Home Starts Rebound, Single-Family Production Sets a Record in 2004 - 1/24/2005 - Mortgage Loan Refinance Debt Equity

Home Starts Rebound in December, Single-Family Production Sets a Record in 2004

Housing starts in December climbed 10.9% to a seasonally adjusted annual rate of 2.004 million, according to the Commerce Department’s monthly report last week on residential construction. A total of 1.953 million housing units were started last year, up 5.7% from 1.848 million starts in 2003.

“The nation’s home builders continue to move forward to meet the strong housing demand that has characterized the marketplace for some time, and we are confident that 2005 will be another excellent year for housing,” said NAHB President David Wilson, a custom home builder from Ketchum, Idaho.

Wilson noted that the industry was helped last year by persistently low mortgage interest rates, and he said that ongoing gains this year in jobs and household income should help offset the slow but steady rise in mortgage interest rates that is anticipated as a result of Federal Reserve policy. “We are geared up for another big housing year,” Wilson said, “although we don’t expect to be building at quite the break-neck pace of 2004.”

Single-family production was up 13.1% in December to an annual rate of 1.678 million units, the second strongest monthly pace for all of 2004. The 1.608 million single-family homes started in 2004, an all-time high, was 7.3% above the 1.499 million single-family units started in 2003.

Multifamily housing starts were up 0.6% in December, at a seasonally adjusted annual rate of 326,000; they were down a scant 1% for the year, slipping to 345,000 units from 349,000 units in 2003.

“Home building in December was absolutely solid, finishing up the year nicely after some softening in November that was related to bad weather,” said David Seiders, chief economist of NAHB. “The level of unused building permits moved up last month, and that is a favorable sign for starts activity as we move forward this year.” He added that builders polled in this month’s NAHB/Wells Fargo Housing Market Index (HMI) expressed a high degree of optimism about housing market conditions currently and over the next six months.

Seiders said he expected to see a modest decline, of roughly 3%-4%, in housing starts this year as the result of higher mortgage rates, which are projected to average about 6.3% on fixed-rate loans, up from 5.8% last year.

Regionally, December starts were up 18.8% in the Midwest, to a pace of 379,000 units; 10.6% in the South, to 941,000 units; 7.9% in the West, to 516,000 units; and 5.7% in the Northeast, to 168,000 units.

For the year, starts were up 9.2% in the West, 8.3% in the South and 6.6% in the Northeast; they declined 4.8% in the Midwest, primarily reflecting a falloff in multifamily production.