Fourth Quarter of 2022 Homeownership Rate at 65.9%

2023-01-31T12:17:25-06:00

By Na Zhao on January 31, 2023 • The Census Bureau’s Housing Vacancy Survey (CPS/HVS) reported the U.S. homeownership rate at 65.9% in the last quarter of 2022, which is statistically unchanged from the fourth quarter reading (66%). It is 0.4 percentage points higher than the rate in the fourth quarter of 2021. The national rental vacancy rate dipped slightly to 5.8%, and the homeowner vacancy rate inched down to 0.8%. The homeowner vacancy rate is still hovering near the lowest rate in the survey’s 66-year history (0.9%). The covid-induced data collection restrictions have ended in all areas as of the last quarter of 2021. However, technical issues involved with data collection changes limit useful comparisons of the data during the pandemic with the prior data series. We have particularly noted the homeownership rate data for the last three quarters of 2020 with separate dots below to denote these technical issues. We encourage readers to consider these data points separately from the remaining data series.  Nonetheless, the first three quarters of 2021 likely return the series to a more apples-to-apples comparison with the prior history of the series. The homeownership rates of adults in all age groups increased over the last year, except those householders aged 65 years and over experienced decrease. The homeownership rates among households aged 35-44 registered the largest gains among all age groups, from 61.4% to 62.2%, followed by householders aged 45-54 with 0.6 percentage point increase from 70% to 70.6%. Households aged less than 35 and the group aged 55-64 experienced a modest 0.4 percentage point increase separately. However, homeownership rates of householders aged 65+ showed a decline of 0.4 percentage points. The housing stock-based HVS revealed that the count of total households increased to 129.3 million in the fourth quarter of 2022 from 127.6 million a year ago. The gains are largely due to strong owner household formation (1.6 million increase), while renter households increased 151,000. Related ‹ Fewer Prospective Buyers Are Fully Engaged in Purchase Process

Fourth Quarter of 2022 Homeownership Rate at 65.9%2023-01-31T12:17:25-06:00

Fewer Prospective Buyers Are Fully Engaged in Purchase Process

2023-01-31T09:21:23-06:00

By Rose Quint on January 31, 2023 • Dwindling housing affordability in the fourth quarter of 2022 caused the share of prospective home buyers who are actively engaged in the purchase process (i.e. who have moved beyond just the planning phase) to drop to 46%, down from 59% a quarter earlier. The share of prospective buyers fully engaged in the buying process declined in every region between the third and fourth quarters of 2022: Northeast (62% to 50%), Midwest (53% to 42%), South (51% to 47%), and West (68% to 44%). After reaching a record high of 70% in the third quarter of 2022, the share of active buyers who have spent 3+ months searching for a home to buy eased a bit in the fourth quarter, down to 65%.  As demand has weakened, competition is letting up slightly for those still willing and able to buy a home. * Results come from the Housing Trends Report (HTR) – a research product created by the NAHB Economics team with the goal of measuring prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets.  The HTR is produced quarterly to track changes in buyers’ perceptions over time.  All data are derived from national polls of representative samples of American adults conducted for NAHB by Morning Consult.  Results are seasonally adjusted.  A description of the poll’s methodology and sample characteristics can be found here. This is the fifth in a series of six posts highlighting results for the 4th quarter of 2022.  Related ‹ Housing Affordability Goes SouthTags: housing economics, housing trends report

Fewer Prospective Buyers Are Fully Engaged in Purchase Process2023-01-31T09:21:23-06:00

Housing Affordability Goes South

2023-01-30T09:18:23-06:00

By Rose Quint on January 30, 2023 • Buyers’ outlook for housing affordability took a sharp negative turn in the final quarter of 2022, when a record high of 87% reported being able to afford fewer than 50% of the homes for-sale in their markets.  The remaining 13% can afford the majority of homes available, less than half the 31% who could in the third quarter. Affordability expectations between the third and fourth quarters of 2022 worsened in all regions.  The share of buyers able to afford less than half the homes available in their markets rose in the Northeast, from 66% to 89%; in the Midwest, from 83% to 84%; in the South, from 77% to 83%, and in the West, from 58% to 87%. * Results come from the Housing Trends Report (HTR) – a research product created by the NAHB Economics team with the goal of measuring prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets.  The HTR is produced quarterly to track changes in buyers’ perceptions over time.  All data are derived from national polls of representative samples of American adults conducted for NAHB by Morning Consult.  Results are seasonally adjusted.  A description of the poll’s methodology and sample characteristics can be found here. This is the fourth in a series of six posts highlighting results for the 4th quarter of 2022.   Related ‹ How Pandemic Changed Living Arrangements of Young AdultsTags: housing affordability, housing economics, housing trends report

Housing Affordability Goes South2023-01-30T09:18:23-06:00

How Pandemic Changed Living Arrangements of Young Adults

2023-01-30T08:30:22-06:00

NAHB’s analysis of headship rates from the latest 2021 American Community Survey (ACS) reveals that the Covid-19 pandemic unlocked some pent-up housing demand, especially among young adults ages 25 to 34. The pandemic-heightened desire for more spacious and independent living, as well as “excess” savings accumulated early in the lockdown stages of the pandemic, propelled headship rates of young adults by two percentage point to 43.1%, the highest level since 2010. Nevertheless, constrained by a persistent structural housing shortage and the inability of builders to ramp the production up to meet the surge in pent-up demand, headship rates did not reach the historic norms of 1990-2000s. Headship rates – share of people who are household heads – tell us how many households are formed for a given population. The higher the headship rate, the more households are formed, and the more housing units are needed to be built. For decades, U.S. headship rates of young adults have been declining, suggesting the U.S. housing market has been missing millions of new young adult households. Close to 46% of adults ages 25 to 34 were household heads in 1990 and 2000. Since that time, headship rates for this age group have been declining relentlessly and hit a bottom reading of 40.2% in 2017. Reflecting improving housing affordability, headship rates for young adults started to rise in 2018 before the pandemic rocked the housing market, but the gains were modest at that time.  Nevertheless, it was a hopeful indicator that the troublesome trend of rising shares of young adults living with parents, relatives or sharing house with roommates finally reversed. It took the pandemic to move hundreds of thousands of young adults out of their home sharing arrangements with parents, other relatives and roommates. Between 2019 and 2021, the share of young adults living with parents declined 1.5 percentage points from 21.2% to 19.7%, the share living with other relatives dropped from 5.1% to 4.8% and the share of those sharing housing with roommates decreased 1.4 percentage points from 7.2% to 5.8%. The pandemic-expedited formation of independent households by young adults is succinctly reflected in a 2.3 percentage point jump in headship rates. 40.3% adults ages 25 to 34 were household heads in 2019. Two years of the pandemic brought this share to 43.1%. The share of unmarried partners co-leading independent households also registered substantial gains over the pandemic, rising 1.1 percentage points from 6.2% to 7.3% over the course of 2 years. The share of married partners remained at a record low 17.1% reflecting a persistent demographic trend of declining marriage rates that remained largely unaffected by the pandemic. Despite these significant gains, headship rates remain low by historic standards of 1990-2000s when close to 46% of young adults were leading independent households.  It has been suggested that young adults merely postponed the decision to lead their own households, and what was the typical household-forming behavior in their late 20s a decade or two ago now happens in their late 30s. As of 2021, there is limited evidence to support this hypothesis. While household formation rates for the 35-44 year old group improved during the pandemic, they nevertheless remain historically low.  In fact, headship rates across all age groups did not reach their historic norms despite substantial gains registered during the two years of the Covid-19 pandemic. This suggests that while the pandemic was able to unlock some pent-up housing demand, especially among young adults, it was not released completely. Home builders could not ramp production up fast enough to meet the surge in pent-up demand. Instead, the unmet portion of the demand drove vacancy rates to record low levels.  NAHB Economics compared the 2021 abnormally low vacancy rates to historic norms and estimated that 1.5 million units, almost equally split between rental and for sale units, were required to close the gap and bring vacancy rates to long-run equilibrium levels. Related ‹ Personal Income Rises 0.2% in DecemberTags: economics, headship rates, house shareres, household formation, housing, pent-up demand, young adults living with parents

How Pandemic Changed Living Arrangements of Young Adults2023-01-30T08:30:22-06:00

Personal Income Rises 0.2% in December

2023-01-27T10:26:46-06:00

By Na Zhao on January 27, 2023 • The most recent data release from the Bureau of Economic Analysis (BEA) showed that personal income increased 0.2% in December. The pace of personal income growth slowed after reaching a 0.8% monthly gain in October. Gains in personal income are largely driven by increases in compensation of employees in December. Real disposable income, income remaining after adjusted for taxes and inflation, inched up 0.2% in December. However, on a year-over-year basis, real (inflation adjusted) disposable income has experienced almost 2 years of negative growth following March 2021. Personal consumption expenditures (PCE) dropped 0.2% in December after a 0.1% decrease in November. Real spending, adjusted to remove inflation, decreased 0.3% in December, implying the economy slowed at the end of 2022. While remaining low historically, the December personal savings rate (3.4%) increased to the highest level since May 2022. As Inflation almost wiped out compensation gains, people are dipping into savings to support spending. Related ‹ Buyers Expect Less Housing Availability

Personal Income Rises 0.2% in December2023-01-27T10:26:46-06:00

Buyers Expect Less Housing Availability

2023-01-27T09:16:26-06:00

By Rose Quint on January 27, 2023 • After a brief respite earlier in 2022, buyers’ expectations of housing availability soured again at the end of the year.  In the final quarter of 2022, the share of buyers who expect the home search to get easier in the months ahead dropped to 24%, down from 37% in the third quarter. In contrast, 66% expect the search to get harder/stay the same, up from 59%. Housing availability expectations deteriorated in three regions of the country.  In the Northeast, the share of buyers expecting an easier home search in the months ahead dropped from 44% in the third quarter to 28% in the fourth quarter.  In the Midwest, the share dropped from 33% to 19%; and in the West, from 52% to 27%.  The share edged up in the South, from 23% to 24%. Another way to measure buyers’ perceptions of housing inventory is to ask them if they are seeing more/fewer/the same number of homes for-sale (with desired features and price point) in their markets.  By this measure, buyers’ perceptions also worsened.  In the final quarter of 2022, 30% of buyers were seeing more such homes available, down from 36% a quarter earlier. Inventory perceptions weakened across all regions.  From the third to the final quarter of 2022, the share of buyers seeing more homes (with desired features and price point) on the market fell in the Northeast (43% to 26%), Midwest (30% to 23%), the South (33% to 32%), and West (42% to 31%). * Results come from the Housing Trends Report (HTR) – a research product created by the NAHB Economics team with the goal of measuring prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets.  The HTR is produced quarterly to track changes in buyers’ perceptions over time.  All data are derived from national polls of representative samples of American adults conducted for NAHB by Morning Consult.  Results are seasonally adjusted.  A description of the poll’s methodology and sample characteristics can be found here. This is the third in a series of six posts highlighting results for the 4th quarter of 2022.  See previous post on plans to buy and new vs. existing preferences. Related ‹ New Home Sales Uptick in December But Market Weakness RemainsTags: housing availability, housing economics, housing trends report

Buyers Expect Less Housing Availability2023-01-27T09:16:26-06:00

New Home Sales Uptick in December But Market Weakness Remains

2023-01-26T16:25:34-06:00

While new home sales posted a modest gain in December, elevated mortgage rates and higher construction costs continue to hinder housing affordability and put a damper on consumer demand. The U.S. Department of Housing and Urban Development and the U.S. Census Bureau estimated sales of newly built, single-family homes in December at a 616,000 seasonally adjusted annual pace, which is a 2.3% increase over downwardly revised November rate of 602,000 and is 26.6% below the December 2021 estimate of 839,000. A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the December reading of 616,000 units is the number of homes that would sell if this pace continued for the next 12 months. Sales-adjusted inventory levels are at an elevated 9.0 months’ supply in December. A measure near a 6.0 months’ supply is considered balanced. A year ago, there were just 35,000 completed, ready to occupy homes available for sale (not seasonally adjusted). By December 2022, that number increased 117% to 76,000, reflecting flagging demand and more standing inventory due to lower sales. Completed, ready to occupy inventory however remains just 16.5% of total inventory and homes under construction accounts for 62.6 of the inventory. Home that has not started construction when the sales contract is signed accounts for 20.9% of new homes sold in December. The median sales price decreased 3.7% to $442,100 in December but is up 7.8% compared to a year ago due to higher construction costs. The number of entry-level homes priced below $300,000 has been steadily falling in recent years. In 2021, 23% of new home sold were priced below $300,000. That share has now fallen to 10%. In 2022, there were 266,000 homes that were priced above $500,000 compared to 226,000 in 2021. Nationally, on a year-to-year basis, 644,000 new homes were sold in 2022. This is 16.4% below the 2021 level of 771,000. Regionally, on a year-to-year basis, new home sales fell in all four regions, down 8.2% in the Northeast, 22.1% in the Midwest, 13.0% in the South and 23.5% in the West. Related ‹ Economic Growth and Signs of Cooling Inflation End 2022Tags: economics, home building, housing, new home sales, sales, single-family

New Home Sales Uptick in December But Market Weakness Remains2023-01-26T16:25:34-06:00

Economic Growth and Signs of Cooling Inflation End 2022

2023-01-26T16:25:51-06:00

The U.S. economy continued to grow in the fourth quarter of 2022. As consumer spending and private inventory investment helped increase GDP, residential fixed investment dragged down the contribution to percent change in real GDP by 1.29 percentage points. More importantly, the data from the GDP report suggests that inflation is cooling. The GDP price index, rose 3.5% for the fourth quarter, down from a 9.0% increase in the second quarter and a 4.4% increase in the third quarter. Also, the Personal Consumption Expenditures (PCE) price Index, capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior, rose 3.2% in the fourth quarter, compared with a 7.5% increase in the first quarter of 2022. Looking forward, only a mild recession is expected for this cycle due to the Federal Reserve tightening financial conditions. According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 2.9% in the fourth quarter, following a 3.2% increase in the third quarter. In 2022, real GDP contracted in the first half and then rebounded. For the full year, real GDP increased 2.1% in 2022, down from a 5.9% increase in 2021 and slightly better than NAHB’s forecast of 1.9%. This quarter’s increase reflected increases in private inventory investment, consumer spending, government spending, and nonresidential fixed investment, partially offset by decreases in residential fixed investment and exports. The increase in private inventory investment was led by manufacturing as well as mining, utilities, and construction industries. Consumer spending rose at an annual rate of 2.1% in the fourth quarter, reflecting increases in both services and goods. While expenditures on services increased 2.6% at an annual rate, goods spending increased 1.1% at an annual rate, led by motor vehicles and parts (+7.4%). Meanwhile, federal government spending increased 6.2% in the fourth quarter, led by an increase in nondefense spending, while state and local government spending rose 2.3%, led by an increase in compensation of state and local government employees. The deceleration in real GDP in the fourth quarter mainly reflected a downturn in exports and decelerations in nonresidential fixed investment, state and local government spending and consumer spendings. Nonresidential fixed investment increased 0.7% in the fourth quarter. An increase in intellectual property products was partly offset by a decrease in equipment. Additionally, residential fixed investment (RFI) decreased 26.7% in the fourth quarter. This was the seventh consecutive quarter for which RFI subtracted from the headline growth rate for overall GDP. Within residential fixed investment, single-family structures declined 26.7% at an annual rate, multifamily structures rose 17.3% and other structures (specifically brokers’ commissions) decreased 23.1%. Related ‹ Housing Share of GDP Lower in the Fourth Quarter of 2022New Home Sales Uptick in December But Market Weakness Remains ›Tags: economics, gdp, inflation, macroeconomics, macroeconomy, residential fixed investment

Economic Growth and Signs of Cooling Inflation End 20222023-01-26T16:25:51-06:00

Housing Share of GDP Lower in the Fourth Quarter of 2022

2023-01-26T16:26:12-06:00

Housing’s share of the economy edged lower at the end of the fourth quarter of 2022. This is the second straight quarter where GDP increased in 2022, with overall GDP increasing at a 2.9% annual rate, following a 3.2% increase in the third quarter and 0.6% decrease in the second quarter. However, due to higher interest rates, housing’s share of GDP decreased to 15.9%, below the third quarter share of 16.1%. In the fourth quarter, the more cyclical home building and remodeling component – residential fixed investment (RFI) – decreased to 4.0% of GDP. Home construction continues to face challenges such as higher interest rates and decreased housing affordability. RFI subtracted 129 basis points from the headline GDP growth rate in the fourth quarter of 2022. In 2022, RFI made up 4.4% of GDP which is down from 4.8% in 2021. Housing services made up 11.8%, down from 11.9% in 2021. Housing’s share was 16.2% over the year, down from 16.7% in 2021. Housing-related activities contribute to GDP in two basic ways. The first is through residential fixed investment (RFI). RFI is effectively the measure of the home building, multifamily development, and remodeling contributions to GDP. It includes construction of new single-family and multifamily structures, residential remodeling, production of manufactured homes and brokers’ fees. For the fourth quarter, RFI was 4.0% of the economy, recording a $1.0 trillion seasonally adjusted annual pace. The second impact of housing on GDP is the measure of housing services, which includes gross rents (including utilities) paid by renters, and owners’ imputed rent (an estimate of how much it would cost to rent owner-occupied units) and utility payments. The inclusion of owners’ imputed rent is necessary from a national income accounting approach, because without this measure, increases in homeownership would result in declines for GDP. For the fourth quarter, housing services represented 11.9% of the economy or $3.1 trillion on seasonally adjusted annual basis. Taken together, housing’s share of GDP was 15.9% for the fourth quarter. Historically, RFI has averaged roughly 5% of GDP while housing services have averaged between 12% and 13%, for a combined 17% to 18% of GDP. These shares tend to vary over the business cycle. However, the housing share of GDP lagged during the post-Great Recession period due to underbuilding, particularly for the single-family sector. The recent expansion in housing activity has increased these shares to near historic norms. Related ‹ Popularity of New Homes Declines in Final Quarter of 2022Economic Growth and Signs of Cooling Inflation End 2022 ›Tags: homebuilding, housing, housing share of GDP, housing share of the economy

Housing Share of GDP Lower in the Fourth Quarter of 20222023-01-26T16:26:12-06:00

Popularity of New Homes Declines in Final Quarter of 2022

2023-01-25T09:14:25-06:00

By Rose Quint on January 25, 2023 • Interest for new home construction weakened in the fourth quarter of 2022, driven by high mortgage rates and elevated new home prices.  The latest Housing Trends Report (HTR) shows that the share of prospective buyers looking to buy new construction dropped to 20% in the final quarter of 2022, down from 27% a quarter earlier. The latest decline in interest for new homes happened nationwide. From the third to the final quarter of 2022, the share of prospective buyers looking to purchase a new home fell in all four regions, most prominently in the West (31% to 21%), but also in the Northeast (27% to 20%), Midwest (18% to 15%), and South (26% to 20%). * Results come from the Housing Trends Report (HTR) – a research product created by the NAHB Economics team with the goal of measuring prospective home buyers’ perceptions about the availability and affordability of homes for-sale in their markets.  The HTR is produced quarterly to track changes in buyers’ perceptions over time.  All data are derived from national polls of representative samples of American adults conducted for NAHB by Morning Consult.  Results are seasonally adjusted.  A description of the poll’s methodology and sample characteristics can be found here. This is the second in a series of six posts highlighting results for the 4th quarter of 2022.  See previous post on plans to buy. Related ‹ Employment Situation in December: State-Level AnalysisTags: housing economics, housing trends report

Popularity of New Homes Declines in Final Quarter of 20222023-01-25T09:14:25-06:00

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