January 2013 U.S. Construction

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Overall construction spending in the United States decreased by 2.1 percent during January, to a seasonally adjusted and annualized rate (SAAR) of $883.0 billion. Although private residential spending was unchanged, the other categories retreated.

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Total housing starts fell in January, to 890,000 units SAAR (-83,000 units or 8.5 percent relative to December). The decrease originated in the multi-family sector (-88,000 units or 24.1 percent) as single-family units rose modestly (+5,000 units or 0.8 percent). 

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December’s “raw” starts aligned with their seasonally adjusted counterparts. Total unadjusted starts were at their lowest level since March 2012, thanks to a 6,400 unit (24.4 percent) drop in the multi-family category.

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Sales of new single-family homes jumped by 59,000 units (15.6 percent) to 437,000 (SAAR). The median price of new homes sold retreated, however, by 9.4 percent, to $226,400. Although the change in single-unit starts (+5,000) was exceeded by that of sales (+59,000), the three-month average starts-to-sales ratio remained essentially unchanged at 1.5 in January.

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Single-unit completions advanced by 7.0 percent, while -- despite remaining unchanged in absolute terms -- the inventory of new single-family homes fell in months-of-sales (to 4.1 months) terms.

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Existing home sales advanced to 4.92 million units (+20,000 units or 0.4 percent, SAAR) in January. The share of total sales comprised of new homes showed some life when jumping to 8.2 percent. The median price of previously owned homes sold in January fell by $6,600 (3.7 percent), to $173,600.

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Housing affordability remained essentially unchanged as the median price of existing homes for sale rose by a modest $900 (+0.5 percent) in December. Simultaneously, Standard & Poor’s reported that both the 10- and 20-City Composites in the S&P/Case-Shiller Home Price indices posted monthly gains of 0.2 percent in November. The 10- and 20-City Composites reported respective annual returns of 5.9 and 6.8 percent for all of 2012.

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"Home prices ended 2012 with solid gains," said David M. Blitzer, chair of the Index Committee at S&P Dow Jones Indices. "Housing and residential construction led the economy in 4Q2012. In December's report all three headline composites and 19 of the 20 cities gained over their levels of a year ago. Month-over-month, nine cities and both Composites posted positive monthly gains. Seasonally adjusted, there were no monthly declines across all 20 cities.

"The National Composite increased 7.3 percent over the four quarters of 2012. From its low in the first quarter, it surged in the second and third quarter and slipped slightly in the 2012 fourth period. The 10- and 20-City Composites, which bottomed out in March 2012 continued to show both year-over-year and monthly gains in December. These movements, combined with other housing data, suggest that while housing is on the upswing some of the strongest numbers may have already been seen.

"Atlanta and Detroit posted their biggest year-over-year increases of 9.9 percent and 13.6 percent since the start of their indices in January 1991. Dallas, Denver, and Minneapolis recorded their largest annual increases since 2001. Phoenix continued its climb, posting an impressive year-over-year return of 23.0 percent; it posted eight consecutive months of double-digit annual growth."

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With builders’ confidence in the residential market steady in January, the number of permits applied for nudged higher on a SAAR basis. Total permits rose to 925,000 units (+16,000 units or 1.8 percent) on the strength of single-family units (+11,000 units or 1.9 percent, to 584,000 units); multi-family units also rose by a more meager 5,000 units (+1.5 percent), to 325,000 units. Total permits were 40.5 percent higher in January than a year earlier.

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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.

December 2012 U.S. Construction

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Overall construction spending in the United States increased by 0.9 percent during December, to a seasonally adjusted and annualized rate (SAAR) of $885.0 billion. Gains in private construction more than offset the decline in the public category.

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Total housing starts rose in December, jumping to 954,000 units SAAR (+103,000 units or 12.1 percent relative to November). The increase was fairly evenly split in absolute terms between single- (+46,000 or 8.1 percent) and multi-family starts (+57,000 units or 20.3 percent), although the percentage changes were dramatically different.

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December’s “raw” total and single-family starts demonstrate that the headline numbers were essentially products of seasonal adjustment. Total unadjusted starts were at their lowest level since March 2012 (or February 2012 for single-family starts), whereas multi-family remained just off October’s peak and higher than any other (pre-2012) month since September 2008. Nonetheless, it is worth noting that December’s total starts were 44 percent higher than a year earlier.

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Sales of new single-family homes slipped (-29,000 units or 7.3 percent) to 369,000 (SAAR). The median price of new homes sold also rose by 1.3 percent, to $248,900. Although the change in single-unit starts (+46,000) exceeded that of sales (-29,000), the three-month average starts-to-sales ratio remained essentially unchanged at 1.5 in December.

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Single-unit completions advanced by 3.7 percent, while the inventory of new single-family homes nudged higher on both absolute (to 151,000 units) and months-of-sales (to 4.9 months) bases.

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Existing home sales retreated to 4.94 million units (-50,000 units or 1.0 percent, SAAR) in December. The share of total sales comprised of new homes ticked down to 7.0 percent. The median price of previously owned homes sold in December rose by $1,400 (0.8 percent), to $180,800.

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Housing affordability retreated slightly as the median price of existing homes for sale rose by $3,600 (+2.0 percent) in November. At the same time, however, Standard & Poor’s reported that the 10- and 20-City Composites in the S&P/Case-Shiller Home Price indices posted monthly declines of 0.2 and 0.1 percent, respectively, in November. Nonetheless, the Composites were, respectively, 4.5 and 5.5 percent higher relative to a year earlier.

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"The November monthly figures were stronger than October, with 10 cities seeing rising prices versus seven the month before,” said David Blitzer, chair of the Index Committee at S&P Dow Jones Indices. “Phoenix and San Francisco were both up 1.4% in November followed by Minneapolis up 1.0%. On the down side, Chicago was again amongst the weakest with a drop of 1.3% for November.

"Winter is usually a weak period for housing which explains why we now see about half the cities with falling month-to-month prices compared to 20 out of 20 seeing rising prices last summer. The better annual price changes also point to seasonal weakness rather than a reversal in the housing market. Further evidence that the weakness is seasonal is seen in the seasonally adjusted figures: only New York saw prices fall on a seasonally adjusted basis while Cleveland was flat.

Regional patterns are shifting as well. The Southwest -- Las Vegas and Phoenix -- are staging a strong comeback with the Southeast -- Miami and Tampa close behind. The Sunbelt, which bore the brunt of the housing collapse, is back in a leadership position. California is also doing well while the Northeast and industrial Midwest is lagging somewhat.

"Housing is clearly recovering. Prices are rising as are both new and existing home sales. Existing home sales in November were 5.0 million, highest since November 2009. New-home sales at 398,000 were the highest since June 2010. These figures confirm that housing is contributing to economic growth.

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With builders’ confidence in the residential market steady to gaining, the number of permits applied for in December nudged higher on a SAAR basis. Total permits rose to 903,000 units (+3,000 units or 0.3 percent) on the (albeit meager) strength of single-family units (+10,000 units or 1.8 percent, to 578,000 units); multi-family units fell, however, to 325,000 units (-7,000 units or 2.1 percent). The growth in total permits was a function of seasonal adjustment, since both the total (-2,300 units) and single-family (-3,700 units) estimates declined on a not-seasonally adjusted basis. Only the multi-family segment saw a modest uptick (+1,400 units). Still, total permits were 24 percent higher in December than a year earlier.

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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.

November 2012 U.S. Construction

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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.
 

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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).
 

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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.
 

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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.

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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.
 

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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.
 

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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.
 

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“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.”
 

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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.
 

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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.

October 2012 U.S. Construction

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Overall construction spending in the United States increased by 1.4 percent during October, to a seasonally adjusted and annualized rate (SAAR) of $872.1 billion. Gains occurred “across the board” although private residential construction exhibited the largest absolute and percentage increases.
 

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Total housing starts also tracked higher in October, to 894,000 units SAAR (+31,000 units or 3.6 percent relative to September). The increase was restricted to multi-family starts (+32,000 or 11.9 percent), however, as single-family starts decreased to 594,000 units (-1,000 units or 0.2 percent).
 

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New-home sales edged lower, by 0.3 percent, to 369,000 (SAAR). The median price of new homes sold also fell by 4.2 percent, to $237,700. Although the change in single-unit starts equaled that of sales (both -1,000), the three-month average starts-to-sales ratio jumped above 1.6 in October -- the highest value since May 1996.
 

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Single-unit completions rose by 3.4 percent; the inventory of new single-family homes also bumped higher, to 147,000 units and 4.8 months.
 

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Existing home sales diverged with new home sales by advancing to 4.79 million units (+100,000 units or 2.1 percent, SAAR) in October. The share of total sales comprised of new homes dipped to 7.1 percent, from 7.3 percent in September. The median price of previously owned homes sold in October edged up by $300 (about 0.1 percent), to $178,600.
 

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In September, housing affordability rose slightly as a result of a minor dip in the median price of existing homes. Simultaneously, the not seasonally adjusted 10- and 20-city S&P/Case-Shiller home price indices showed average home prices increased by 0.3 percent for both the 10- and 20-City Composites relative to August 2012. Seventeen of the 20 metro statistical areas and both composites posted better annual returns in September versus August 2012; Detroit and Washington D.C. recorded a slight deceleration in their annual rates, and New York saw no change.

“Home prices rose in the third quarter, marking the sixth consecutive month of increasing prices,” said David Blitzer, chair of the Index Committee at S&P Indices. “In September’s report all three headline composites and 17 of the 20 cities gained over their levels of a year ago. Month-over-month, 13 cities and both Composites posted positive monthly gains.

“The National Composite increased by 3.6 percent from the same quarter in 2011 and by 2.2 percent from the second quarter of 2012. The 10- and 20-City Composites have posted positive annual returns for four consecutive months with a +2.1 percent and +3.0 percent annual change in September, respectively. Month-over-month, both Composites have recorded increases for six consecutive months, with the most recent monthly gain being +0.3 percent for each Composite.

“We are entering the seasonally weak part of the year. The headline figures, which are not seasonally adjusted, showed five cities with lower prices in September versus only one in August; in the seasonally adjusted data the pattern was reversed: one city fell in September versus two in August. Despite the seasons, housing continues to improve.

“Phoenix continues to lead the recovery with a +20.4 percent annual growth rate. Atlanta has finally reversed 26 months of annual declines with a +0.1 percent annual rate as observed in September’s housing data. At the other end of the spectrum, Chicago and New York were the only two cities to post annual declines of 1.5 percent and 2.3 percent respectively and were also down 0.6 percent and 0.1 percent month-over-month.
 

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Although builders are gradually gaining more confidence in the residential market, fewer permits were applied for in October. Total permits fell to 866,000 units (-24,000 units or 2.7 percent); single family units increased to 562,000 units (+12,000 units or 2.2 percent) while multi-family units slowed to 304,000 units (-36,000 units or 18.6 percent).
 

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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.

September 2012 U.S. Construction

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Overall construction spending in the United States increased by 0.6 percent during September, to a seasonally adjusted and annualized rate (SAAR) of $851.6 billion. The gain in private residential spending more than offset the decline in the other categories.
 

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Total housing starts leapt by 15.0 percent in September, to 872,000 units (SAAR). Single-family starts increased to 603,000 units (+60,000 units or 11.0 percent) relative to August; at the same time, multi-family starts rose to 269,000 units (+54,000 units or 25.1 percent).
 

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New-home sales advanced by 5.7 percent, to 389,000 (SAAR). The median price of new homes sold fell by 3.2 percent, to $242,400. Because the change in single-unit starts (+60,000 units) exceeded that of sales (+21,000), the three-month average starts-to-sales ratio jumped to 1.55 in September.

Interestingly, the jump in sales was entirely a result of seasonal adjustments; on a not seasonally adjusted basis, sales during September were on par with August, and at their lowest level since February.
 

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Single-unit completions rose by 8.5 percent; the inventory of new single-family homes remained relatively stable at 145,000 units and 4.5 months.
 

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Existing home sales diverged with new home sales by retreating to 4.75 million units (-80,000 units or 1.7 percent, SAAR) in September. The share of total sales comprised of new homes rose to 7.6 percent, from 7.1 percent in August.
 

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The median price of previously owned homes sold in August edged up by $100 (less than 0.1 percent), to $188,700, causing housing affordability to move sideways.

Simultaneously, the not seasonally adjusted 10- and 20-city S&P/Case-Shiller home price indices showed average home prices increased by 0.9 percent for both the 10- and 20-City Composites in August versus July 2012. Nineteen of the 20 cities and both Composites posted positive monthly gains in August; Seattle was the only exception where prices declined 0.1 percent over the month.

“Home prices continued climbing across the country in August,” said David Blitzer, chair of the Index Committee at S&P Indices. “Nineteen of the 20 cities and both Composites showed monthly gains in August. Seventeen cities and both Composites posted positive annual returns in August 2012. In 18 cities and both Composites annual rates improved in August versus July. Dallas’ rate remained unchanged at +3.6 percent and Chicago worsened slightly from a -1.0 percent annual rate in July to a -1.6 percent annual rate in August.

“Phoenix continues to lead the home price recovery. It recorded its fourth consecutive month of double-digit positive annual returns with a +18.8 percent rate for August. Atlanta posted a -6.1 percent annual rate, however this is significantly better than the nine consecutive months of double-digit declines it posted from October 2011 through June 2012. Las Vegas’ annual rate finally moved to positive territory with a +0.9 percent annual rate of change in August 2012, its first since January 2007.

“The sustained good news in home prices over the past five months makes us optimistic for continued recovery in the housing market.

“News on home prices confirms other good news about housing. Single family housing starts are 43 percent ahead of last year’s pace, existing and new home sales are also up, the inventory of homes for sale continues to drop and consumer mortgage default rates are reaching new lows. Further consumer confidence continues to rise. Even as we end the seasonally strong home buying period, the statistics are positive. For the fifth time in a row, both Composites had monthly gains. Home prices in Seattle fell modestly in August, but other than that the 20 cities have also seen home prices generally improve since April.”
 

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Builders are gradually gaining more confidence in the residential market and hence applying for more permits. Total permits rose to 894,000 units (+90,000 units or 11.6 percent) in September; single family units increased to 545,000 units (+34,000 units or 6.7 percent) while multi-family units jumped to 349,000 units (+59,000 units or 20.3 percent).
 

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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.