes Report on Survey Responses,” GuildQuality

Smaller Housing Markets Leading Recovery

As more housing markets return to normal, smaller markets are leading the pack, according to the National Association of Home Builders/First American Leading Markets Index. The latest index shows that 56 of the 350 metro areas evaluated nationwide have returned to or exceeded their normal levels of economic and housing activity.

“Forty-five percent of metro areas are recovering at a faster pace than the nation as a whole, with smaller markets leading the way,” says NAHB Chief Economist David Crowe. “Of the 56 markets that are at or above normal levels, 48 of them have populations that are less than 500,000, and many of these local metros are fueled by a strong energy sector, which is producing solid job and economic growth.”

The LMI evaluates more than 350 markets to gauge whether they are approaching or exceeding their previous normal levels of economic and housing activity, taking into account home prices, employment levels, and housing permits.

More information  at source: National Association of Home Builders