Housing Starts Activity Records Gain During October

The seasonally adjusted annualized rate of building permits issued nationwide for new housing construction increased by 1.7% from September to October to the second-highest level of 2002. And the October permit pace, 1.763 million units on an annual basis, was 12.6% stronger than the reasonably healthy level recorded during October 2001. Permits for single-family homes increased by 2.0% from September to October, while the number of units permitted for future construction in multifamily buildings rose by 0.8% during October.

Still, the permit pace during October was sharply lower in the Northeast (-9.6%) than during the previous month. But the number of units permitted during October 2002 in the West (+3.9%), South (+3.5%) and Midwest (+0.9%) rose above their September totals, even after seasonal adjustment.

Through the first 10 months of this year, total permit volume nationwide was running 6.5% ahead of the total for January-October 2001. Single-family permit volume was 7.0% greater than a year ago through the first 10 months of 2002, while the total number of units newly permitted in multifamily buildings was ahead of the 2001 pace by 2.3%.

But housing starts activity during October presented a considerably different picture of the residential market's health. After an 11.0% gain from August to September, total housing starts plunged by 11.4% during October. Still, at annualized volume of 1.603 million units, the October pace was 4.7% stronger than in October 2001.

New single-family homes were started at a rate 7.0% slower in October than in September. And the level of new multifamily construction starts fell much more steeply, down 39.3% from the encouragingly robust September pace.

But despite the October setback, housing starts remained well ahead of their year-ago total through the first 10 months of 2002, totaling an estimated 1,444,000 units. That's 4.9% greater than during the first 10 months of 2001. The multifamily sector recorded 3.1% more starts through October than during the first 10 months of 2001, while starts of single-family homes increased by 5.3%.

The starts pace fell in three of the four broad regions of the country from September to October. Over-the-month losses were substantial, ranging from 19.5% in the Midwest and 18.8% in the Northeast to 14.3% in the South. The exception was the West, where starts improved by 3.6% - the second straight month of increase in the region - to the best annualized construction pace in more than a year.

Through the first 10 months of 2002, total starts were up at least a bit compared with the year-ago pace in all regions of the nation. Year-to-date gains ranged from 7.9% in the Northeast, 5.4% in the South and 4.0% in the Midwest to a smaller (but fast-gaining) increase of 3.5% in the West.

Thirty-year fixed-rate mortgages carried an average interest rate of 6.11% in October, down from the 6.62% average of October 2001. Adjustable-rate mortgages tied to the yield on one-year Treasury bills averaged an interest rate of 4.27% during October 2002, well below the 5.28% average during October 2001.

Single-family home sales rose by 4.4%, at an annualized rate, from September to October. And through the first 10 months of 2002, overall (new and existing) single-family home sales were running almost 6% ahead of the total for January-October 2001.

The pace of new single-family home sales (at a seasonally adjusted annualized rate) eased a bit during October from the record-high level set in September. And the October 2002 annualized sales pace was more than 16% healthier than during October 2001. The Commerce Department estimates that total sales of new homes throughout the nation during the first 10 months of this year were 7% greater than during January-October 2001.

The average sales price of a new home sold in October ($225,100) was 8.7% higher than in October 2001. However, the median price ($176,700) of new homes sold during October 2002 was 3.2% above the level for the same month a year earlier.

Existing single-family homes sold at an annualized rate of 5.77 million units during October 2002, according to data compiled by the National Association of Realtors, a pace 6.1% faster than the month before. Compared to October 2001, existing home sales this October were up 9.5%. Home re-sales continued to run at a record-high pace through the first 10 months 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 the record level set last year.

The median price of an existing home sold during October 2002 was $159,600, while the average price of a re-sale was $202,600. These prices represented gains of 11.4% and 9.8%, respectively, over the values recorded during October 2001.