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The seasonally adjusted annualized rate of building permits let for new housing construction rose sharply again from November to December of 2001. This was the second straight month-to-month improvement after five consecutive months when permit activity declined.
The December annualized rate of 1.653 million units was up 3.6% from the November level after a 7.4% gain the month before. And the annualized rate of new home permits issued during December 2001 was 6.4% higher than in the final month of 2000.
In contrast to this positive trend, the annualized pace of total housing starts dipped 3.4% from November to December of last year after a 7.0% gain the month before. However, all of the loss was recorded by the more volatile multifamily side of the residential market. While the seasonally adjusted annualized pace of multifamily construction starts plunged 26.5% from November to December, starts for single-family homes rose 3.6%.
Total December 2001 starts (after seasonal adjustment) were 2.5% higher than in December of 2000, with the pace of single-family (+4.6%) up modestly and the pace of multifamily starts (-6.4%) down a bit.
Although the numbers are still preliminary and subject to at least modest revision, it looks like total housing starts last year totaled just more than 1.6 million, an increase of 2.2% from 2000. Single-family starts were an estimated 3.6% greater last year than in 2000, while starts in multifamily buildings came in about 3% lower in 2001 than during 2000. So a mixed bag for the market - but a much better 2001 performance than just about anyone had been expecting at this time last year, coming off a 4.4% decline in starts from 1999 to 2000. And, of course, these relatively conservative forecasts were developed when the terrorist attacks of Sept. 11 were unthinkable.
Regionally, starts last year were above the comparable 2000 totals for three of the four broad regions of the nation. Only the Northeast (-3.2%, based on preliminary estimates) had fewer new homes started last year than in 2000. Modest gains were recorded in the West (+2.3%), South (+2.5%) and - perhaps most surprisingly - Midwest (+4.0%).
Thirty-year fixed-rate mortgages carried an average interest rate of 7.07% this past December, down modestly from the 7.38% average of December 2000. Adjustable-rate mortgages tied to the yield on one-year Treasury bills averaged an interest rate of 5.23% during the final month of 2001, marginally higher than the November average but down sharply from the 7.09% average for December 2000. For all of 2001, fixed-rate mortgages averaged 6.97% - versus 8.06% in 2000 - while adjustable-rate mortgages written during 2001 carried an average interest rate of 5.83%, much more affordable than the 7.04% average rate recorded the year before.
Single-family home sales remained healthy right through the final month of last year. In fact, preliminary numbers show that sales were at a record-high level during 2001. This was surprising, gratifying and encouraging - especially given that unemployment continues to rise and the nation is in the throes of its first recession in a decade.
Existing single-family home sales plunged by almost 12% from August to September but bounced back to recover almost half that loss (+5.5%) during October and rose again in November (+1.0%). Although the annualized pace of single-family home resales eased slightly during December 2001 (-0.8%), existing home sales during the final month of last year were 5.1% higher than during December 2000. And for the year, an estimated 5.25 million existing single-family homes were sold - up 2.7% from the total for 2000. The median price of an existing home sold during 2001 was $147,500, while the average price of a resale was $185,100. These prices represented gains of 6.1% and 5.1%, respectively, over the levels for 2000 - increases that slightly exceeded price appreciation realized from 1999 to 2000.
New single-family home sales soared to their highest level in nine months during December 2001. At a seasonally adjusted annualized rate of 946,000, new homes sold at a pace 5.7% faster in December than in November. For the year, an estimated 900,000 new single-family houses were sold, 2.6% more than during 2000. The median sales price of a new home sold last year was $174,100, while the average price was $211,900. The median sales price was up 3.0% over the year, while the average price increased by 2.4% from 2000 to 2001 - smaller gains than those recorded during the past three years and an indication that a somewhat larger share of total sales during 2001 was for starter rather than luxury homes.
Low interest rates have been instrumental in keeping the housing market on a reasonably even keel during this period of serious economic challenge for U.S. consumers. But with the unemployment rate (a lagging indicator of economic distress) likely to rise a bit more through the first half of this year, the housing market will probably tread water for a while even though consumer confidence is improving.
But holding its own at the current level of permit/starts/sales activity is a remarkable accomplishment in itself and proof of the market's amazing resilience. And there's little downside risk for the market in the near term because during the final month of last year the annualized rate of new permit volume was higher than the annualized pace of housing starts - the first time we've seen this positive leading indicator relationship since May of last year.
