The housing market, like all aspects of American society, has enough
momentum to get us through the worst of crises. The housing market
was severely tested in September, but the pace established early in
the third quarter was enough to maintain high levels of activity throughout
most of the housing sector for that quarter. Also, the momentum from
the first 9 months may be enough to make 2001 a very good year for
the housing market. What happens in the fourth quarter and early next
year will depend on employment levels, consumer confidence, government
response, and financial markets, among other things.
Third-quarter reports show slightly lower values for most indicatorspermits,
starts, new home sales, existing home sales, and housing affordability.
However, these indicators are still at fairly high levels. Although
lower than in the second quarter, sales of new and existing homes
were quite high in the third quarter, with existing home sales reaching
an all-time high in August. Interest rates were low at the start of
the quarter and declined further throughout the 3-month period, thus
improving housing affordability. Homeownership is now enjoyed by 68.1
percent of American householdsa new record.
Production levels for the third quarter slipped from the second,
although they continue at reasonably high levels. Third-quarter permits,
starts, and completions are ahead of levels from the third quarter
of 2000. Within the quarter, September, as expected, was generally
a slow month. For the first 9 months of 2001, permits and starts are
running approximately 2 percent ahead of the same period in 2000.
- Housing permits were issued at a seasonally adjusted annual rate
(SAAR) of 1,555,000 in the third quarter of 2001, 3 percent below
the second quarter but 1 percent above the third quarter of the
past year. Single-family permits were issued for 1,194,000 (SAAR)
homes in the third quarter, down 2 percent from the second quarter
but up 3 percent from the third quarter of 2000. September was the
month with the lowest number of permits, overall and single-family,
in the quarter. Total permits for the first 9 months of 2001 are
running nearly 2 percent ahead of the first 9 months of 2000, and
single-family permits are nearly 3 percent ahead.
- In the third quarter, builders started construction on 1,594,000
(SAAR) housing units, 2 percent below the second quarter but 6 percent
above the third quarter of 2000. Single-family starts equaled 1,273,000
(SAAR) houses, down 1 percent from the second quarter but up 7 percent
from the third quarter of 2000. September starts were not the lowest
in the quarter. Total starts for the first 9 months are 2 percent
ahead of the same period in 2000, and single-family starts are more
than 3 percent ahead.
- Housing completions in the third quarter totaled 1,571,000 (SAAR)
units, unchanged from the second quarter and up 3 percent from the
third quarter of 2000. Single-family completions equaled 1,254,000
(SAAR) housing units, up 1 percent from the second quarter and up
5 percent from the third quarter of 2000. September had the lowest
number of completions, overall and single-family, in the quarter.
For the first 9 months of 2001, total completions and single-family
completions are below the first 9 months of 2000 by 3 percent and
2 percent, respectively.
- Manufactured housing remains in the doldrums. Although the third-quarter
levels of shipments (199,000 [SAAR]) were 6 percent ahead of the
second quarter, placements (189,000 [SAAR]) were off 1 percent from
the first quarter. It is too early to know the September values
for placements, but September shipments totaled 206,000 (SAAR)
the first time they totaled more than 200,000 since October 2000.
Housing marketing in the third quarter exhibited a robust pace despite
Septembers lower activity. New and existing sales were near
their second-quarter levels, inventories were up slightly (both in
absolute terms and relative to sales), but prices were mixed with
new home prices falling and existing home prices rising. The momentum
of the first 9 months may be enough to have near-record levels of
new and existing home sales in 2001. Toward the end of the third quarter
and into October, builders seem to be less optimistic about the future.
- Sales of new single-family homes totaled 881,000 (SAAR) in the
third quarter of 2001, down 1 percent from the second quarter but
up 1 percent from the third quarter of 2000. September was the lowest
month in the quarter, but the level of 864,000 (SAAR) is not a low
one. Year-to-date sales totaled 714,000 homes through September,
up 5 percent from the first 9 months of 2000. It is still likely
that 2001 will finish as a banner year for new home sales.
- Sales of existing homes totaled 5,210,000 (SAAR) in the third
quarter of 2001, down 2 percent from the second quarter but up 3
percent from the third quarter of 2000. September was the lowest
month in the quarter, but on the other hand, August was the highest
month ever reported with sales of 5,540,000 (SAAR) homes. The NATIONAL
ASSOCIATION OF REALTORS® expects
2001 to be the second-best year on record.
- The median new home price in the third quarter of 2001 was $170,000,
down 5 percent from the second quarter but up 1 percent from the
third quarter of 2000. The average price was $203,600, down 4 percent
from the past quarter and unchanged from the third quarter of 2000.
- Existing home prices increased in the third quarter. The median
price was $151,200, 3 percent above the second quarter and 6 percent
above the third quarter of 2000. The average price for an existing
home in the third quarter was $190,300, 3 percent above the second-quarter
price and 6 percent above the third quarter of 2000.
- Inventories remain at reasonable levels in both absolute terms
and relative to sales. At the end of the third quarter, 306,000
new homes were available for sale, up from 301,000 available at
the end of both the past quarter and the third quarter of 2000.
The inventory would support 4.4 months of sales, up from 4.2 months
in the second quarter and up from 4.1 months in the third quarter
of 2000. Existing homes available for sale at the end of the third
quarter totaled 2,190,000, 1 percent above the end of the second
quarter and 10 percent above the third quarter of 2000. The inventory
situation for existing homes relative to sales volume has shown
some weakening. At the end of the third quarter, the inventory would
support 5.4 months of sales, up from 4.9 months at the end of the
second quarter and up from 4.6 months at the end of the third quarter
of 2000.
- The National Association of Home Builders (NAHB) composite
Housing Market Index for the third quarter reveals that builders
are becoming less optimistic. The third-quarter value of the index
averaged 57 points, unchanged from the second quarter, but down
3 points from the third quarter a year ago. The October value (48)
recently made available indicates that builders are even less optimistic
about current sales, expected future sales, and prospective buyer
traffic than they were in the third quarter.
Housing affordability declined slightly in the third quarter but
continues to be a bright spot in the housing market. Low and declining
interest rates and increasing family incomes nearly kept pace with
the increase in median sales price of existing homes. The NATIONAL
ASSOCIATION OF REALTORS® composite affordability
index indicates that families earning the median income had 137.2
percent of the income needed to afford the medianpriced home1.3
points lower than the second quarter but 12.2 points higher than the
third quarter of 2000. This slight drop in the index is the result
of a 3-percent increase in the median price of existing homes not
being offset by a slight (9-basispoint) drop in the interest rate
and a 1.2-percent increase in the median family income. This favorable
affordability may be among the reasons behind the record homeownership
rate of 68.1 percent set in the third quarter of 2001, up 0.4 percentage
point from both the second quarter of 2001 and the third quarter of
2000.
During the third quarter, multifamily housing declined modestly along
almost all activity measures: permits, starts, apartment absorptions,
and rental vacancies.
- Multifamily permits were issued for 296,000 (SAAR) housing units
in the third quarter, 5 percent below the second quarter and 6 percent
below the third quarter of 2000. Multifamily starts totaled 287,000
(SAAR) housing units in the third quarter, 1 percent below the second
quarter but 6 percent above the third quarter of 2000. Multifamily
completions stood at 285,000 (SAAR) housing units, unchanged from
the second quarter and 8 percent below the third quarter of 2000.
- New rental apartments were not being rented as quickly as they
were in the past. In the third quarter, 65 percent of the 46,300
apartments completed in the second quarter were leased up. This
is 1 percentage point below the second-quarter rate and 8 percentage
points below the third quarter of 2000.
- The rental vacancy rate averaged 8.4 percent in the third quarter,
0.1 percentage point higher than in the second quarter and 0.2 percentage
point higher than in the third quarter of 2000.
First-Time Homebuyers:
Trends From the American Housing Survey
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