As 2013 wound down, some economists suggested the nascent U.S. housing recovery was on the verge of stalling out.
However, in December the U.S. Commerce Department reported that privately owned housing starts rose to a seasonally adjusted rate of 1.09 million in November, a 22.7% increase over October’s 889,000 starts, and nearly 30% more than the year-ago rate of 842,000.
Also, single-family starts jumped 20.8% in November to 727,000 over October’s 602,000 starts.
Privately owned housing completions fell 0.1% in November to a seasonally adjusted annual rate of 823,000, compared with 824,000 for October. Still, November’s completions were 21.6% higher than the November 2012 rate of 677,000.
Building permits for privately owned housing in November were at a seasonally adjusted annual rate of 1.01 million, 3.1% lower than the prior month’s 1.04 million, but still 7.9% higher than November 2012. Single-family authorizations in November came to 634,000, a 2.1% increase over the 621,000 recorded in October.
“Sales slowed down sharply this summer and fall because builders got ahead of themselves with pricing,” says Brad Hunter, chief economist and director of consulting at Metrostudy. (Metrostudy is a Hanley Wood company. Hanley Wood also publishes ProSales.) “The other major factor was that there was a buying frenzy in the first half of the year that has subsided, leaving behind sustainable, organic demand.”
And, that demand, fueled by new household formation, should continue to gain momentum through the spring, he says.
One worrisome trend comes from the Mortgage Bankers Association, which says that mortgage applications fell at the end of 2013 to the lowest level in more than a dozen years as interest rates for home loans ticked up.
In mid-December, mortgage applications fell 5.5%, continuing a downward trend in applications for six of the previous seven weeks.
“It is possible that the decline in purchase mortgage applications relates to the recent slump in sales,” Hunter says. Also, new rules coming this year for mortgage lending will have a dampening effect on home sales, but for the most part that will be outweighed by the increase in the demand for new homes.
The National Association of Home Builders says that builders are more optimistic about the single-family home market, specifically over current sales conditions, sales expectations, and prospective buyer traffic, according to December’s NAHB/Wells Fargo Housing Market Index.
“Following a two-month pause in the index, this uptick is due in part to release of the pent-up demand caused by the uncertainty generated by the October government shutdown,” says NAHB chief economist David Crowe. “We continue to look for a gradual improvement in the housing recovery in the year ahead.” —Steve Campbell