U.S. Housing Market
Conditions: Homelife Has Never Been Hotter
Last year was an exceptionally good one for the housing industry.
In 2003, records were set for single-family permits, single-family
starts, single-family completions, new single-family home
sales, existing single-family home sales, mortgage interest
rates, and the homeownership rate. The strength of the housing
sector contributed heavily to the strength of the overall
economy. In 2003, the real gross domestic product (GDP) grew
by 3.1 percent in comparison to the 2002 value, while housing
or Residential Fixed Investment grew by 7.6 percent and contributed
0.37 percent to the overall growth rate. Other housing market
measures, such as total permits, total starts, builders’
attitudes, and housing affordability, were at levels not seen
in the past 25 to 30 years. However, the manufactured housing
industry continues its extended stay in the doldrums, with
very low shipments of new manufactured housing units. Some
signs of weakness can also be seen in the multifamily sector.
While production levels are strong, the rental market faces
record high vacancies and very low lease-up rates on new apartments.
If you find this kind of information useful and interesting,
you’ll probably want to get a copy of U.S. Housing
Market Conditions, regarded by many as one of U.S. HUD’s
most eagerly anticipated publications. Each quarterly edition
is a compilation of statistical data and written reports that
describe national housing trends in the areas of production,
marketing, finance, investment, trends are presented for ten
geographical regions, each including a profile on a selected
housing market. To keep things fresh, every issue also includes
a topical piece that describes a noteworthy aspect of housing
activity. The new edition is no different, in that it features
an update of the 2001 American Housing survey.
Each year, the Census Bureau conducts the American Housing
Survey-National Survey. This national sample includes about
60,000 housing units, 43,000 of which are occupied. The November
2001 issue of U.S. Housing Market Conditions features
an article about the characteristics of first-time homebuyers
in the 1990s. The report in the current issue examines the
characteristics of first-time homebuyers, and compares this
group to other recent homebuyers (that is, repeat homebuyers)
and to other homeowners (those who had not moved in the year
prior to the interview). In comparison to other recent homebuyers
and other homeowners, first-time homebuyers are younger, more
often foreign born, and more likely to be minorities. In terms
of location, they are slightly more likely to live in the
West or in central cities of metropolitan areas, and less
likely to live in the Northeast or outside of metropolitan
areas.
The homes they purchase tend to be townhouses, apartments
in multifamily buildings, manufactured (mobile) housing, and
units in condominiums or cooperatives. As is traditionally
the case, their homes tend to be smaller and of more modest
value. First-time homebuyers more often require mortgage-financing,
take out smaller mortgages, and more often rely on Federal
Housing Administration (FHA) mortgage insurance and Department
of Veteran Affairs (VA) guarantees.
The main focus of each quarterly issue of U.S. Housing
Market Conditions is a discussion and presentation of
recent national data on housing production, housing marketing,
housing finance, housing investment, and housing inventory.
In the current issue, we learn that housing production was
very strong in the fourth quarter of 2003. New quarterly records
were set for single-family permits, single-family starts,
and single-family completions. Near-record levels were reported
for total permits, total starts, and total completions. The
sole exception to the rule in terms of the production sector’s
strong showing was the record low shipments of new manufactured
homes.
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Housing sales also continued at very high, near-record levels
in the fourth quarter of 2003. Builders of new single-family
homes had their second-highest quarterly sales in the fourth
quarter, following close on the heels of a record-setting
third quarter. Realtors also had their second-best quarter
for sales of existing single-family homes, despite the fact
that prices have been somewhat mixed. New home prices generally
increased in the fourth quarter, while existing home prices
declined slightly. The inventory of new homes available for
sale at the end of the fourth quarter increased considerably
in both absolute terms and relative to sales. Continued strong
sales have led to optimism among builders as they gave positive
responses to the National Association of Home Builders’
Housing Market Index Survey.
According to the index published by the National Association
of Realtors®, housing affordability improved slightly
in the fourth quarter and remains among the most favorable
levels ever seen. Slightly higher interest rates were offset
by lower home prices and income growth. The interest rate
on closed loans was 5.83 percent; 17 basis points higher than
in the third quarter, but 27 basis points below the fourth
quarter of 2002. Interest rates for new mortgage commitments
in 2003 were the lowest ever reported by Freddie Mac’s
Primary Mortgage Market Survey since it began in
1971. Applications for FHA mortgage insurance on 1–4
family homes were down 34 percent from the third quarter.
Endorsements for refinancings were down 25 percent, the number
of private mortgage insurers issued was down 28 percent, VA
guarantees were down 25 percent, and total delinquencies were
down 7 percent from the second quarter of 2003.
At the closing bell of fourth quarter 2003, the estimate
of the total housing stock, 121,415,000 units, was up 0.3
percent from third quarter 2003 and increased 1.3 percent
above 2002’s fourth-quarter level. Rentals decreased
0.3 percent from the previous quarter and decreased 0.7 percent
from the fourth quarter of 2002. Vacant units were up 0.2
percent from last quarter and increased 7.0 percent from 2002’s
fourth-quarter figures. Low interest rates and favorable affordability
may account for the fourth quarter surge in the home-ownership
rate to 68.6 percent, a new record. The rate is 0.3 percent
above the third-quarter 2003 levels and 0.4 percent ahead
of the rate seen in fourth quarter 2002. The multifamily (5+units)
sector is not faring as well as the single-family sector,
with production mixed, absorption of new rental units sluggish,
and the vacancy rate at an all-time high of 10.2 percent.
The rental vacancy rate exceeded 10 percent for the first
time ever and the absorption rate is among the lowest quarterly
absorption rates reported in the past 30 years.
In addition to national data, each quarterly report presents
data on regional activity. Economists in the HUD field offices
prepare these reports, which provide an overview of economic
and housing market trends within each region of HUD management.
Regional reports include New England, New York/New Jersey,
Mid-Atlantic, Southeast/Caribbean, Midwest, Southwest, Great
Plains, Rocky Mountain, Pacific, and Northwest. Also included
are profiles of selected local housing market areas that offer
some perspective on current economic conditions and their
impact on the housing market. This quarter’s profiles
include Austin-Round Rock, Texas; Cedar Rapids, Iowa; Columbus,
Ohio; Minneapolis-St. Paul, Minnesota; Orange County, California;
Reno, Nevada; Rochester, New York; Salt Lake City-Ogden, Utah;
Seattle, Washington; and Wilmington, Delaware.
The 4th Quarter edition of U.S Housing Market Conditions
is available as a free download from HUD USER at http://www.huduser.org/periodicals/ushmc.html
or in printed form for a nominal charge by calling HUD USER
at 1-800-245-2691.
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