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New Home Construction In February Continuing to Outpace New Home Sales

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for February 2010 showing a decrease in new home construction activity from February, but siginificant increases from a year ago..

The report shows the following:

  • Building permits issued for single-family residences in February were at an annual rate of 503,000 which is 0.2 percent below the revised January rate of 504,000 and an increase of 32.0 percent from a year ago when the rate was 381,000.
    • Dragging down the overall permit numbers for housing are multi-family dwellings with 5 or more units. Permits for those buildings were down 10.1 percent in February from January and down 41.4 percent from a year ago.
  • Housing starts for single-family residences in February were at an annual rate of 499,000 which is a decrease of 0.6 percent from January’s rate of 502,000 and an increase of 39.8 percent from a year ago.
    • Once again, bringing down the overal start numbers for housing was multi-family dwellings with 5 or more units. Starts for those buildings were down 43.1 percent in February from January and down a whopping 71.6 percent from a year ago.
  • Homes completed in February was at a rate of 458,000 homes, up 4.3 percent from January’s rate of 439,000 homes and a decrease of 14.2 percent from a year ago when the rate was 534,000 homes.
    • Interesting enough, multi-family dwellings with 5 or more units in February increased 14.6 percent from January and was down just 15.7 percent from a year ago.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for February 2010 versus February 2009. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • Through February 2010 there have been 65,100 permits issued for new homes compared with 47,900 this time last year for an increase of 35.7 percent.
    • In February there were 34,300 permits issued, an increase from January’s 30,800 permits.
  • Through February 2010 there have been 65,100 new homes started compared with 47,300 this time last year for an increase of 37.6 percent.
    • In February there were 33,500 new homes started, an increase from January’s 31,600 new starts.
  • There have been 60,200 new homes completed through February 2010, compared with 75,500 this time last year for a decline of 20.2 percent.
    • In February there were 30,500 new homes completed, an increase from January’s 29,700 completions.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

Through the end of January, 2010 there have been 21,000 homes sold and there have been 29,700 new homes completed, outpacing sales by 41.4 percent. At the end of January there were 234,000 new homes for sale, a 9.1 month supply based upon the January seasonally adjusted sales rate, but a supply of over 11 months based upon current actual new home sales.

In January there were 31,600 new homes started outpacing the new home sales activity for January by over 50 percent.

So what does all this say about the new home market? I think it says that builders are being too optimistic about the housing market and are perhaps seeing a recovery and demand that is not here yet. The pace of new home construction activity at all stages (permits, starts, completions) has increased significantly from a year ago (in all case at least a third) but yet there are fewer new homes being sold than last year and the supply of new homes is increasing. I’m afraid this is the beginning of the next blow to the new home market.

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