Starts, permits and new home sales increased in April for the first time in many months, confirming that the housing market is stabilizing at the job site although not yet downstream in the real estate market. A few more months of random up and down data reports are likely before a sustained recovery begins. Many of the necessary recovery conditions are now in place. Home affordability is very high, home prices are plunging bringing some buyers back into the market and consumer income, while no longer growing with the impact of rising energy cost, remains high. Now, only confidence needs to improve to set up a sustained market recovery.
At this late stage of the housing downturn, starts consists of still large declines in the overbuilt housing markets in the southeast and southwest and economically troubled Great Lakes Region and steady or modestly rising starts in most of the rest of the country.
High fuel costs have become an additional restraint on home purchases. Beyond the negative impact on real income, savings and confidence, $4.00/gallon gasoline raises the commuting cost from the suburbs where most of the surplus homes for sale are located. The consensus energy outlook is that gasoline prices will peak in June but remain in the $3.50 range for many more months.
The forecast expects a 14.9% fall in residential construction spending, including remodeling, this year and a 15.4% gain next year with up to one-third of this rise due to higher costs, both materials and builders’ margins. Housing starts, 1.032 million in April, will rise to over 1.1 million by year end and to nearly 1.4 million by the end of 2009. This recoups only about 30%of the decline in 2006-08.
U.S. Residential Building Construction
(thousands of units)
| Monthly Figures (1) (latest actual values) |
|||||||
| Actual | Forecast | ||||||
| Mar-08 | Apr-08 | 2005 | 2006 | 2007 | 2008 | 2009 | |
| Northeast (% change is period versus same period, previous year) |
97 | 117 | 189 | 171 | 143 | 127 | 144 |
| -24.8% | -28.2% | 7.4% | -9.7% | -16.3% | -11.3% | 13.6% | |
| Midwest | 121 | 144 | 357 | 284 | 206 | 151 | 198 |
| -46.5% | -30.1% | 0.5% | -20.5% | -27.5% | -26.8% | 31.0% | |
| South | 498 | 516 | 1,001 | 912 | 675 | 543 | 658 |
| -34.0% | -29.5% | 10.4% | -8.9% | -26.0% | -19.6% | 21.3% | |
| West | 227 | 269 | 551 | 444 | 317 | 225 | 274 |
| -39.3% | -30.1% | 7.3% | -19.4% | -28.5% | -29.3% | 22.0% | |
| Total | 954 | 1,032 | 2,073 | 1,811 | 1,341 | 1047 | 1274 |
| -36.1% | -30.6% | 6.3% | -12.6% | -26.0% | -21.9% | 21.7% | |
| Total Single-family | 704 | 692 | 1719 | 1,474 | 1,034 | 724 | 928 |
| -41.1% | -42.2% | 7.1% | -14.3% | -29.8% | -30.0% | 28.1% | |
| Total Multi-family | 250 | 340 | 354 | 338 | 307 | 323 | 346 |
| -15.5% | 17.6% | 2.6% | -4.7% | -9.2% | 5.3% | 7.3% | |
| New Home Sales (2) | 509 | 526 | 1,279 | 1,049 | 764 | 594 | 712.5 |
| -38.7% | -42.0% | 6.5% | -18.0% | -27.2% | -22.3% | 20.0% | |
| Manufactured Home Shipments | 93 | 90 | 148 | 118 | 95 | 93 | 103 |
| -5.3% | -5.3% | 13.8% | -20.0% | -19.3% | -2.7% | 11.0% | |
(1) Monthly figures are seasonally adjusted at annual rates (SAAR figures).
(2) Based on a survey of homebuilders; excludes homes built under contract and multi-family rental units).
Actuals: U.S. Department of Commerce, National Association of Realtors, Freddie Mac.
Forecasts and table: Reed Construction Data.
Mfg. home shipment data for Feb. and Mar.
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