November 2012 U.S. Construction

Click image for larger view

Click image for larger view

Overall construction spending in the United States decreased by 0.3 percent during October, to a seasonally adjusted and annualized rate (SAAR) of $866.0 billion. Gains in private residential construction were more than offset by declines in the other categories.
 

Click image for larger view

Total housing starts slipped in November, falling to 861,000 units SAAR (-27,000 units or 3.0 percent relative to October). The decrease occurred primarily in single-family starts (-24,000 or 4.1 percent), as multi-family starts ticked down to 296,000 units (-3,000 units or 1.0 percent).
 

Click image for larger view

Click image for larger view

November’s not-seasonally adjusted total (and single-family) starts were at their lowest level since March 2012, whereas multi-family remained just off October’s peak and higher than any other month since September 2008.
 

Click image for larger view

New-home sales jumped higher, by 4.4 percent, to 377,000 (SAAR). The median price of new homes sold also rose by 3.7 percent, to $246,200. Because the change in single-unit starts (-24,000) was far below that of sales (+16,000), the three-month average starts-to-sales ratio tipped over and slid to 1.5 in November.

Click image for larger view

Single-unit completions retreated by 2.4 percent, while the inventory of new single-family homes bumped higher (to 149,000 units) on an absolute basis but lower (to 4.7 months) on a months-of-sales basis.
 

Click image for larger view

Existing home sales advanced to 5.04 million units (+280,000 units or 5.9 percent, SAAR) in November. The share of total sales comprised of new homes held stable at 7.0 percent. The median price of previously owned homes sold in November jumped by $3,700 (2.1 percent), to $180,600.
 

Click image for larger view

In October, housing affordability rose slightly as the median price of existing homes remained essentially unchanged (-$200). At the same time, however, Standard & Poor’s reported that 12 of the 20 cities and both Composites in the S&P/Case-Shiller index posted monthly declines in home prices in October. Nonetheless, the 10- and 20-City Composites rose by, respectively, 3.4 and 4.3 percent relative to a year earlier.
 

Click image for larger view

“The October monthly numbers were weaker than September as 12 cities saw prices drop compared to seven the month before,” said David Blitzer, chair of the Index Committee at S&P Indices. “The five which turned down in October but not in September, were Atlanta, Dallas, Miami, Minneapolis and Seattle. Among all 20 cities, Chicago was the weakest with prices dropping 1.5 percent, followed by Boston where prices fell 1.4 percent. Las Vegas saw the strongest one-month gain with prices up 2.8 percent.

“Annual rates of change in home prices are a better indicator of the performance of the housing market than the month-over-month changes because home prices tend to be lower in fall and winter than in spring and summer. Both the 10- and 20-City Composites and 19 of 20 cities recorded higher annual returns in October 2012 than in September. The impact of the seasons can also be seen in the seasonally adjusted data where only three cities declined month-to-month. The 10-City Composite annual rate of +3.4 percent in October was lower than the 20-City Composite annual figure of +4.3 percent because the two weaker cities -- Chicago and New York -- have higher weights in the 10-City Composite.

“Looking over this report, and considering other data on housing starts and sales, it is clear that the housing recovery is gathering strength. Higher year-over-year price gains plus strong performances in the Southwest and California, regions that suffered during the housing bust, confirm that housing is now contributing to the economy. Last week’s final revision to third quarter GDP growth showed that housing represented 10 percent of the growth while accounting for less than 3 percent of GDP.

“One indication of the rebound is the gains from the bottom. The largest rebound is 24.2 percent in Detroit even though prices there are still about 20 percent lower than 12 years ago. San Francisco and Phoenix have also rebounded from recent lows by 22.5 percent and 22.1 percent with prices comfortably higher than 12 years ago. The smallest recoveries are seen in Boston and New York, two cities in the northeast which suffered smaller losses in the housing bust than the Sunbelt or California.”
 

Click image for larger view

Coincident with builders gaining more confidence in the residential market, a higher number of permits were applied for in November on a SAAR basis. Total permits rose to 899,000 units (+31,000 units or 3.6 percent) on the strength of multi-family units (+32,000 units or 10.6 percent, to 334,000 units); single family units edged lower, however, to 565,000 units (-1,000 units or 0.2 percent). The growth in total permits was a function of seasonal adjustment, since both the total (-8,000 units) and single-family (-9,000 units) estimates declined on a not-seasonally adjusted basis. Only the multi-family segment saw a modest uptick (+1,000 units). Still, total permits were 28 percent higher in November than a year earlier.
 

Click image for larger view

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.