Residential Building Material Price Increase to Start 2024

2024-02-16T12:23:16-06:00

By Jesse Wade on February 16, 2024 • The latest Producer Price Index, reported by U.S. Bureau of Labor Statistics, indicated that inputs to residential construction, goods less foods and energy (residential building materials, not seasonally adjusted) increased 1.28% between December 2023 and January 2024. This was the largest monthly change for the index since March of 2022, when it increased by 2.07%. The year-over-year change of the index was 1.91%, the largest yearly increase since February of 2023. The seasonally adjusted Producer Price Index for final demand goods decreased 0.2% in January, a fourth consecutive decrease for the index. The PPI for final demand energy decreased 1.7%, while final demand goods less foods and energy increased 0.3% in January. On a yearly basis, between January 2023 and 2024, the PPI for final demand goods was down 1.7%, with final demand energy down 9.8%, and final demand goods less foods and energy up 1.6%. The seasonally adjusted PPI for softwood lumber continued to fall as it decreased for the 6th consecutive month, down 1.82% in January. Over the past year, softwood lumber prices have been down 8.98%. Earlier this month, the U.S. Department of Commerce signaled plans to increase tariffs on Canadian softwood lumber from 8.05% to 13.86% this summer or early fall. The not seasonally adjusted PPI for gypsum building materials did not change over the month of January, but was 1.92% lower than last year. Ready-mix concrete seasonally adjusted prices increased in January 1.37% after falling 1.27% in December. On a yearly basis, ready-mix concrete was up 6.88% from January 2023. The not seasonally adjusted PPI for steel mill products continued to rise for the second straight month, up 5.4% in January. Over the year, steel mill products are up 4.39%. ‹ Best Quarter for Townhouse Construction Since 2006Tags: construction costs, inflation, lumber prices, ppi, producer price index, producer prices, ready-mix concrete, softwood lumber, steel

Residential Building Material Price Increase to Start 20242024-02-16T12:23:16-06:00

Best Quarter for Townhouse Construction Since 2006

2024-02-16T11:15:51-06:00

By Robert Dietz on February 16, 2024 • Despite weakness for single-family construction in 2023, townhouse construction recorded the best quarter for starts in more than 17 years. According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the fourth quarter of 2023, single-family attached starts totaled 47,000, which is 27% higher than the fourth quarter of 2022. This represents an acceleration over the last four quarters, during which townhouse construction starts totaled a strong 158,000 homes, which is almost 7% higher than the prior four-quarter period (148,000).  Townhouses made up almost 20% of total housing starts in the final quarter of 2023. Using a one-year moving average, the market share of newly-built townhouses stood at 16.7% of all single-family starts for the fourth quarter. With the recent gains, the four-quarter moving average market share is the highest on record, for data going back to 1985. Prior to the current cycle, the peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6%, on a one-year moving average basis. This high point was set after a fairly consistent increase in the share beginning in the early 1990s. The long-run prospects for townhouse construction are positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities.  Where it can be zoned, it can be built. ‹ Housing Starts Decline in January on Multifamily WeaknessTags: economics, home building, housing, townhome, townhouse

Best Quarter for Townhouse Construction Since 20062024-02-16T11:15:51-06:00

Single-Family and Multifamily Permits Down in 2023

2024-02-14T09:14:59-06:00

Over 2023, the total number of single-family permits issued year-to-date (YTD) nationwide reached 909,227. On a year-over-year (YoY) basis, this is 6.5% below the December 2022 level of 972,180. Year-to-date ending in December, single-family permits declined in all four regions. The range of permit decline spanned 5.0% in the South to 9.7% in the West. The Northeast declined by 7.1% and the Midwest declined by 7.6% in single-family permits during this time. For multifamily permits, the percentage decline spanned 14.6% in the South region to 28.5% in the Northeast. The West declined by 15.2% and the Midwest declined by 21.1% in multifamily permits during this time. Between December 2022 YTD and December 2023 YTD, except for Hawaii (+16.7%), Maryland (+8.7%), Nevada (+5.8%), West Virginia (+4.7%), Virginia (0.8%), North Carolina (0.7%), and Alabama (0.0%), all other states and the District of Columbia reported declines in single-family permits. The range of declines spanned 0.1% in Idaho to 59.4% in the District of Columbia. The ten states issuing the highest number of single-family permits combined accounted for 63.9% of the total single-family permits issued. Texas, the state with the highest number of single-family permits issued, declined 6.5% in the past 12 months; The succeeding highest state, Florida saw a decline of 6.9% while the next highest, North Carolina, posted an increase of 0.7%. For 2023, the total number of multifamily permits issued nationwide reached 561,369. This is 17.4% below the December 2022 level of 679,898. Between December 2022 YTD and December 2023 YTD, 15 states recorded growth in multifamily permits, while 35 states and the District of Columbia recorded a decline. Delaware (+96.3%) led the way with a sharp rise in multifamily permits from 562 to 1,103, while Wyoming had the greatest decline of 74.2% from 1,044 to 269. The ten states issuing the highest number of multifamily permits combined accounted for 63.2% of the multifamily permits issued. Over the last 12 months, Texas, the state with the highest number of multifamily permits issued, experienced a decline of 24.0%. Following closely, the second-highest state in multifamily permits, Florida, saw a decline of 12.4%. California, the third largest multifamily issuing state, declined by 3.4%. At the local level, below are the top ten metro areas that issued the highest number of single-family permits. Top 10 Largest Single-Family Markets Dec-23 (# of units YTD, NSA) YTD % Change (compared to Dec-22) Houston-The Woodlands-Sugar Land, TX                                         50,014 5% Dallas-Fort Worth-Arlington, TX                                         42,543 -2% Phoenix-Mesa-Scottsdale, AZ                                         24,810 -8% Atlanta-Sandy Springs-Roswell, GA                                         23,972 -9% Charlotte-Concord-Gastonia, NC-SC                                         19,088 1% Orlando-Kissimmee-Sanford, FL                                         17,035 5% Austin-Round Rock, TX                                         16,738 -22% Tampa-St. Petersburg-Clearwater, FL                                         14,827 -5% Nashville-Davidson–Murfreesboro–Franklin, TN                                         14,169 -7% Jacksonville, FL                                         12,402 -14% For multifamily permits, below are the top ten local areas that issued the highest number of permits.  Top 10 Largest Multifamily Markets Dec-23 (# of units YTD, NSA) YTD % Change (compared to Dec-22) New York-Newark-Jersey City, NY-NJ-PA                                         28,226 -39% Dallas-Fort Worth-Arlington, TX                                         24,014 -29% Austin-Round Rock, TX                                         21,861 -4% Phoenix-Mesa-Scottsdale, AZ                                         20,827 1% Los Angeles-Long Beach-Anaheim, CA                                         18,881 -13% Houston-The Woodlands-Sugar Land, TX                                         18,322 -35% Miami-Fort Lauderdale-West Palm Beach, FL                                         15,947 21% Atlanta-Sandy Springs-Roswell, GA                                         14,617 -30% Washington-Arlington-Alexandria, DC-VA-MD-WV                                         12,189 -41% Denver-Aurora-Lakewood, CO                                         11,651 -13% ‹ Inflation Remains Sticky due to Persistent Housing CostsTags: home building, multifamily, single-family, state and local markets, state permits

Single-Family and Multifamily Permits Down in 20232024-02-14T09:14:59-06:00

Inflation Remains Sticky due to Persistent Housing Costs

2024-02-13T11:15:21-06:00

Consumer prices picked up again in January while core prices remained elevated, especially housing costs. Despite a slowdown in the year-over-year increase, shelter costs continue to put upward pressure on inflation, accounting for over two-thirds of the total increase in all items excluding food and energy. This hotter-than-expected report will almost certainly delay Fed rate cuts until the second half of the year. The Fed’s ability to address rising housing costs is limited because increases are driven by a lack of affordable supply and increasing development costs. Additional housing supply is the primary solution to tame housing inflation. The Fed’s tools for promoting housing supply are constrained. In fact, further tightening of monetary policy would hurt housing supply because it would increase the cost of AD&C financing. This can be seen on the graph below, as shelter costs continue to rise despite Fed policy tightening. Nonetheless, the NAHB forecast expects to see shelter costs decline further in the coming months.  This is supported by real-time data from private data providers that indicate a cooling in rent growth. With respect to the aggregate data, the Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.3% in January on a seasonally adjusted basis, after rising 0.2% in December. The price index for a broad set of energy sources fell by 0.9% in January as the decline in gasoline index (-3.3%) and fuel oil index (-4.5%) more than offset the increase in the natural gas index (+2.0%) and electricity index (+1.2%). Meanwhile, the food index and the food at home index both increased by 0.4% in January. Excluding the volatile food and energy components, the “core” CPI rose by 0.4% in January, after rising 0.3% in December. In January, the index for shelter (+0.6%) continued to be the largest contributor to the monthly increase in the core CPI. Among other top contributors that rose in January include indexes for motor vehicle insurance (+1.4%) and medical care (+0.5%). Meanwhile, the top contributors that experienced a decline in January include indexes for used cars and trucks (-3.4%) and apparel (-0.7%). The index for shelter makes up more than 40% of the “core” CPI. The index saw a 0.6% rise in January, following an increase of 0.4% in December. The indexes for owners’ equivalent rent (OER) increased by 0.6% and rent of primary residence (RPR) increased by 0.4% over the month. These gains have been the largest contributors to headline inflation in recent months. During the past twelve months, on a non-seasonally adjusted basis, the CPI rose by 3.1% in January, following a 3.4% increase in December. The “core” CPI increased by 3.9% over the past twelve months, the same increase for the 12-months ending December. This was the slowest annual gain since May 2021. Over the past twelve months, the food index rose by 2.7% while the energy index fell by 2.0%. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than overall inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index was unchanged in January. ‹ Modest Improvements in Demand, Lending Conditions for Real Estate Loans During Q4 2023Tags: BLS, cpi, inflation

Inflation Remains Sticky due to Persistent Housing Costs2024-02-13T11:15:21-06:00

Modest Improvements in Demand, Lending Conditions for Real Estate Loans During Q4 2023

2024-02-12T13:15:13-06:00

According to the Federal Reserve Board’s January 2024 Senior Loan Officer Opinion Survey (SLOOS), lending standards loosened for all commercial real estate (CRE) loan categories and residential real estate (RRE) categories in the fourth quarter of 2023.  Demand for RRE and CRE loans improved across all categories over the quarter, except for government loans. Even though the federal funds rate remained unchanged, the shifting expectations from the Federal Reserve toward rate cuts is having an impact on sentiment among major lending institutions. A higher net percentage of banks reported looser residential mortgage lending standards in Q4  2023 compared to Q3 2023 for all categories of RRE loans.  The largest improvement occurred for Qualified Mortgage (QM) jumbo which fell 10.6 percentage points from 26.0% in Q3 2023 to 15.4% in Q4 2023. GSE-eligible, Non-QM jumbo, and Non-QM non-jumbo experienced decreases of at least 8 percentage points quarter-over-quarter. All RRE categories saw increases in loan demand, except for government loans which saw a 0.4 percentage points decline from Q3 2023 to Q4 2023.  Subprime experienced a dramatic quarterly shift: it had the weakest demand in Q3 2023 (-71.9%) but rose almost 30 percentage points to become the strongest demand category for RRE in Q4 2023 at -41.7%, relatively speaking.  The remaining five RRE categories had demand increases by single-digits quarter-over-quarter. Compared to Q4 2022, all RRE categories increased the share of banks reporting stronger minus weaker demand by at least 30 percentage points. Both multifamily loans as well as all CRE construction and development loans, on net, saw modest improvements in lending conditions from Q3 2023 to Q4 2023. Construction & development experienced the share of banks reporting tightening conditions fall 25.2 percentage points to 39.7%. Multifamily improved by 24.8 percentage points to 40.7% in Q4 2023. Fifty percent of banks reported weaker demand for loans secured by multifamily properties and 46.6% for construction & development loans; This is slightly more positive compared to Q3 2023, where both categories were greater than 50%. Year-over-year, demand for construction & development improved 15.5 percentage points compared to Q4 2022 whereas multifamily experienced a small decrease (-0.7 percentage points). ‹ The Age of the U.S. Housing StockTags: ad&c loans, commercial real estate loans, credit, credit standards, Federal Reserve, GSE, lending, lending conditions, loan demand, loans, monetary policy, mortgage finance, real estate loans, residential real estate loans, sloos, subprime

Modest Improvements in Demand, Lending Conditions for Real Estate Loans During Q4 20232024-02-12T13:15:13-06:00

The Age of the U.S. Housing Stock

2024-02-12T09:27:16-06:00

By Na Zhao on February 12, 2024 • The median age of owner-occupied homes is 40 years old, according to the latest data from the 2022 American Community Survey[1]. The U.S. owner-occupied housing stock is aging rapidly especially after the Great Recession, as the residential construction continues to fall behind in the number of new homes built. New home construction faces headwinds such as rising material costs, labor shortage, and elevated interest rates nowadays. With a lack of sufficient supply of new construction, the aging housing stock signals a growing remodeling market, as old structures need to add new amenities or repair/replace old components. Rising home prices also encourage homeowners to spend more on home improvement. Over the long run, the aging of the housing stock implies that remodeling may grow faster than new construction. New construction added nearly 1.7 million units to the national stock from 2020  to 2022, accounting for only 2% of owner-occupied housing stock in 2022. Relatively newer owner-occupied homes built between 2010 and 2019 took up around 9%.  Owner-occupied homes constructed between 2000 and 2009 make up 15% of the housing stock. The majority, or around 60%, of the owner-occupied homes were built before 1980, with around 35% built before 1970. Due to modest supply of housing construction, the share of new construction built within the past 12 years declined greatly, from 17% in 2012 to only 11% in 2022. Meanwhile, the share of housing stock that is at least 53 years old experienced a significant increase over the 10 years ago. The share in 2022 was 35% compared to 29% in 2012. [1] : Census Bureau did not release the standard 2020 1-year American Community Survey (ACS) due to the data collection disruptions experienced during the COVID-19 pandemic. The data quality issues for some topics remain in the experimental estimates of the 2020 data. To be cautious, the 2020 experimental data is not included in the analysis. ‹ Which Local Markets Track National Trends the Most: Correlations of Metro Single-Family Permits to U.S. Data

The Age of the U.S. Housing Stock2024-02-12T09:27:16-06:00

Which Local Markets Track National Trends the Most: Correlations of Metro Single-Family Permits to U.S. Data

2024-02-09T09:27:02-06:00

New NAHB analysis of single-family permits shows which Metropolitan Statistical Areas (MSAs) have been trending in the same direction as U.S. single-family permits. Using single-family permits from 2012-2022, five-year and ten-year correlations are used to create an association index for each MSA that describes how similar, or dissimilar, particular MSAs are when compared to the national trend. The post focuses on single-family permits, a similar analysis of multifamily permits will be posted in the coming weeks. NAHB’s purpose in developing this set of statistics, which will be updated annually, is to give local industry leaders a statistic to describe whether or not their local market typically matches overall macroeconomic conditions. And as a set of statistics, the MAI provides forecasters another variable to scale and distribute local market forecasts for home building. The Market Association Index (MAI) is created by using the average of the five-year correlation and ten-year correlations between the U.S. single-family permit level and the respective MSA. With this method, the five-year trend is weighted more than the ten-year trend because the five years overlap within both variables. The MAI correlation coefficient that is calculated for both years can range from a negative one to a positive one and measures the strength of the linear relationship between the respective MSA and the U.S. A correlation of negative one would mean there is a perfect inverse linear relationship between the two geographies, while zero means no linear relationship and a positive one represents a perfect positive linear relationship. After taking the average of the five- and ten-year correlations, the MSA percentile rank of correlation is determined amongst all MSA. This way, the MAI provides simple reading of which metro areas have single-family home building trends that look the most like national dynamics in terms of growth and contraction. The scatter plots above illustrate MSAs on opposite ends of the distribution of correlations, where Raleigh, North Carolina has the highest degree of association with the national trend while Dubuque, Iowa had the most negative correlation with respect to the national trend. In the middle of the distribution, the average correlation for Anchorage, Alaska was zero, with the graph showing no linear relationship between the two variables. Of the 383 metro areas, the average correlation is 0.495. In total, 314 MSAs had a correlation greater than a zero and 69 MSAs had less than zero. This is expected as historically in aggregate MSAs have on average, accounted for 90.4% of all single-family permits in the U.S. between 2012 and 2022. Therefore, a majority of the MSAs should follow the national trend. The map below displays the percentile rank of each MSA. Hovering over a particular MSA will display its percentile rank. MSAs in the southeast tended to have a much higher percentile rank when it comes to the MAI. MSAs in the northeast were more likely to have a lower percentile rank compared to other regions. The ten highest ranked MSAs trending to the national level are below. The ten lowest association index MSAs which are least likely to follow the national trend are below. The full single-family MAI file for 2022 can be downloaded here. ‹ Housing Affordability Remains Near Historic Low LevelTags: building permits, MAI, MSA, single-family, single-family construction

Which Local Markets Track National Trends the Most: Correlations of Metro Single-Family Permits to U.S. Data2024-02-09T09:27:02-06:00

New CBO Population Estimates: Additional 8.9 Million People in 2053

2024-02-08T08:24:31-06:00

The Congressional Budget Office (CBO) released new 30-year population growth projections that include substantial upward revisions to the net immigration rates and slightly lower projected rates of mortality from COVID-19. As a result, the revised population estimates now include an additional 8.9 million people in 2053, a 2.4% increase from its previous forecast. A faster growing population will undoubtedly increase demand for housing (multifamily and single-family, for-sale, and for-rent), creating added pressure on the persistently underbuilt housing market. The largest revisions are concentrated in the population of prime working ages 25 to 54, the core of the US labor force, that is now projected to be larger by 4.8 million workers per year, on average, over the next 30 years. The population aged 16 to 24 is increased by 1.5 million people per year on average. The older population growth has undergone smaller revisions: the population ages 55 to 64 and ages 65 and older is augmented by an average of 740,000 people and 270,000 people per year, respectively. The CBO population growth projections are influenced by birth, death, and net immigration rates. The agency attributed most of the forecast gains in the labor force population to higher rates of net immigration over the next three years. After immigration levels declined in the early years of the pandemic, CBO estimates that net immigration to the United States increased sharply in recent years, reaching 2.6 million in 2022 and 3.3 million in 2023 . In comparison, net immigration from 2010 to 2019 was averaging 900,000 people per year. The agency boosted the projected number of people immigrating to the United States to 3.3 million in 2024, 2.6 million in 2025, and 1.8 million in 2026. After 2026, net immigration is expected to return to historical levels, averaging 1.1 million per year over the 2027–2054 period. The lower projected rates of mortality from COVID-19 also contributed to the upward revisions but on a smaller scale, and mostly for the population in the older age groups. Partially offsetting the positive gains in population is a reduction in the projected total fertility rate, from 1.75 to 1.70 births per woman. Despite the substantial positive revisions, US population growth generally slows over the next 30 years. As population ages with deaths exceeding births, net immigration is expected to bring additional workers to sustain the aging population. According to the CBO forecast, by 2040, net immigration will become the only source of population gains in the US. CBO’s projections of net immigration are based on the latest data from the Department of Homeland Security (DHS) and the Census Bureau. In the near term, reflecting a current surge in international immigration, CBO’s projections are significantly higher than the Census Bureau’s projections. ‹ Higher Rates and Lack of Supply Continue to Hamper Mortgage MarketTags: CBO, housing demand, net immigration rates, population projections

New CBO Population Estimates: Additional 8.9 Million People in 20532024-02-08T08:24:31-06:00

Higher Rates and Lack of Supply Continue to Hamper Mortgage Market

2024-02-07T10:19:56-06:00

By Jesse Wade on February 7, 2024 • Per the Mortgage Bankers Association’s (MBA) survey through the week ending February 2nd, total mortgage activity increased 3.7% from the previous week, and the average 30-year fixed-rate mortgage (FRM) rate rose two basis points to 6.80%. The 30-year FRM has floated around 6.8% for much of the start of the year, only moving one basis point from January. Total mortgage activity is 12.9% lower than last year. One reason for this is the 30-year FRM was at a relatively lower level of 6.18% last year. The Market Composite Index, a measure of mortgage loan application volume, rose by 3.7% on a seasonally adjusted (SA) basis from one week earlier. Purchasing activity fell 0.7% and refinancing activity increased 12.3% week-over-week. Purchasing activity was 18.6% lower than one year ago, and refinancing activity was up 0.7% from one year ago. The refinance market has remained dull due to most homeowners having lower rates than the current levels, while in the purchase market the lack of housing supply continues to hamper potential buyers. The refinance share of mortgage activity rose from 34.2% to 35.4% over the week, while the adjustable-rate mortgage (ARM) share of activity fell from 6.6% to 6.4%. The average loan size for purchases was $434,800 at the start of February, up from $421,800 over the month of January. The average loan size for refinancing decreased from $273,500 in January to $270,500 in February. The average loan size for an ARM was up at the start of February to $949,200, while the average loan size for a FRM rose to $337,300. ‹ Homeownership Rates by Race and EthnicityTags: finance, interest rates, mba, mortgage applications, mortgage bankers association, mortgage lending, refinancing

Higher Rates and Lack of Supply Continue to Hamper Mortgage Market2024-02-07T10:19:56-06:00

Homeownership Rates by Race and Ethnicity

2024-02-06T09:22:35-06:00

By Na Zhao on February 6, 2024 • The latest CPS/HVS data shows that the overall homeownership rate was 65.7% in the last quarter of 2023. This was 3.5 percentage points lower from the peak of 69.4% in 2004. In this post, we focus on the homeownership rates by race and ethnicity over the past decade. According to data from the Census Bureau, homeownership in the U.S. varies significantly by race and ethnicity. In the 4th quarter of 2023, the homeownership rate among non-Hispanic White Americans was 73.8%, followed by Asian Americans (63%), Hispanic Americans (49.8%), and Black Americans (45.9%). Compared to a decade ago, the Black American homeownership rate has increased 2.7 percentage point (43.2% in the fourth quarter of 2013). Meanwhile, the non-Hispanic White households has only experienced less than half of 1 percentage point increase (73.4% in the fourth quarter of 2013 compared to 73.8% in 2023). Consequently, the homeownership gap between Black and non-Hispanic White households is narrowing. This gap was 30.2 percentage points in 2013, compared to 27.9 percentage points in 2023. Hispanic Americans experienced a large increase in homeownership rate in the past 10 years. This rate increased from 45.5% in 2013 to 49.8% in the last quarter of 2023. The homeownership rate of Asian, Hawaiian and Pacific Islander Americans has reached a record high of 63% since Census Bureau began tabulating it separately from the “All other Race” category. ‹ Gains for Student Housing Construction

Homeownership Rates by Race and Ethnicity2024-02-06T09:22:35-06:00
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