While recent housing data releases suggest the rate of market improvement has slowed temporarily, long-run trends continue to be positive. And this general picture is consistent with NAHB’s forecast of the housing market: continued monthly ups and downs, but a general improving trend for construction and sales activity.
According to Census data, March new home sales were down 7.3% from February’s total, but this decline was due to the fact that the February number was upwardly revised by 13%. In fact, the March rate was up 7.5% from the pace of March last year. Taken as a whole, new home sales were up 3.7% in the first quarter of 2012.
In March, the inventory of new homes fell to a record low of 144,000 units. At the current sales rate, this equals a 5.3 months-supply. At recent inventory levels, the supply of newly constructed homes is so low that even moderate increases in sales should substantially stimulate new construction activity. In fact, of the 144,000 units in inventory, only 48,000 were completed homes ready for sale. This is only, on average and if equally distributed, 14 homes per county.
Existing homes sales, as reported by the National Association of Realtors, were also down in March: 2.6% from an upwardly revised February rate. But sales are up 5.2% from a year ago. Existing home inventory at the end of March decreased 1.3% from the previous month to 2.37 million existing homes for sale, down from 2.4 million homes in February.
At the current sales rate, the March 2012 inventory represents a 6.3 months-supply, much improved from the 8.5 months-supply of more than 3 million homes a year ago. Distressed sales constituted 29% of the market, according to NAR.
Housing construction slowed in March, after an unusually warm winter resulted in an acceleration of some 2012 home building. Total housing starts were down 6% in March, but this decrease was due to a decline in multifamily starts. Starts of units in buildings with five or more units were down 20% from February but remain 9% higher than the March 2011 rate.
The slowing of construction activity in March was consistent with the NAHB/Wells Fargo Housing Market Index (HMI), which reported its first decline in seven months, falling three points to 25. Nonetheless, the HMI remains higher than levels seen a year ago when the index stood at 16.
This long-run improving trend is consistent with increases in Census reported housing permits, which suggest future growth for home building in 2012. Total permits were up 4.5% in March, while permits for multifamily units were up 21%.
Other recently reported economic data provide cautionary notes concerning future economic growth. Producer prices were unchanged in March, but gypsum prices continue to rise, up 17.7% from February of 2011. Consumer prices, including residential rents, were up in March, with gasoline price hikes reducing consumer purchasing power. Gas prices were up 7.4% month over month in March.
April is tax time for families and small businesses. Recent NAHB analysis highlighted how many taxpayers benefit from the housing tax incentives. Data from 2010 indicate that nearly 34 million homeowning families saved money on their taxes due to the mortgage interest deduction, with the average benefit for households earning between $100,000 and $200,000 at more than $2,500. Almost 33 million taxpayers benefitted from the real estate tax deduction, with an average benefit of about $800 for
households with incomes between $100,000 and $200,000.
Finally, NAHB analysis suggests the importance of individual income tax rates as business tax rates for small enterprises. NAHB survey data indicate that approximately 80% of its membership is organized as pass-thru entities for tax purposes, most in the form of S corporations and LLCs. Recent Congressional testimony on behalf of NAHB called for certainty and tax law simplification as policy recommendations to increase small business growth.
Other analysis and information appearing on NAHB’s Eye on Housing economics blog include:
- NAHB Economics staff recently updated a calculator that estimates housing price affordability for selected income levels and automatically calculates items such as local property taxes.
- NAHB analysis of the American Housing Survey provides a demographic breakdown of who lives in new housing, as part of an April New Homes Month focus on new construction.
- Rochester, N.Y. and Evansville, Ind. were recently spotlighted as two metropolitan areas on the NAHB/First American Improving Markets Index (IMI).
Read more in the following posts from Eye on Housing.