Building Permits, Housing Starts on the Rise

The seasonally-adjusted annualized rate of building permits let for new housing construction rose sharply between October and November 2001 following five consecutive months of decline. The November annualized rate of 1.564 million units was up 5.3% from the October level, although it still fell 3.1% short of the November 2000 annualized pace. And last November's permit level was below that recorded during any month over the first two-thirds of 2001. But with the November pace beating both the September and October totals by an impressive amount, there's reason to believe that the permit drop (down almost 9% between May and October of last year) has stabilized.

The annualized pace of total housing starts soared 8.2% between October and November of last year. Starts had declined sharply during two of the previous three months, with the October annualized pace coming up 8.4% short of the July level. But November 2001 starts were 5.5% better than in November of 2000, with the pace of both single-family (+4.3%) and multifamily (+9.7%) starts beating year-earlier levels.

Through the first eleven months of 2001, total housing starts nationwide were 2.3% greater than over the January-November period of 2000. Single-family starts through last November were running 3.3% ahead of the 2000 pace, while multifamily housing starts totaled a modest 1.7% fewer during January-November 2001 than over the first eleven months of 2000.

Regionally, the South recorded 2.9% more starts over January-November 2001 than over the first eleven months of 2000. The West posted an increase of 2.7% through eleven months of last year, while total starts in the Midwest through last November were up 2.2% from the January-November 2001 total. Starts in the Northeast, however, trailed the year-earlier total by 1.9% through the first eleven months of 2001.

Thirty-year fixed-rate mortgages carried an average interest rate of 6.66% this past November, down sharply from the 7.75% average of November 2000. Adjustable rate mortgages tied to the yield on one-year treasury bills fell to 5.20% during November 2001, down from the 7.22% average during the same month in 2000.

Single-family home sales remained surprisingly healthy during November, especially given the fact that unemployment continues to rise and the nation has plunged into its first recession in a decade. Existing single-family home sales had plunged by almost 12% between August and September, but bounced back to recover almost half that loss (+5.5%) during October, and rose again in November (+0.6%). The annualized pace of single-family home re-sales during November 2001 was only 1.7% lower than during the same month of 2000.

And new single-family home sales soared to their highest level in eight months during November 2001. At a seasonally-adjusted annualized rate of 934,000, new homes were selling at a pace 5.9% stronger last November than during November of 2000. However, recent sales have skewed increasingly towards lower-valued, "starter" homes - a development not unexpected given overall economic conditions. The median sales price of a new home sold last November was 11.0% less than during November of 2000, while the average sales price declined a less-precipitous 5.7%.

However, it's clear that although the specifics of sales have changed during the current economic recession, low interest rates have nevertheless been instrumental in keeping the housing market on a reasonably even keel during a period of serious economic challenge for U.S. consumer households. Through the first eleven months of 2001, single-family home sales (new and existing homes combined) were running about 4% ahead of the January-November 2000 total.