Nationwide housing production edged down 1.1 percent in July, but confidence of homebuilders hasn’t been higher since February 2007, mostly riding on the single best month for housing permits since 2008.
Let’s start with the numbers: The seasonally adjusted annual rate of housing starts sat at 746,000 units in July, according to stats from HUD and the U.S. Census Bureau. After four consecutive months of gains, single-family housing starts fell back 6.5 percent to a seasonally adjusted annual rate of 502,000 units in July. Meanwhile, multifamily starts posted a 12.4 percent gain to 244,000 units, their strongest pace since February.
However, builders pulled more permits for planned new-home projects than they have in any month since August of 2008. Issuance of new building permits, which can be an indicator of future building activity, rose 6.8 percent to a seasonally adjusted annual rate of 812,000 units in July — the fastest pace in nearly four years. Single-family permits rose 4.5 percent to 513,000 units (their best pace since March of 2010) while multifamily permits rose 11.2 percent to 299,000 units.
This all leads to builder confidence in the market for newly built, single-family homes, which improved for a fourth consecutive month in August — a two-point gain to 37 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This gain builds on a six-point increase in July and brings the index to its highest level since February of 2007.
“From the builder’s perspective, current sales conditions, sales prospects for the next six months and traffic of prospective buyers are all better than they have been in more than five years,” said Barry Rutenberg, chairman of NAHB and a homebuilder from Gainesville, Fla. “While there is still much room for improvement, we have come a long way from the depths of the recession and the outlook appears to be brightening.”
Regionally, builder confidence rose nine points to 42 in the Midwest and two points to 35 in the South, but declined nine points to 25 in the Northeast and three points to 40 in the West in August. For the August HMI release, NAHB is introducing an alternative trend comparison of regional HMIs by also showing a three-month moving average of each region's index. The current three-month moving averages show a two-point decline to 29 in the Northeast, a five-point gain to 35 in the Midwest, a three-point gain to 32 in the South and a three-point gain to 38 in the West.