Housing production in 1998 is off to a very healthy start. Housing production in the first quarter of 1998 was ahead of both the final quarter of 1997 and the first quarter of 1997.

• Permits in the first quarter increased by 7 percent from the fourth quarter of 1997 to a seasonally adjusted annual rate (SAAR) of 1,578,000 homes and were 10 percent ahead of the first quarter of last year.

• First-quarter starts increased by 4 percent from the fourth quarter of 1997 to 1,590,000 housing units (SAAR). This was an 8-percent increase from the first quarter of last year.

• Manufactured homes shipments in the first quarter of 1998 slipped slightly from both the fourth quarter and the first quarter of 1997 to 351,000 housing units (SAAR).

• Existing home sales, which continue to set new monthly records, reached 4,687,000 homes (SAAR) in the first quarter of 1998, 7 percent ahead of the fourth quarter of 1997 and 14 percent ahead of the first quarter a year ago.

• New home sales increased 2 percent in the first quarter from the fourth quarter of 1997 to 849,000 homes (SAAR). March was the seventh month in a row with sales of over 800,000 homes. (This is a new record.)

• Placements of new manufactured homes were at a seasonally adjusted annual rate of 287,000, 1 percent below last quarter and 13 percent below the first quarter of 1997.

• Inventories of new homes available for sale were unchanged at 287,000, which represents 4.3- months' supply at the current sales rate. March was the 15th month in a row with the months' supply below 5 months. Existing home inventories at the end of the first quarter were 2,480,000 homes, a 6.1-months' supply at the current sales rate.

• Median prices for new homes increased 6 percent over the quarter to $152,200, and the average price increased 3 percent to $180,600. Increases from the first quarter of 1997 were 5 percent for both the median and average prices. The price for a constant quality new home, $174,400, had a more modest increase of 2 percent over the quarter and 4 percent from the first quarter of last year. Prices for existing homes were fairly stable compared with the last quarter, with a 1-percent increase in the median to $125,900 and no change in the average price of $156,000. Increases from last year were 5 and 6 percent, respectively.

• Builders were upbeat. The National Association of Home Builders' Housing Market Index rose 7 percentage points from the last quarter to 65, reflecting improved builders' views of current sales and future sales and prospective buyer traffic.

Low interest rates and affordability continued to be the keys to the active housing market. Interest rates on 30-year, fixed-rate mortgage loans averaged 7.05 percent in the first quarter of 1998, down 14 basis points from the fourth quarter and down 74 basis points from the first quarter of 1997. The NATIONAL ASSOCIATION OF REALTORS'^® Composite Housing Affordability Index increased 3 percent from both the fourth and first quarters of 1997 to 134.5. These conditions continue to support homeownership for 65.9 percent of American households.

The multifamily (5+ units) market exhibited strength in the first quarter, especially compared with a year ago.

• Multifamily housing permits totaled 357,000 units (SAAR), 11 percent above the fourth quarter of 1997 and 15 percent above the first quarter of 1997. If this level continues, 1998 will be the best year in a decade.

• Multifamily starts, at 292,000 units (SAAR), showed a mixed pattern -- 11 percent below last quarter but 13 percent above the first quarter of 1997.

• In the first quarter, 71 percent of the 55,800 new, unsubsidized, unfurnished rental apartments completed in the prior quarter were leased. This was a slight decline from the 73 percent of the fourth quarter of 1997.

• The first-quarter rental vacancy rate was unchanged from the last quarter of 1997 at 7.7 percent.

Regional Perspective

Sales housing markets continued strong across the Nation. All 10 regions had first-quarter increases in single-family building permits compared with the first quarter of 1997. The Southwest led all regions with a 19-percent increase, spurred by the 27-percent gain in Texas. New England ended 1997 with large gains in home sales and sales price appreciation and saw an 18-percent increase in single-family building permits during the first quarter of this year. Several regions reported significant improvement in the market for condominium housing. Sales and sales prices of condominiums soared in Manhattan and are buoying the sales markets in the other boroughs of New York City. Increases in rents and in sales prices of single-family homes are benefiting the condominium markets in the Boston, Atlanta, and Denver areas, and throughout much of California.

Rental housing markets in much of the country range from strong to balanced, but are more competitive. The increased supply of new apartments is still being absorbed well, and vacancy rates are in the low to moderate range. Exceptions to this generalization are the Jacksonville and Miami areas, where the rental markets are softening and vacancy rates are rising. The Minneapolis-St. Paul, San Francisco Bay, and Seattle areas all have especially tight rental markets in which demand is exceeding the limited production of new apartments.