The U.S. housing market had a strong first quarter. Production generally was strong; permits and starts increased, but completions decreased. Marketing—new and existing home sales-was surprisingly strong with stable or decreasing prices, and inventories were very low, especially compared with sales. Affordability was favorable in the housing market with interest rates falling 60 basis points from the fourth quarter of 2000 and 125 points from the first quarter of 2000.

Housing production in the first quarter was strong but somewhat mixed. Overall, first-quarter single- and multifamily (5+ units) increased. Total housing starts and single-family starts increased, although multifamily starts declined slightly. Single-family and total completions were down, whereas multifamily completions were up slightly. Manufactured housing continued the decreases posted in earlier quarters.

• Housing permits were issued at a seasonally adjusted annual rate (SAAR) of 1,671,000 units in the first quarter of 2001, which is 8 percent above the fourth quarter's level but unchanged from the first quarter of 2000. Single-family permits were issued for 1,243,000 (SAAR) housing units in the first quarter of 2001, which is 6 percent above the fourth quarter but 1 percent below the first quarter of 2000. These permits levels are robust and show that 2001 is starting off on a high note.

• Housing starts in the first quarter totaled 1,557,000 (SAAR) housing units, which is 2 percent above the fourth quarter but 8 percent below the first quarter of 2000. Single-family housing starts totaled 1,254,000 (SAAR). This level is 3 percent above the fourth quarter but 9 percent below the first quarter of 2000. Such a high level for starts is further evidence of the housing sector's strength.

• Housing completions in the first quarter totaled 1,512,000 (SAAR), down 4 percent from the past quarter and 10 percent below the first quarter of 2000. Completions of single-family housing units totaled 1,197,000 (SAAR), down 5 percent from the fourth quarter and down 11 percent from the first quarter of 2000.

• In the first quarter of 2001, 173,000 (SAAR) manufactured homes were shipped, which is 11 percent below the fourth quarter and 41 percent below the first quarter of 2000. The annual rate for homes shipped in 2000 was 251,000—the lowest annual level since 1992.

• Builders sold 990,000 (SAAR) new single-family homes in the first quarter, up 5 percent from the fourth quarter and up 7 percent from the first quarter of 2000. March set a new monthly record, and the first-quarter pace is record setting.

• REALTORS^® sold 5,277,000 (SAAR) existing homes in the first quarter, up 3 percent from the fourth quarter and up 2 percent from the first quarter of 2000. As with new home sales, this first-quarter rate is at a record-setting pace.

• New home prices have declined from the past quarter but have increased from a year ago. The median price of new homes was $166,000 in the first quarter, down 4 percent from the past quarter but up 1 percent from the first quarter of 2000. The average price was $208,900, down 2 percent from the fourth quarter but up 3 percent from the first quarter of 2000.

• Existing home prices were unchanged in the first quarter. The median price of $139,700 is unchanged from the fourth quarter but up 4 percent from the first quarter of 2000. The average price for an existing home was $176,700 in the first quarter, also unchanged from the fourth quarter and up 4 percent from a year earlier.

• The inventory situation continues to be healthy—inventories of new homes have declined, whereas inventories of existing homes have increased. In both cases, the inventories are modest compared with sales levels. There were 297,000 new homes available for sale at the end of the first quarter, down 5 percent from the past quarter and down 7 percent from the first quarter of 2000. This inventory will support 3.6 months of sales, down 3 percent from 3.7 months in the fourth quarter. The inventory of existing homes was 1,580,000 at the end of the first quarter, up 15 percent from 1,370,000 at the end of the fourth quarter. In terms of monthly sales, this inventory would last 3.5 months, up 6 percent from 3.3 months in the fourth quarter.

• According to the National Association of Home Builders™, its members were less optimistic about housing market activity than in the fourth quarter and the first quarter of 2000. The composite Housing Market Index stood at 57 during the first quarter, down from 62 in the fourth quarter.

Multifamily housing market conditions are mixed. Multifamily (5+ units) permits are up whereas starts are down, and completions have increased slightly. Rental vacancies have increased, and absorption of new rental units has declined.

• Multifamily permits were issued for 363,000 (SAAR) apartments in the first quarter of 2000, up 17 percent from the fourth quarter and up 4 percent from the first quarter of 2000. Starts of multifamily units in the first quarter totaled 263,000 (SAAR), down 2 percent from the fourth quarter and down 8 percent from the first quarter of 2000.

• Completions of multifamily units in the first quarter of 2000 were at 291,000 (SAAR) units, up 1 percent from the fourth quarter but down 7 percent from the first quarter of 2000.

• In the first quarter, 68 percent of the 53,700 apartments completed in the fourth quarter were leased. This absorption rate decreased 5 percentage points from the past quarter and 5 percentage points from the same period in 2000.

• Rental vacancies during the first quarter were 8.2 percent of the available stock, 0.4 percentage point lower than in the fourth quarter and 0.3 percent point lower than in the first quarter of 2000.

Regional Perspective

HUD's field economists report that new and existing home sales during the first quarter of 2001 remained very strong in most of the major markets throughout the Nation and were not far off the pace set in 2000. In New England, sales were approximately equal to those in 2000, and prices for existing homes continued to increase by double digits, particularly in the greater Boston area. In New York City, the Manhattan co-op and condominium markets remained very active during the first quarter of 2001, although sales volume has fallen and prices have flattened compared with the large increases recorded in the first half of 2000.

In the Mid-Atlantic region, strong employment conditions continued to boost existing home sales in Virginia and Maryland. The Virginia Association of REALTORS^® reported a double-digit increase in home sales for early 2001. Despite declines in inventory, the market is expected to be even hotter this spring in light of strong demand and lower interest rates. The Maryland Association of REALTORS^® reported that existing homes sales in the State during the first quarter of 2001 were up 20 percent compared with the first quarter of 2000.

In the Atlanta metropolitan area, demand for new homes has not slowed. Builders are cautiously optimistic that recent declines in mortgage interest rates will maintain the market's recent high level of performance. Single-family permit activity in the first quarter was up 2 percent over the first quarter of 2000.

Home sales in the Midwest region are also maintaining a strong pace in the first quarter. The Ohio Association of REALTORS^® reported existing sales volume in the first 3 months of 2001 to be nearly identical to that of the first 3 months of 2000. In Illinois, sales activity was also equal to the volume in 2000. The Minneapolis Area Association of REALTORS^® reported that first-quarter 2000 sales of existing homes in the Twin Cities were 9 percent greater than during the same period in 2000.

In the Southwest region, sales of both new and existing homes were strong in most metropolitan areas during the first quarter of 2001. Home sales in the Dallas-Fort Worth area are very close to 2000's first-quarter volume.

Rocky Mountain metropolitan areas continue to report growing economies and increased housing demand. The slowing in employment growth so far has had little impact on housing construction. Single-family building permit activity was up 8 percent in Colorado during the first quarter. In the Pacific region, California recorded a 20-percent increase in single-family building permit activity, and existing home sales were only 5 percent below 2000's near-record levels. Building permit activity in Arizona and Nevada in the first quarter were on a pace to equal 2000's near-record volumes. Resales in Las Vegas and Phoenix began the year at a record pace, with activity for the first 2 months of the year up 8 and 10 percent, respectively, compared with the same period in 2000.

In the Northwest, home sales picked up substantially during the first quarter of 2001 despite slower employment growth. Sales of existing homes in the Seattle metropolitan area were up 10 percent. Local REALTORS^® pointed to low interest rates, an increased number of move-up and retiree buyers, and healthy employment levels as the reasons for the continued success of the sales markets in Washington State.

Rental housing market conditions in most of the Nation's major markets report either balanced or tight conditions and continued strong demand for new rental units. In the first 3 months of 2001 multifamily activity in New England increased by 15 percent. Almost all of the units are planned for the Boston and Stamford-Norwalk metropolitan areas. In the New York City metropolitan area multifamily building permit activity for the first quarter of 2001 totaled approximately 4,100 units, 44 percent greater than the same period a year ago.

The tight rental market in the Washington, D.C. metropolitan area is expected to become more balanced over the next 2 to 3 years as an estimated 25,000 new rental units come on the market. In Baltimore, more than 1,000 units are under construction in the downtown area as developers are taking advantage of a tax abatement program encouraging the renovation of old commercial buildings. In the Southeast, despite a growing pipeline of new units, developer interest in the Atlanta rental market remains strong. However, developers are reporting that lenders have become more cautious and are setting stricter underwriting standards, especially for larger developments. The Raleigh-Durham-Chapel Hill area continues to be one of the most active apartment markets in the region, with an estimated 6,000 units currently under construction and more than 4,400 units in the planning stages.

In the western suburbs of the Chicago metropolitan area, rental market conditions are softening. Balanced market conditions are typical for all of the Southwest region's major rental markets. As of the first quarter of 2001, the overall occupancy rate in the Dallas-Fort Worth area apartment market was approximately 94 percent. Conditions remain relatively tight in the Austin rental market with apartment occupancy in the high 90-percent range. However, with 8,000 units under construction, conditions should ease somewhat in the later half of the year.

Further west in the Pacific region, the San Francisco Bay Area rental market remains tight with rental vacancy rates in larger properties typically 2 percent or less. However, as a result of the slowdown in the high-technology sector, conditions in submarkets near technology employment centers have eased, especially in upper-end rentals. For the first time in years, concessions are appearing.

Conditions tightened in the Northwest region's major rental markets during the first quarter of 2001. In the Puget Sound area, the tighter market conditions are expected to ease during the next 12 months as the supply of new units begins to meet and, in some cases, slightly exceed, demand.