Single-family construction temporarily bottoms out

From John Burns Real Estate Consulting Inc. -- While the continued decline in total housing construction is getting all the headlines, seasonally adjusted single-family construction activity was up slightly month-over-month. This is consistent with the findings of our monthly survey of builders, who report a slight increase in construction.

While single-family construction may be improving month-over-month, activity is still down significantly from one year ago. A rolling 12-month count of construction activity is a good check on the seasonally adjusted data, and is less subject to wild swings. Single-family construction continues to decline on this rolling 12-month basis.

The current Seasonally Adjusted annual single-family permit number is 373,000, and we believe that permits will bottom out around 340,000 later this year (this is a rollup of our MSA by MSA forecasts which are available by MSA here or for all MSAs for our retainer clients). If mortgage conditions remain favorable, the tax credits are renewed, and banks begin dumping quality land REO, construction could pick up more quickly than we anticipate.

Existing Home Market
The existing home market remains very weak, yet reported a few improvements compared to last month. The seasonally adjusted annual existing home sales volume increased to 4.68 million transactions, yet is down nearly 4% year-over-year, according to the National Association of Realtors (NAR). The median price in the resale market has fallen 15% year-over-year to $169,800, according to NAR, while the Case-Shiller index posted an annual decline in paired sales of more than 19% in the first quarter, which was a record low. The supply of unsold homes increased and remains high at 10.2 months of inventory. The pending home sales volume jumped in April, and is up 3.2% compared to one year ago.

New Home Market
Conditions in the new home market have shown signs of improvement, but the overall health of the sector remains extremely weak. Builder confidence once again increased as the Housing Market Index rose to 16, showing that some builders believe the worst is behind us. The median new home price rose slightly to $209,700, yet remains down almost 15% year-over-year, according to the Census Bureau. The annualized new home sales volume, at 352,000 transactions, was essentially flat in April from March, but is down 34% year-over-year. The overall inventory of new homes continued to decline in April, pushing months of supply down to approximately 10 months.

Housing Supply
Housing supply continued to diminish, falling to the lowest levels of both starts and permits in the nearly 50 years that the Census Bureau has been tracking these statistics. Seasonally adjusted single-family starts increased slightly in April, yet a large drop in multifamily starts pushed total starts to just 458,000 units. Like housing starts, single-family permits increased slightly, while multifamily permits fell, resulting in an overall decline in total permits. The annual volume of new home completions rose slightly in April to 874,000 units, yet remains down 15% year-over-year. The homeowner vacancy rate declined in the first quarter to 2.7%.

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