While more work needs to be done to restore economic security for families nationwide, a look at the recent data on the housing market shows continued improvements that are welcome news given the challenges experienced by homeowners since the recession. Earlier today, the Commerce Department’s Census Bureau released data on new residential construction in July 2012.
- July 2012 permits increased 6.8 percent from June 2012, to a level of 812,000 units at an annual rate – the highest level since August 2008. The July increase in total permits reflected increases in both single-family and multi-family units.
- For year-to-date 2012, total permits rose 26.1 percent, single-family permits increased 18.7 percent, and multi-family permits jumped 42.2 percent.
- July 2012 starts edged down 1.1 percent from June 2012 levels, reflecting a 6.5-percent decline in single-family starts. However, total starts rose 21.5 percent from July 2011, and single-family starts increased 17.0 percent.
- For year-to-date 2012, total starts advanced 24.9 percent, single-family starts rose 19.3 percent, and multi-family starts climbed 39.4 percent.
Other housing indicators are also up
The positive trends exhibited in the new residential construction data are consistent with other positive trends in the industry:
The recent improvements in permits and starts data have translated into notable increases in construction activity.
- For year-to-date 2012, total construction increased 8.7 percent, and private residential construction rose 8.6 percent. Single-family construction jumped 12.3 percent, and multi-family construction has climbed 39.7 percent.
Positive trends in the sector go beyond permits, starts, and construction; historically low mortgage interest rates and low home prices have made housing more affordable than ever. These factors, along with upward trends in sales, have made builders more optimistic about the future.
- According to the Mortgage Bankers’ Association, the average rate for a 30-year fixed-rate mortgage fell again in July, to 3.57 percent, another record low.
- The National Association of Realtors “Affordability Index” eased somewhat so far in Q2 but generally has been at historically high levels over the last year and a half (higher levels mean houses are more affordable).
- Sales of new homes increased 3 percent in the second quarter, and have risen more than 20 percent since their low two summers ago; though existing home sales fell slightly in the second quarter, they have increased 26 percent since their low point.
- The National Association of Home Builders homebuilder sentiment index for August rose for the fourth consecutive month. All three components of the index—current sales, expected future sales, and prospective buyer traffic—improved.
In sum, while challenges clearly remain in the housing sector, a spate of recent data show important, positive trends in this key dimension of our economy. But more work remains to help responsible homeowners and strengthen the middle class, so Congress should pass President Obama’s proposals to cut taxes for 98 percent of Americans and cut red tape so responsible homeowners can refinance to take advantage of today’s historically low interest rates.
~Mark Doms, Chief Economist, U.S. Department of Commerce
August 16, 2012
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