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Housing Activity to Remain Solid in 2003

Released by the Commerce Department last Thursday, new-home sales skidded 15% in January to a seasonally adjusted annual rate of 914,000. While the decline was bigger than expected, it was coming off December sales figures that were the fastest on record.

If January’s sales pace were simply maintained for the balance of this year, “we would be looking at the second-best year on record for new-home sales,” said NAHB Chief Economist David Seiders. “And we’re bound to do better than that.”

NAHB is forecasting 972,000 new-home sales this year, falling just shy of the record-smashing 976,000 homes sold for all of 2002.

“Fundamentals in the market for new single-family homes remain quite solid,” Seiders said, “including long-term mortgage rates that are now hovering in the 5.8% range. On top of this, our latest surveys reveal a high level of builder confidence heading into the new year.”

Mortgage interest rates are expected to start heading up some later this year as the pace of the economic recovery quickens, Seiders said, but the momentum behind housing activity is not expected to slip by much since the job market will be strengthening in the process.

Builders began work on new homes and apartments at a seasonally adjusted annual rate of 1.85 million units in January, the Commerce Department reported on Feb. 19. That marked the fastest pace of housing construction in 16 years.

Work on single-family homes rose 2.1% over the prior month to a seasonally adjusted annual rate of 1.51 million units, which was the fastest pace since November of 1978 and just short of the record 1.53 million single-family starts rate of December of 1977. The multifamily starts rate was 340,000 units in January, close to the average for 2002.

NAHB is forecasting 1.65 million housing starts for this year, which would be down 3.5% from last year’s “exceptionally strong” 1.71 million units, Seiders said.

February’s unusually harsh winter weather will most likely take its toll on housing activity for that month, he predicted, “but ultimately 2003 should still shape up as the second best year on record for new home sales and it should be another great year to be a home builder.”

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