From Home Furnishing Business
A Healthy Housing Industry Emerging
After years of fighting back from the housing bubble pop, the Housing Industry is finally on the mend and appears to be getting healthier by the year. Although still shy of 2007 pre-recession levels, housing appears to be catching up fast despite a couple of stumbles last year. This article picks up from Statistically Speaking’s September 2015 article Housing’s Rebound.
Although the rate of growth slowed for existing home sales last year, unit sales approached pre-recession levels. Meanwhile, new home sales, while still well below pre-recession numbers, are catching up to pent up demand as housing construction steadily increases its new single family homebuilding. Multi-family construction is the one area lagging in 2016, but starts are up in 2017. With both rental and homeowner vacancies at their lowest, the Housing Market is, most assuredly, on an upswing.
As shown in Table A, indexed growth for existing home sales in 2016 was only 3.6 percentage points shy of peak 2007 pre-recession sales. In 2016, 5.49 million existing homes were sold compared to 5.65 million in 2007. For new homes, the 559,000 units sold in 2016 were still 27.8 percent below the 769,000 sold in 2007. However, as construction has played catch-up to demand, new home sales have grown 82.7 percent since the recession bottom of 2011.
New Home Sales
New home sales had a solid performance in 2016 – increasing 11.3 percent from 2015. However, sales are off to a slow start with January sales flat on a seasonally annualized basis (Table B).
Existing Home Sales
Despite dipping in 2014, existing home sales (Table C) have grown steadily in recent years – up 3.8 percent from 2015 to 2016 and another 4.4% jump into January of this year.
Existing home sales grew consistently throughout the country last year. The Northeast region, the smallest in terms of home sales, was the fastest growing last year – up 5.7 percent 2015 to 2016 to 740,000 units plus an 8.1 percent boost (seasonally annualized) to start off 2017. Increasing 2.8 percent from 2015 to 2016, the South still leads the pack with 2.2 million existing houses sold in 2016. The Midwest had a slight decline from 2016 to January 2017 – down 0.8 percent to 1.3 million annualized resales, while the West had the biggest leap into 2017 – increasing 8.4 percent in January to 1.29 million annualized units (Table D).
New Housing Construction
Despite the growth in new and existing home sales last year, New Housing Construction, specifically, multi-unit apartment construction fell considerably. After solid gains since 2011, combined growth of single and multi-unit construction went negative last year – falling 0.5 percent to 1.17 million units. Due to booming housing starts in January of this year, 2017 began 9.6 percent higher with a seasonally annualized average of 1.29 million units (Tables E and F).
As shown in Table G, single-family construction has maintained its upward trajectory since the Great Recession. However, 2016 single- family units totaling 747,000 are still 23.1 percent below peak 2007 levels. Meanwhile multi-family construction at 392,000 units in 2016 is well below the 451,000 in 2015.
The flat growth in new construction was not a result of declining construction of single-family units (Table H). Growth has continued unstopped in recent years – increasing 7.5 percent from 2015 to 2016. Up 8.1 percent annualized, the first month of 2017 builds on the momentum.
The slowdown of total new housing construction came solely on the shoulders of multi-family apartments and condominiums where construction fell by 13 percent in 2016. On a positive note, authorized permits for the first month of 2017 are up 13.7 percent (Table I).
Rental and Homeowner Vacancy Rates
Rental vacancy rates at 6.9 percent are at their lowest in over 30 years, giving way to high rents (Table J). Meanwhile homeowner unit vacancies have also continued to drop to 1.7 percent in 2016 – the lowest in over 10 years.
The vacancy rate of rentals is lowest inside metro areas, both in principal cities and in the suburbs, compared to outside of metro areas. Inside metro areas for both urban (principal cities) and suburban areas have similar vacancy rates at 6.7 percent and 6.3 percent respectively. These rates have continued to fall over the last seven years. Meanwhile, vacancies outside metropolitan areas are much higher at 9.4 percent last year and have shown little improvement over the last few years (Table K).
For homeowner units, vacancy rates in the suburbs of metro areas are low at 1.5 percent in 2016 and only slightly higher at 1.9 percent in principal cities of metro areas. Vacancy rates outside metro areas are higher at 2.3 percent (Table L).
Pent up demand from Millennials aging into their prime homeownership years combined with low vacancy rates have set the stage for good housing growth in the near future. And nothing spurs the home furnishings industry as much as home sales.