County Level Permit Activity

June 12, 2014

The Census Bureau recently released annual estimates of building permits issued at the county level. In 2013, 1,807 counties and county equivalents saw an increase in the number of single family permits issued over the prior year while 858 saw a decrease. County equivalents include the 64 parishes in Louisiana, 16 boroughs in Alaska, and 42 independent cities.

The map below provides a visual of the change in annual permit estimates in 2013 for single family units. Counties in blue saw an increase in the number of permits issued for single family housing units while the counties in red saw a decrease in the number of permits issued for single family housing units. Counties that saw no change, no permit activity, or with insufficient data are white.

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In 2013, 820 counties and county equivalents saw an increase in the number of multifamily permits issued over the prior year while 675 saw a decrease. One thousand four hundred and seventy-nine counties saw no multifamily permit activity in 2012 and 2013.

The map below provides a visual of the change in annual permit estimates in 2013 for multifamily units. Again, counties in blue saw an increase in the number of permits issued for multifamily housing units while the counties in red saw a decrease in the number of permits issued for single-family housing units. Counties that saw no change, no permit activity, or with insufficient data are white.

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The issuance of housing permits is a key metric for the housing industry. The number of housing permits issued has risen in recent months and are over one million for the third consecutive month.

The Census Bureau collects data on building permits issued for new privately-owned residential housing units. The statistics are compiled through the Building Permit Survey (BPS) which is sent to permit-issuing jurisdictions. NAHB makes the most recent data available to the public for the states, the District of Columbia, and metropolitan statistical areas in the Construction Statistics section of NAHB.org.


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.

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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.


House Prices: the “Priced Out” Effect

February 10, 2012

NAHB Economics regularly receives requests to evaluate the effects of pending new regulations on housing affordability in local markets where regulatory actions are expected to raise home prices.  The NAHB Priced Out Model provides straightforward answers on the issue. The model estimates how many households can qualify for a new home mortgage before and after a house price increase. The resulting difference is the number of priced out households.    A new research paper from NAHB Economics discusses the priced out methodology in detail and presents the new 2012 estimates for the United States and 325 metropolitan areas.

The 2012 estimates show that nationally a $1,000 increase in the home price leads to pricing out about 232,447 households.  The size of the impacts across metropolitan areas ranges from more than 6,000 households in Chicago-Naperville-Joliet, IL-IN-WI to only 14 households in Napa, CA. These large differences mainly depend on metro population, new home prices and income distribution. The Chicago-Naperville-Joliet, IL-IN-WI metro area registers by far the largest priced out effect in the nation, in part because it is a relatively affordable metro area where 43 percent of households can afford a new home, and in part because it is a populous area with almost 3.5 million households residing there. On the other hand, in Napa, CA, where half of all new homes sell for more than $700,000, only 13 percent of households can afford new homes to begin with. So adding another thousand to the price disqualifies only 14 households from buying a new home.

Looking at the affordable metro areas, where more than fifty percent of households can afford new homes, the priced out effects are large and can often disqualify thousands of new home buyers. In Houston-Sugar Land-Baytown, TX, almost 4,700 households are priced out of the new home market as a result of prices rising by $1,000, in Atlanta-Sandy Springs-Marietta, GA – 3, 771 households. 

Even though the NAHB Priced Out Model does not estimate effects of new regulation on new home sales or housing starts, it highlights often overlooked effects of regulation on affordability of new homes.

The research paper also notes that every time a local or regional government raises construction costs by, for example, increasing building permit or impact fees, the final price of the home to the buyers usually goes up by more than the increase in the government fee. This is because other costs such as commissions and financing charges automatically rise as well. As shown in Table 1, these add-on charges range from 0 percent if a fee is imposed directly on buyers to 39 percent if cost is incurred when applying for site development approval. So that for every $1 increase in fees incurred, for example, when acquiring a building permit, the final price of a new home to its final customer rises by $1.20.


Metro Area New Home Prices

February 8, 2012

The U.S. Census Bureau regularly tracks new home prices for the United States, Census Regions and Divisions. However, there is no systematic measurement of new home prices by states or metropolitan areas. To fill the void, NAHB Economics periodically estimates median new home prices for metropolitan areas. The most recent estimates show that median new home prices range from less than $110,000 in Beaumont-Port Arthur, TX to more than $845,000 in Bridgeport-Stamford-Norwalk, CT (Table 1). The map below helps visualize the wide cross-country differences and reveals a familiar geographic pattern with most expensive new homes clustered in the coastal areas of California, Hawaii and the Northeast region.  The least expensive new homes are concentrated in Texas and the center of the United States.

To estimate median new home prices by metro NAHB Economics relies on data reported by the 2010 Census Bureau’s Building Permits Survey and Survey of Construction (SOC). The Permits Survey provides both the number and aggregate value of new housing units authorized by building permits and, thus, allows calculating average permit values for all metro areas. However, permit values do not include brokerage commissions, marketing/finance costs and may not include the cost of raw land. These additional costs are likely to differ across geographic areas but not available for metro areas. To account for these additional costs, NAHB Economics estimates ratios of median new home prices to average permit value for nine Census divisions available in the SOC and then uses the division-wide ratios to convert metro average permit values into median new home prices.


Improving Markets Index: Tyler, TX MSA

November 18, 2011

NAHB recently unveiled an index that tracks housing 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 third release, 30 markets are currently classified as improving under a conservative examination of local economic and housing market conditions.  Among these areas is the Tyler, Texas metropolitan statistical area (MSA).

The health of the Tyler housing market is due to a well diversified economy based on higher education, healthcare, the oil and gas industry and interestingly enough, retirees.  According to home builder Kevin Humphrey, “unlike in the mid-80s when our economy was badly hurt because of overreliance on the oil and gas industry, this time diversification has been the difference.”  He went on to say that, “with three hospitals, including a teaching hospital, and three colleges Tyler is more of a service based economy and  is better educated than ever and thus insulated  from booms and busts.”

Comparing educational attainment data from the 2000 Census to the 2009 American Community Survey confirms this.  The number of people with a high school diploma jumped from 27,578 to 39,004, and those with an associate degree rose from 8,219 to 12,032.  The number of those with a B.A. increased from 17,008 to 21,606 and those with graduate degrees climbed too, from 8,025 to 8,742.  This is clearly an area that is strongly focused on higher education coupled with many employers eager to hire newly minted graduates.   

The Texas constitution has also played a part in the health of the Tyler economy and the housing sector in particular.  According to Ben Robertson of the Central Title Company, “because the Constitution limits HELOCS to no more than 80% of house value, excessive borrowing was never an issue.  As a result, we avoided many of the problems and pitfalls other places experienced.  Moreover, our position as a growing regional retail hub along with the steady influx of retirees, which began in the mid-1990s, can’t be overemphasized.”  He went on to say that “the retirees have continued to come even during the past few years and have, along with the growing healthcare sector, been a boon to housing.”  As a result house prices have held up well during the downturn.  They are up 5.9% since the trough in December 2010 and are less than 1% off their all-time high set in June 2007. 

Improving economic conditions have resulted in payroll employment being just 2,200 down from its peak in November 2008 and up by 3.5% since the trough in July 2010.  Single family permitting activity is up 0.3% on a seasonally adjusted monthly average basis from the trough set in March 2009.  While new homes are being built in many parts of the Tyler MSA, for the past few decades, activity has been primarily centered in the southern part of both Smith County and the City of Tyler.  Recently, however, a noticeable uptick in building activity has been in evidence in the northern part of the county too.


Improving Markets Index: Jonesboro, AR MSA

November 10, 2011

NAHB recently unveiled an index that tracks housing 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 third release, 30 markets are currently classified as improving under a conservative examination of local economic and housing market conditions.  Among these areas is the Jonesboro, Arkansas metropolitan statistical area (MSA).

The health of the Jonesboro housing market is due to the presence of Arkansas State University, which employs 2,000 people; a large, growing and diversified industrial base specializing in food production (which has not felt the economic downturn like other industrial sectors); and its position as a regional healthcare center.  According to Todd Wilcox, a past President of the Arkansas Home Builder Association, “construction of the new $650 to $850 million NEA Baptist Memorial Hospital and cancer center is already making a huge difference in the community.  Many of the new jobs will be high paying and they are already hiring highly qualified staff and some are buying houses. If you are well educated, there are good jobs here”  

Comparing educational attainment data from the 2000 Census to the 2009 American Community Survey confirms this.  The number of people with a high school diploma jumped from 23,195 to 28,653, and those with some college increased from 12,518 to 14,348.  The number of people with an associate degree rose from 2,159 to 3,261, and those with a B.A. increased from 7,453 to 9,485. Finally, those with graduate degrees climbed too, from 4,224 to 5,387.  This is clearly an area that is heavily investing in education with a more highly skilled workforce than just a decade ago, 

According to home builder Steve Schmidt, “the increase in the number of professionals and healthcare workers can’t be overemphasized.  And, the fact that we are a regional banking hub, have a growing airport and recently attracted a wind turbine manufacturer speaks volumes about our high quality workforce.  He went on to say that “as a result of this, even at its worst, spec building slowed down but it never stopped.”  As a result house prices have held up well during the downturn.  They are up 1.1% since the trough in January 2010 and are just 1.7% off their all-time high set in June 2006. 

Improving economic conditions have resulted in payroll employment being just 1,600 down from its peak in July 2008 and up by 0.4% since the trough in February 2011.  Single family permitting activity is up a strong 2.7% on a seasonally adjusted monthly average basis from the trough set in May 2009.  While new homes are being built in many parts of the Jonesboro MSA, activity is centered in the northeast part of the city near the new hospital with additional activity in the Sage Meadow neighborhood.