Summary

Housing continues to be a bright spot in the national economy. Housing production and marketing are at high levels, although there is some retrenchment from 2001's record-setting pace. American families can still easily afford homeownership, and the homeownership rate is still at a historically high level. Affordability and homeownership rates in the first quarter of 2002 are down slightly from last quarter but are still near recently set record rates. The multifamily market is one area for possible concern: Most indicators show signs of weakness compared with the fourth and first quarters of 2001.

Housing production posted a strong first quarter, particularly in January and February, which may be attributable to unseasonably favorable weather. Single-family and total permits and starts were strong in the first quarter and posted gains from the fourth quarter of 2001. Completions were slightly lower than those from the fourth quarter of 2001, although single-family completions were slightly ahead. The manufactured housing sector continues to ship fewer than 200,000 seasonally adjusted annual rate (SAAR) units.

  • Builders took out permits for 1,698,000 (SAAR) new housing units in the first quarter of 2002, which is up 8 percent from the fourth quarter of 2001 and up 2 percent from the first quarter of 2001. Single-family permits were taken out for 1,317,000 (SAAR) housing units in the first quarter, up 10 percent from the fourth quarter of 2001 and up 6 percent from the first quarter of 2001. Much of this strength was experienced in January and February, when the weather was unseasonably favorable.

  • In the first quarter of 2002, construction was started on 1,715,000 (SAAR) housing units, which is 9 percent above the fourth quarter of 2001 and 5 percent above the first quarter of 2001. Single family starts reached 1,373,000 (SAAR) in the first quarter, which is 9 percent ahead of the fourth quarter of 2001 and 7 percent ahead of the first quarter of 2001. As with permits, high numbers of starts were posted for January and February.

  • Housing unit completions reached 1,604,000 (SAAR) units in the first quarter of 2002, which is down 1 percent from the fourth quarter of 2001 but up 9 percent from the first quarter of 2001. Single-family completions were recorded for 1,327,000 (SAAR) units, which is 1 percent above 2001's fourth-quarter level and 14 percent above the first quarter of 2001.

  • Shipments of manufactured homes in the first quarter totaled 181,000 (SAAR), which is 12 percent lower than shipments in the fourth quarter of 2001 but 2 percent higher than in the first quarter of 2001. Shipments continue to be low, especially when compared with the heady days of the mid-1990s.

Housing marketing and sales were strong in the first quarter of 2002, although new home sales were off from the fourth-quarter 2001 pace. Existing home sales set a monthly record in January. Prices increased for new and existing homes, with the median price for new homes posting a 7-percent gain, and the median price for existing homes posting a 2-percent gain. Inventories are increasing but still reasonable compared with sales. Finally, homebuilders are optimistic about the future.

  • Builders sold 879,000 (SAAR) new single-family homes in the first quarter of 2002, which is down 5 percent from the fourth quarter of 2001 and down 7 percent from the first quarter of 2001. This is a very high level of new home sales: any concern about the decline should be tempered by recalling that 2001 was a record-setting year.

  • REALTORS® sold 5,780,000 (SAAR) homes in the first quarter of 2002, which is 10 percent above the fourth quarter of 2001 and 9 percent above the first quarter of 2001. In January, REALTORS® sold a record number of homes—more than 6 million on a seasonally adjusted annual basis—and in February they posted a near-record 5.9 million (SAAR) sales.

  • New home prices increased in the first quarter of 2002. The median price of a new single-family home was $182,700, 7 percent higher than the fourth quarter of 2001 and 8 percent higher than the first quarter of 2001. The average price was $224,400, which is 5 percent above the fourth quarter of 2001 and 6 percent above the first quarter of 2001.

  • Existing home prices also posted increases in 2002's first quarter. The median price of an existing home was $150,900, which is 2 percent above the fourth quarter of 2001 and 8 percent above the first quarter of 2001. The average price was $190,900, which is 3 percent above the last quarter and 8 percent above the first quarter of 2001.

  • Inventories of new and existing homes increased in the first quarter of 2002, although they remain reasonable compared with sales activity, that is, less than 5 months of sales. At the end of the first quarter there were 311,000 new homes available for sale, which is 1 percent higher than at the end of the fourth quarter and 8 percent higher than at the end of the first quarter of 2001. When expressed in terms of current sales levels, the inventory at the end of the first quarter would support 4.3 months of sales, up from the 3.7 months posted at the ends of both the fourth and first quarters of 2001. The inventory of existing homes available for sale at the end of the first quarter was 2,160,000, which is 17 percent higher than at the end of the fourth quarter of 2001 and 10 percent higher than at the end of the first quarter of 2001. The inventory of existing homes represents 4.8 months of sales, which is up from 2001's fourth-quarter value of 4.2 months and first-quarter value of 4.4 months.

  • The National Association of Home BuildersTM Housing Market Index indicates that builders are more upbeat than they were in the fourth and first quarters of 2001. The composite index was 59 points in the first quarter, which is up from 51 points in the fourth quarter of 2001 and from 57 points in the first quarter of 2001. Their optimism is due to improved views of current sales, expectations about future sales, and prospective buyer traffic.

Housing affordability declined slightly in the first quarter but remains at very favorable levels, according to the affordability indexes published by the NATIONAL ASSOCIATION OF REALTORS®. Interest rates, although rising, remain below 7 percent; family incomes increased slightly; and home price increases were moderate. The composite index indicates that a family earning the median income and purchasing the median-priced existing home had 137.3 percent of the income needed to support the mortgage, according to standard lending guidelines. This is down 3.7 percentage points from the fourth quarter of 2001 and down 2.9 percentage points from the first quarter of 2001. This affordability decline results from the 1.6-percent increase in the median price of an existing house and the 15-basis-point increase in the mortgage interest rate, offsetting the 0.5-percent increase in the median family income. The historically low interest rate continues to provide the major impetus for favorable affordability levels and high homeownership rates. The homeownership rate in the first quarter was 67.8 percent, which is a very high rate, although it is off from the fourth quarter's record-setting rate of 68.0 percent.

Multifamily (5 or more units) housing market conditions are not as favorable as in the single-family sector, with worsening in all market indicators—permits are down, starts are unchanged, completions have decreased, apartment absorptions have declined, and vacancies have increased.

  • Permits were issued for 306,000 (SAAR) multifamily units in the first quarter of 2002, which is 2 percent lower than in the fourth quarter and 16 percent below the first quarter of 2001.

  • Multifamily housing starts totaled 288,000 (SAAR) units in the first quarter of 2002, which is nearly equal to the level in the fourth quarter of 2001 but down 8 percent from the first quarter of 2001.

  • There were 251,000 multifamily completions in the first quarter of 2002, down 7 percent from the fourth quarter of 2001 and down 12 percent from the first quarter of 2001.

  • There were 46,800 apartments completed in the fourth quarter of 2001, and 59 percent were leased by the end of the first quarter of 2002. This new apartment absorption rate declined from the 65- percent lease-up rate in the fourth quarter of 2001 and the 67-percent lease-up rate in the first quarter of 2001.

  • Rental vacancy rates averaged 9.1 percent in the first quarter, which is up from the fourth-quarter vacancy rate of 8.8 percent and the 8.2-percent rate of the first quarter of 2001.


    HOUSING IN AMERICA: 2001 AMERICAN HOUSING SURVEY RESULTS


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