Housing Starts Activity Recorded A Strong Gain During September

The seasonally adjusted annualized rate of building permits issued nationwide for new housing construction increased by 3.7% from August to September to the second-highest level of 2002. And this September's permit pace - 1.727 units on an annual basis - was 10% higher than the reasonably healthy level recorded during September 2001. Permits for single-family homes increased by 3.2% from August to September, while the number of units permitted for future construction in multifamily buildings rose by 5.1% during the latest month.

Still, the permit pace during September was marginally lower than in August in the Midwest and the South (both off 1.2% over the month). But permit volume rose sharply during September in the Northeast (+14.3%) and the West (+12.8%).

Through the first nine months of this year, total permit volume nationwide was running 5% ahead of the total for the first three-quarters of 2001. Single-family permit volume was 6.1% greater than it was a year ago through January-September of 2002, while the total number of units newly permitted in multifamily buildings was ahead of the 2001 pace by 1.4%.

Housing starts activity also recorded a surprisingly strong gain during September after modest declines during five of the previous six months.

The annualized pace of total housing starts soared by 13.3% from August to September to pull the level up to an extremely bullish - and ultimately unsustainable - volume of 1.843 million units. This was a home construction pace 16.5% stronger than in September 2001.

New single-family homes were started at a rate 18.2% faster in September than during August. The level of new multifamily construction starts retreated a bit during the month, but even with the 2.9% loss the number of units started this September still exceeded the September 2001 multifamily-unit total by 14.7%. Total September 2002 single-family starts (after seasonal adjustment) were 16.9% higher than in September of last year.

During the first three quarters of this year, overall housing starts totaled an estimated 1,304,500 units. This was 5.4% greater than during the first nine months of 2001. The multifamily sector recorded 5.6% more starts through September of this year than over the first three quarters of 2001, while starts of single-family homes increased by 5.4%.

The starts pace rose sharply in all four regions of the country from August to September. Over-the-month gains ranged from 24.2% in the West to 9.5% in the Northeast. And through the first three quarters of 2002, total starts are up at least a bit compared with the year-ago pace in all regions of the nation. Year-to-date gains ranged from 10.0% in the Northeast, 7.2% in the South and 5.5% in the Midwest to 0.5% in the West (Rocky Mountain and Pacific Coast states).

Thirty-year fixed-rate mortgages carried an average interest rate of 6.09% this September, down from the 6.82% average of September 2001. Adjustable-rate mortgages tied to the yield on one-year Treasury bills averaged an interest rate of 4.29% during September of this year, well below the 5.57% average recorded during September 2001.

Single-family home sales rose by a modest 1.6% (at an annualized rate) from August to September. And through the first three quarters of 2002, overall (new and existing, combined) single-family home sales were running almost 5% ahead of the total for January-September 2001.

New single-family home sales (at a seasonally adjusted annualized rate) were estimated to be 0.4% higher in September of this year than during August. And the September 2002 annualized sales pace was more than 19% healthier than during September 2001. The Commerce Department estimates that total sales of new homes throughout the nation during the first nine months of this year were 5.3% greater than during the first three quarters of 2001.

The number of new single-family homes sold this year has increased in every region of the nation. Gains ranged from 1.9% in the South to 4.2% in the Northeast, 6.3% in the Midwest and 11.1% in the West (where, paradoxically, the increase in new housing starts has been the weakest).

The average sales price of a new home sold this September ($218,100) was 7.3% higher than in September 2001. However the median price ($176,300) of new homes sold this September was 5.9% above the level for the same month a year earlier, so it's clear that the weak economy has begun to affect house prices and/or the "mix" of the kinds of homes being purchased, although the "bubble" - if, indeed, there is one - certainly hasn't come close to bursting yet.

Existing single-family homes sold at an annualized rate of 5.40 million units during September of this year, according to data compiled by the National Association of Realtors. This was a pace 1.9% faster than the month before. Compared with September 2001, existing home sales this September were up 7.8%. And home resales continued to run at a record-high pace through the first three quarters of 2002. The NAR projects that overall sales of existing single-family homes during 2002 will total approximately 5.47 million units, up 3.2% from last year's record.

The median price of an existing home sold during September 2002 was $159,000, while the average price of a resale was $203,200. These prices represented gains of 7.9% and 9.7%, respectively, over the values recorded during September 2001.