The new year has seen positive figures all round for the new home market. US new home permits and sales both rose on a year-on-year basis as did median prices for new construction. However, against a background of continuing price rises and plummeting inventory in the resale market, the sector is still failing to keep up demand.
According to figures published by the National Association of Home Builders (NAHB), corroborated by the Census Bureau, US new home permits went up by 15.1% in the year to January. The Census Bureau also reported an increase in sales of new homes in February and a strong price hike. This pattern reflects the trends in the resale market.
Texas and Florida – top in US new home permits
The NABH’s blog, Eye on Housing, reports that a total of 61,767 US new home permits were issued in January this year. The figure represents a 15.1% increase compared to the same month in 2017. The report reveals that 32 states saw a growth in the number of single-family home permits issued – in 20 of these, the growth exceeded 15% – and a drop in 18 states.
At the top of the national ranking sits Texas. The Lone Star state issued 10,119 single-family home permits in the year to January. Florida’s property market took second position with 7,300 permits, an increase of 20.8% in the year, the highest for all states east of South Dakota.
Nationwide sales and prices grow
Figures for US new home permits for February have not been released, but the Census Bureau has published the results for new homes sales and prices for the start of this year. According to their statistics, some 618,000 new houses were sold throughout the US in February. This represents a slight drop on January (down 0.6%) but an increase of 0.5% in the year.
Current inventory of new homes on the market stands at 305,000 units, the equivalent of 5.9 months. Median sales prices for new single-family homes rose by almost 10% in the year to February to reach US$326,800.
More of the same in US property market
Although US new home permits, sales and prices, have all grown in the last year, this sector only accounts for 10% of the national property market. Figures for February show the market in 2018 shares the same characteristics as last year.
According to the S&P CoreLogic Case-Shiller house price index for February, prices for US property went up by 6.2% in January. This increase is on a par with the 6.3% registered in December 2017, which was the fastest year-on-year growth for almost three years.
Inventory levels continued to plummet and in January, stood at 3.4 months, well below the 6 months’ supply considered by experts to show a balanced market. US property remains very much a seller’s market as it moves into spring 2018.
Not enough new homes
Despite the increase in US new home permits and sales, the sector continues to underperform. In total, 1.2 million new homes were built nationwide last year. Lawrence Yun, chief economist for the National Association of Realtors, called the figure “vastly inadequate”.
As the race among buyers to find available property continues, analysts believe competition will increase among them still further. This will put yet more pressure on the existing homes market and demand will intensify in the new-home sector.
(Sources: Census Bureau, S& P Corelogic Case-Shiller)