Housing Starts: June 2001

Total housing starts during June of this year were at a seasonally-adjusted annualized rate of 1.658 million units — an exceptionally healthy level, given the current state of consumer confidence and anxiety concerning jobs and income. This starts pace was a 3.0% above the May level, and 6.3 % above the June 2000 annualized pace of new residential construction. Starts of single-family homes rose by 1.4% over the month, while multifamily starts soared 9.3% during June.

The annualized starts pace of new home construction rose in two regions of the country. Total starts in the Northeast increased by 9.2% between May and June of 2001. The South registered an over-the-month increase of 6.6%. In the Midwest, no change was recorded from the previous level (which had been almost 16% better than the depressed April total), while the annualized starts pace West region fell 2.6%, to the lowest level in three months.

Multifamily housing starts were 5.4% lower during the first six months of 2001 than the same period in 2000. Single units and the overall total both were higher than January-June 2000, however, recording increases of 2.1% and 0.5%, respectively. Regionally, the West's number for January-June 2001 housing starts was 5.5% higher than during the first half of 2000. The Midwest posted a scant increase of 0.1% compared with the first six months of last year, while the Northeast (-4.3%) and the South (-0.8%) both recorded slightly decreased numbers of starts compared to totals for the first half of 2000

The number of housing units authorized for construction in June 2001 declined 3.3% from May's annualized pace. At an annualized total of 1.568 million houses/apartments, the June 2001 permits level was 5.4% lower than the starts level for the same month. Total residential units permitted during the first six months of 2001 were up 2.9% from the January-June 2000 total, with single-family units increasing by 3.2% and permits for units in multifamily buildings rising by 2.1%.

Fixed-rate mortgages carried an average interest rate of 7.16% this June, virtually unchanged from the 7.15% May average, but still well below the 8.01% rate that prevailed during June of last year. Adjustable rate mortgages tied to the yield on one-year treasury bills continued to decline during June, as the Fed's short-term interest rate moves have flowed more directly to the ARM market (vs. fixed-rate mortgages, that are closely tied to the yields on 10-year treasury bonds). One-year adjustable mortgages recorded an average interest rate of 5.81% during June 2001, down sharply from the 7.04% average for all of 2000 and the 6.48% average that prevailed during the first quarter of this year.

Thanks largely — although certainly not entirely — to a favorable interest rate environment that continues to make housing relatively more affordable as a purchase or investment than other marketplace options — the housing market has thus far been able to sidestep the most serious problems that have plagued other major consumer sectors of the U.S. economy.

Nevertheless, home sales figures remained reassuringly strong during June. New single-family home sales rose to a seasonally adjusted annual rate of 922,000 — a modest 1.7% gain from the May level, but 16.3% better than during June 2000. Sales had averaged 4.6% less in April-May of 2001 than over the first quarter of the year, so the June bounceback was welcome confirmation that the market remains resilient. Through the first six months of 2001, total new single-family home sales were a very healthy 8.7% greater than over the first half of 2000.

Existing single-family home sales fell a scant 0.6% between May and June of this year, but remained at an annualized pace 2.9% better than a year ago. Sales of existing single-family homes over the first half of 2001 exceeded the January-June 2000 total by 6.3%., slightly less than the 8.7% expansion in new single-family home sales. Total single-family sales (new and existing combined) this June were 4.7% above the May 2000 total, following a decline of 1.5% between 1999 and 2000. In total, single-family home sales over the first half of 2001 beat the January-June 2000 total by 6.7% — an unambiguous reflection of a resilient and still-healthy market.

So, despite widespread anxiety about the state of the housing market — given increases in unemployment and declines in consumer spending growth during 2001 — things are actually in better shape now that at the same time last year. Some softening appears inevitable over the second half of 2001, however. But with the nationwide inventory of unsold homes on the market remaining at the historically low level of just about four months, it's increasingly unlikely that we'll see any prolonged declines in new home building or overall single-family sales volume during the current economic slowdown (i.e., "close-but-no-cigar" recession).

Economic Indicators Index (Jun. 2001):

Building Materials Price Inflation - June

Housing Starts - June

Consumer Confidence by Region - June

New Residential Building Permits by Region - June

Recent Trends in New Residential Permits for 2000's Top 25 Metro Areas