Low Inventories Pushing Prices Higher

Filed in Economics by on April 26, 2018 0 Comments

NAHB Chief Economist Robert Dietz provided this housing industry overview in the bi-weekly newsletter Eye on the Economy

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Builder sentiment slipped slightly in April due to ongoing concerns about elevated lumber prices and the lingering effects of inclement weather in some areas. The waning availability of labor is also troublesome: The current count of unfilled construction jobs is 196,000 — significantly higher than the 169,000 recorded a year ago.

However, housing continues to grow at a modest pace. Despite a 3.7% decline in single-family starts in March, total starts increased 1.9% thanks to a strong month for the apartment sector.

Compared to the first quarter of last year, 2018 has seen several gains, including:

  • Single-family starts rose 7%
  • Permits increased 5%
  • Sales of new single-family homes grew 10%

Yet, in the Northeast, new home sales in the first quarter were down approximately 21% compared to last year. The drop is likely due to regional variations of economic growth and changes to the tax law that limit state and local tax deductions.

Existing home sales also posted a small gain of 1.1% in March, but that is 1.2% lower than a year ago due to low inventory (3.6-month supply). In fact, current inventory levels are 7.4% lower than a year ago and have decreased for 34 straight months on a year-over-year basis.

As result of limited supply, solid demand and rising construction costs, home prices continue to exceed income growth and have now increased more than 6% over the last year.

For more, go to Eye On Housing.

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