Publication Date:
Tue, 1999-11-30 18:00
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While it appears that 1999 as a whole will see more starts and sales of homes than 1998, over-the-year growth rates began to moderate during the summer and should be significantly lower over the final quarter of this year.
September housing starts were at a seasonally adjusted annualized level of 1.62 million units. This was 3.2% below the August level, and the lowest pace of new home construction in the past three months. Still, total starts this September were 2.7% higher than recorded during September 1998.
Single-family homes were started at an annualized rate of 1.27 million in September 1999, down 1.9% from the August pace and the lowest monthly total since April. September 1999 single-family starts were 1.7% greater than in September of last year.
Multifamily units were started at an annualized rate of 346,000 during September, a level below that realized in both July and August, but 6.5% ahead of the September 1998 total.
Housing starts continue above their pace of a year ago, but magnitude of growth has slowed in recent months. Total starts during the first quarter of this year were at an annualized pace 11.9% better than during January-March 1998. Over-the-year growth slowed to 3% in the second quarter and to only 1.2% during the third quarter of this year.
Through the first nine months of 1999, total starts increased by 4.8% over the January-September 1998 total. Single-family starts were up 6.1%, while the number of multifamily units started so far this year is about equal (-0.1%) to the first three quarters of 1998.
Regionally, the Midwest recorded a 9% increase in total starts through the first nine months. Working on a much smaller base, the Northeast saw starts grow at a solid 6.9% rate. Growth has been more subdued in the nation’s two largest regions, however, with starts running 4.6% ahead of a year ago in the South and just 1.1% ahead of last year through nine months of 1999 in the West.
For the year, we’re now forecasting total starts of 1.66 million units, reflecting our expectation of a continued moderation in home building activity over the final quarter of this year--but a level about 3% better than last year, and an impressive number by any standard of comparison.
New single-family home sales were at a seasonally adjusted annualized rate of 983,000 during August 1999, almost on par with the 985,000 units all-time record set last November. The August 1999 sales pace was 17.6% better than during August 1998, the best over-the-year growth for any month since last December.
The seasonally adjusted annualized rate of existing single-family home sales stood at 5.25 million this August, 9.2% ahead of the year-earlier level. However, it was down 6.7% from the June 1999 sales pace, suggesting that rising mortgage rates may have caused some prospective buyers to hesitate. There’s always the age-old debate whether rising rates cause more people to jump into the market before interest rates move higher or whether more people get cold feet.
Sales of new single-family homes in the Midwest are estimated to have increased by 17.1% for the first eight months of this year, compared with January-August 1998. The increases in the South and West regions were a solid 9.6% and 9%, respectively, but new home sales in the Northeast were only 3.8% higher.
Construction spending numbers for the residential sector give further dramatic evidence of the sector’s strength during the first two-thirds of this year. Through the first eight months of 1999 an estimated $155.7 billion worth of work was completed on single- and multifamily homes. This was 14.6% ahead of the January-August 1998 level.
Construction spending on new single-family units was up 14.8% through the year’s first eight months. Spending on multifamily buildings was ahead nearly as much, by 12.9%.
Growth in the housing market has exceeded expectations this year largely because the fundamentals that support the market have held up remarkably well.
There will be some moderation and the market will likely plateau and then fall back for a while. But even if our forecast of a 4.5% decline in housing starts next year comes true, we’re still talking about housing activity that equals nearly 1.59 million new units.
