US housing recovery taking place 'in fits and starts,' with demand curbed by widespread negative equity, tight credit availability, lot shortages, excess inventory in some markets because of foreclosures: Fitch Ratings
July 18, 2013
– Volatility in total U.S. housing starts reiterates Fitch Ratings' belief that the new housing recovery is occurring in fits and starts. The Commerce Department Wednesday reported that housing starts dropped 9.9% to an annual rate of 836,000 last month from a revised estimate of 928,000 in May.
Multifamily numbers are often extremely volatile month over month, and June data were no different. Wednesday's report indicated a 26.7% drop in multifamily starts to an annualized rate of 236,000 in June from 322,000 in May. (The annualized rate of multifamily starts grew 32% month over month in May, fell 31.5% in April, increased 16% in March, improved 12.5% in February and declined 20.9% in January 2013.)
Multifamily starts, which include apartment buildings and condo units, can be variable, as these are driven by both the number of buildings started and how many units are in each of these structures.
Single-family U.S. housing starts dipped 0.8% in June, but were up 11.5% year over year. Seasonally adjusted permits for single-family homes were also up in June and were at the highest level since May 2008. Additionally, builder confidence (as measured by the NAHB/Wells Fargo Housing Market Index) rose for the third consecutive month and is at its highest level since January 2006. These are good indications that demand is still very evident and that builders of single-family homes remain optimistic.
We continue to believe that still-attractive home prices, low mortgage rates and a rise in nominal incomes are resulting in superior affordability and valuations. While interest rates may be on the rise, it's important to note that they are still near historically low levels, thus borrowing is still attractive for potential homeowners.
The new housing market is still in a period of recovery, and we expect realized demand is and will continue to be tempered by widespread negative equity, challenging mortgage qualification standards, lot shortages and excess supply due to foreclosures in certain markets.
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