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.


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.

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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%.

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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.


Rental Market Continues to Strengthen

June 6, 2013

The most recent data from the Survey of Market Absorption of Apartments (SOMA) showed that completions of privately financed, nonsubsidized, unfurnished rental apartments continued to climb in the fourth quarter of 2012. The reported 31,600 completions in buildings with 5+ units were slightly above the third quarter level and more than doubled since the fourth quarter of 2011. At the same time, the absorption rates (units rented or sold after construction of the property is complete) remained high, close to 65 percent. Averaged over 2012, the apartment absorption rates reached 64 percent, a level not seen since 2001.

rentals

The condo and co-ops completions remained at historically low levels – only 1,800 units were completed in the fourth quarter of 2012. However, the condo absorption rates improved remarkably. About 78 percent of the condominiums completed in the fourth quarter of 2012 were sold within three months of completions. This rate is 20 percent higher from the previous quarter and 33 percent higher from a year ago.  Over 2012 the condo absorption rates have averaged around 66 percent, marking the highest reading since 2006. Leaner inventories should bolster condo and co-op construction activity going forward, but we expect these units will maintain a diminished share of overall 5+ multifamily production.

condo

The SOMA also reported that approximately 8,100 federally subsidized or tax credit units were completed in the fourth quarter of 2012. This represents a decline of 3,400 units since the previous quarter and 4,100 since a year ago.

types


House Prices Continue to Rebound

May 23, 2013

Nationally, house prices continued to rise in March, contributing to the overall recovery currently underway in U.S. house prices. According to the most recent release by the Federal Housing Finance Agency (FHFA), U.S. house prices rose by 1.3% on a month-over-month seasonally adjusted basis in March and 1.9% on quarter-over-quarter basis. This is the fourteenth consecutive monthly rise and the seventh consecutive quarterly increase for the House Price Index – Purchase Only (HPI). Over the past year house prices have risen by 6.7%.

The March increase in house prices was geographically widespread, increasing in every division of the country. The Census Bureau uses divisions to segment the four major regions of the country; Northeast, Midwest, South, and West. As Chart 1 illustrates, every division experienced a month-over-month increase in house prices, furthering the price recovery underway in each division.

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Although house prices have extended their gains, they have not fully recovered their pre-bust peak. However, it’s clear from the chart that price appreciation accelerated during the boom compared to earlier years. In hindsight those gains were unsustainable and the declines represent a correction, purging the speculative bubble. The recent increases are based on a return to a fundamental balance between house prices and incomes. According to the HPI, house prices are now on par with those that prevailed in November 2004.

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

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Improving Markets Index: Erie, PA MSA

September 27, 2012

NAHB recently unveiled an index that tracks housing markets on the mend, the NAHB/First American Improving Markets Index (IMI).  The IMI highlights the fact that housing markets are local and that there are metropolitan areas where an economic recovery is underway.  The index measures three readily available monthly data series that are independently collected and indicative of improving economic conditions.  The three series are employment, house prices and single family housing permit growth.

For the twelfth release , 99 markets are classified as improving under a conservative examination of local economic and housing market conditions.  Among these areas is the Erie, Pennsylvania metropolitan statistical area (MSA).

The improvement of the Erie economy and its housing market is due to several factors including a recovery in manufacturing, which employs about 25% of the workforce, its position as a major retail center, drawing shoppers from the tri-state area (OH, NY and PA) as well as Canada, and its position as a fast growing regional healthcare center with a number of large hospitals including UPMC Hamot, Millcreek Community Hospital, and St. Vincent Medical Center.  In addition there is Saint Mary’s, a large nursing home with numerous facilities and Regional Health Service Inc. with many offices scatterd across the area and the already large and expanding  Lake Erie College of Osteopathic Medicine (LECOM) which has a medical school, school of pharmacy and a new dental school.  Erie also benefits from a steady stream of tourists who travel from Cleveland, Pittsburgh and Buffalo to enjoy access to Lake Erie and beautiful Presque Isle.  Erie is also home to a number of colleges including (Penn State) Berhend College, Gannon University, Mercyhurst University and Edinboro University.  Lastly, Erie is home to the Erie Insurance Group, GE Transportation Systems which makes among other things locomotives, Plastek Industries and a large Lord Corporation facility.            

According to home builder Mike Corsi, Vice President of the C & C Development Group, “things are definitely getting better.  The combination of growth at the hospitals and universities and turnover at our large firms has guaranteed a steady stream of well paid households that continually relocate here for work.  In addition, growth at LECON has resulted in a shortage of rental apartments for the students and increased demand for housing from new faculty that frequently results in a demand for new housing.   We are also witnessing a rise in remodeling activity.  It’s being caused by the simultaneous realization by many home owners that they will be staying their existing house for a while longer, and that home prices are on the upswing.”  He concluded by saying “tourism also is a big help.  While many tourists come just for the weekend to enjoy the water, the vineyards or skiing, others buy cottages and stimulate the economy in that way.”              

According to Jim Grieshober, Owner of J.E. Grieshober Plumbing-Hydronics , “Erie never saw huge increases in real estate prices and as a result has not seen much in the way of a decline either.  We miss the highs and the lows.  And, of late pent-up demand is starting to make itself felt among those who are more secure in their job and can get a loan.  Things would be even better if only the credit situation improved and if new regulations that add thousands and thousands to the price of a new house had not been passed.  That being said, the cost of living is low, Lake Erie is quite a draw and there is not much inventory around.”  Whatever the cause, house prices are definitely firming.  They are up 1.4% since the trough in February 2011 and are off less than 3.7% from their all–time high set in December 2009.    

Improving economic conditions have resulted in payroll employment being down exactly 2% from its peak in June 2000 and up by a healthy 9.9% since the trough in January 2010.  Single family permitting activity is up 8.0% on a seasonally adjusted monthly average basis from the trough set in April 2011.  While new homes are being built in many parts of Erie, activity has been primarily centered in a ring around the outskirts of Erie extending from Girard Township, Fairview Township and Millcreek Township in the west, through Summit Township in the south and Harborcreek Township in the east.


Improving Markets Index: Palm Bay, FL MSA

September 20, 2012

NAHB recently unveiled an index that tracks housing markets on the mend, the NAHB/First American Improving Markets Index (IMI).  The IMI highlights the fact that housing markets are local and that there are metropolitan areas where an economic recovery is underway.  The index measures three readily available monthly data series that are independently collected and indicative of improving economic conditions.  The three series are employment, house prices and single family housing permit growth.

For the twelfth release , 99 markets are classified as improving under a conservative examination of local economic and housing market conditions.  Among these areas is the Palm Bay-Melbourne-Titusville, Florida metropolitan statistical area (MSA).

The turnaround in the Brevard County economy and its housing market is due to several factors including a steady rise in tourism and recreation expenditures compared to 2010 including a rise of almost 10% in the number of multi-day cruise passenger traffic departing from Port Canaveral.  The area also benefits from its position as a large regional healthcare center with three large healthcare systems including Health First, Inc., Holmes Regional Medical Center and Wuesthoff Health System, Inc., which together employ close to 11,000 persons.  Brevard County is also is home to Patrick Air Force Base, Cape Canaveral Air Force Station, the US Air Force Malabar Test Facility, a naval Trident ballistic missile submarine turning basin and a Naval Ordnance Test Unit.  Brevard County also boasts a large number of high-tech firms such as Harris Corporation, Boeing, Northrop Grumman, Lockheed-Martin, Rockwell-Collins, Honeywell and many other firms that have recently grown and have largely made up for the gradual decline and eventual loss of the Space Shuttle program.   

According to home builder David Armstrong, President of Armstrong Custom Homes, “things are definitely getting better.  The combination of an active and aggressive Economic Development Corporation, the creation of the duty-free zone in Titusville and the expansion of many of the high-tech firms here are helping us backfill the loss of the space center.  In addition, the announcement that Space-X will be expanding here has also boosted buyer spirits.  We are also seeing a rise in remodeling.  Many owners now convinced that they will be staying their existing house for a while longer, are adding a second floor and or updating kitchens and bathrooms.  Another factor in the turnaround is that the national news is getting better and buyers are tired of waiting and are not getting younger.”  He concluded by saying “another indicator of our improving economy is the increase in small business activity.  More new business are opening and that too is helping.”              

According to Marcia Bartley, President of All Pro Title, Inc., “the inventory of existing homes is declining and that is putting upward pressure on prices.  On top of that there are no spec homes being built and the foreclosures that are on the market tend to be in poor condition and buyers are no longer willing to tolerate the false starts and delays that come with trying to purchase one of them.  As a result of these factors, appraisals are starting to rise and that gives prospective buyers increased confidence and as a result, a feeling of cautious optimism is starting to take hold.”  Whatever the cause, house prices are definitely firming.  They are up 6.4% since the trough in April 2011 and look to continue rising through the end of this year and into 2013 and beyond.    

Improving economic conditions have resulted in payroll employment being down less than 11% from its peak in May 2006 and up by 1.3% since the trough in December 2011.  Single family permitting activity is up 2.0% on a seasonally adjusted monthly average basis from the trough set in April 2009.  While new homes are being built in many parts of Brevard County, activity has been primarily centered in the Viera area where there is a new VA clinic, a new hospital, the government center, excellent shopping and is where the spring training home of the Washington Nationals is.  West Melbourne, between Melbourne and Palm Bay, is also a place where new construction activity is pronounced, in large part due to the excellent school system.


Improving Markets Index: Canton, OH MSA

September 5, 2012

NAHB recently unveiled an index that tracks housing markets on the mend, the NAHB/First American Improving Markets Index (IMI).  The IMI is intended to draw attention to the fact that housing markets are local and that there are metropolitan areas where economic recovery is underway.  The index measures three readily available monthly data series that are independently collected and are indicative of improving economic health.  The three are employment, house prices and single family housing permit growth.

For the eleventh release , 80 markets are currently classified as improving under a conservative examination of local economic and housing market conditions.  Among these areas is the Canton-Masillion, Ohio metropolitan statistical area (MSA).

The health of the Canton housing market is in part due to its business friendly environment and low state and local taxes, and the presence of four growing colleges and universities including Stark State College with a student population of over 15,000, and Walsh University with an enrollment of about 3,000.  Canton also benefits from being a growing regional healthcare center with Aultman Hospital and its 5,000 employees as well as Mercy Medical.  However of late, Canton’s growth is primarily, due to the all important Utica shale, a rock layer several thousand feet below the Marcellus shale, and which lies directly below Canton.  As a result Chesapeake Energy, Exxon, Anadarko, Chevron and others are starting to drill and other energy related firms including Slumberger, Baker Hughes, Michael Baker Corporation, and J-W Wireline are all setting up shop.  Canton also benefits from the presence of national firms like Belden Brick, Marathon Petroleum and GE Capital and is the Global headquarters of The Timkin Company and Diebold Incorporated.     

According to home builder James Rudo, President of VictoryGate Custom Homes, “drilling companies as well as oil and gas service companies are setting up operations.  While the Utica shale is just starting to be exploited through fracking and horizontal drilling, the effects of it are being felt in many ways.  For example field managers and executives are beginning to relocate here and these new households not only need housing but often want new houses.”  He went on to say that, “there is not much standing inventory and what little exists is in poor shape.  As a result it is often cheaper to build a new home than buy an existing house and remodel it.  As a result holding a spec is hard as everything sells.  As a matter of fact, things are so good we just hired a new supervisor.”  He closed by saying “referrals are a huge part of our business and we augment it with some light advertising.     

According to Barbara Bennett, President, a managing partner at the engineering firm Hammontree & Associated, Limited, “because of the Utica shale our hotels are full, are restaurants are all busy, there are no vacant storage facilities or warehouses, and there is a constant shortage of truck drivers.  In addition, there is a dramatic up-tick in industrial development and infrastructure improvements.  As a result of this added activity, not to mention the cashing of royalty checks by landowners, the local economy is more vigorous than ever.  As a matter of fact, we are currently working with developers on two brand new subdivisions.”  As a result, house prices have held up well over the past few years.  Prices are up 1.6% since the trough in January 2011 and are off less than 19% from their all-time high set in June 2006.     

Improving economic conditions have resulted in payroll employment being off just 6.2% from the high of the past decade set in July 2002 and up by 7.8% since the trough in October 2009.  Single family permitting activity is up a robust 9.7% on a seasonally adjusted monthly average basis from the trough set in November 2011.  While new homes are being built in many parts of the Canton MSA, activity has been primarily centered in northern Stark County including the City of Green and Jackson Township.


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