By NAHB Chief Economist Robert Dietz
The single-family housing market rebound continues, largely thanks to lower mortgage interest rates. The average 30-year fixed rate is currently 3.7% — whereas, just one year ago those rates were hovering around 4.8%. Although a 110-basis-point decline may seem small compared to rate changes of years past, home buyers have become significantly more sensitive to rates since the Great Recession.
Because of the lower cost of home buying, most housing metrics have improved in recent months. The NAHB/Wells Fargo Housing Market Index, which measures builder confidence in the single-family market, climbed from a level of 60 a year ago to 70 this month. In October, single-family construction starts expanded by 2% to a 936,000 seasonally adjusted annual rate. Despite the slow start for 2019, single-family starts are down only 1% on a year-to-date basis and approaching flat conditions for 2019 as a whole. Permits for single-family homes have been expanding since April, and the pace of starts has been improving since May.
Though the NAHB Home Building Geography Index has reported relative strength in exurban and even some rural markets, custom home building in the third quarter was 6% higher than a year ago. The improvement for the single-family sector extends to the resale market as well. Existing home sales increased slightly in October and were up 5.4% from a year ago. Existing inventory declined to a 3.8-month supply, which caused resale price gains to accelerate.
While single-family conditions have improved over the last year, multifamily construction has been relatively flat. The NAHB Multifamily Production Index declined 7 points to a level of 49, slightly below the break-even threshold of 50. Multifamily starts have cooled since August and are currently registering just a slight gain for 2019 on a year-to-date basis. Quarterly data indicate that more than nine out of 10 apartments are built-for-rent, compared to the historical norm of eight out of 10.