Housing market trends in the third quarter of 2000 were mixed. Almost all production statistics were down from the second quarter. However, even with these signs of weakening, starts, permits, and completions will be at high levels for 2000. Sales figures, on the other hand, continue to show increases and are at near-record levels. Affordability of homeownership has decreased slightly, but a new homeownership rate record of 67.7 percent was set in the third quarter.

Housing production in the third quarter continued to weaken as it did in the second quarter with all indicators below both their second quarter levels and their levels from a year ago. Although production has declined for two quarters, their levels are still high when looking from a longer-term perspective; starts, permits, and completions are at or about the third highest levels in the past 12 years.

• Housing permits were issued at a seasonally adjusted annual rate (SAAR) of 1,501,000 units in the third quarter of 2000, which is 2 percent below the second quarter’s level and 8 percent below the third quarter of 1999. This level of activity will likely place year 2000 permit activity below the levels of the past 2 years but still ahead of the levels recorded in the prior 10-year period (1988–1997). Single-family permits were issued for 1,134,000 (SAAR) housing units in the third quarter of 2000, which is 1 percent below the second quarter and 8 percent below the third quarter of 1999. The third quarter level of single-family permits is below the experience of the past 2 years but is ahead of levels of the prior 19-year period (1979–1997).
  
  
• Housing starts in the third quarter totaled 1,527,000 (SAAR) housing units, which is 5 per-cent below the second quarter and 8 percent below the third quarter of a year ago. Again, this level of production activity is below the past 2 years but ahead of the levels recorded in the prior 10-year period (1988–1997). Starts of single-family housing units were at a seasonally adjusted annual rate of 1,228,000. This level is 3 percent below the second quarter and 6 percent below the third quarter of 1999. As was true for single-family permits, single-family starts were not as high as they have been in the past 2 years but were higher than in the prior 19-year period (1979–1997).
  
  
• Housing completions in the third quarter totaled 1,565,000 (SAAR), 4 percent below the past quarter and 3 percent below the third quarter of 1999. This rate is below last year’s level but above the levels of the prior 11-year period (1988–1998).Completions of single-family housing units totaled 1,236,000 (SAAR), which is 6 percent below the second quarter and 3 percent below last year’s third quarter. Single-family completions were below last year’s level but above the levels in the prior 19-year period (1980–1998).
  
  
• Manufactured homes were shipped in the second quarter at a seasonally adjusted annual rate of 266,000, which is 10 percent below the first quarter and 27 percent below the second quarter of 1999. This decline continued into the third quarter with declines posted for July and August. The last year in which shipments were below 300,000 was 1993.

Housing marketing and sales are still strong in the third quarter. Given the year-to-date performance, it appears that both new home sales and existing home sales will be only slightly behind last year’s record levels. Price changes are moderate, and inventories are at or below 4 months of sales for both new and existing homes.

• Builders sold 910,000 (SAAR) new single-family homes in the third quarter, up 6 percent from the second quarter and up 1 percent from the third quarter of 1999. At the pace set in the first three quarters of 2000, this could be the second best year ever for new home sales.
  
  
• REALTORS ® sold 5,080,000 (SAAR) existing homes in the third quarter, nearly equal to the second quarter’s sales and 3 percent below sales in the third quarter of 1999. Sales for the year will likely total nearly 5 million units and make 2000 the second best year after 1999’s record-setting pace.
  
  
• New home prices generally have increased, although the results are somewhat mixed. The median price of new homes was $166,000 in the third quarter, up 2 percent from the past quarter and up 4 percent from the third quarter of 1999. The average price was $201,100, down a slight 1 percent from the second quarter but up 4 percent from the third quarter of 1999. The price for a constant-quality new home was $192,700, unchanged from the past quarter but up 4 percent from the third quarter of 1999.
  
  
• Existing home prices have increased in the third quarter. The median price of $142,800 is up 3 percent from the second quarter and up 5 percent from the third quarter of 1999. The average price for an existing home was $179,400 in the third quarter, up 2 percent from the second quarter and up 4 percent from a year ago.
  
  
• Inventory changes are mixed—inventories of new homes are down, while inventories of existing homes have increased. In both cases, the inventories are modest compared with sales levels. There were 302,000 new homes available for sale at the end of the third quarter, down 3 percent from the past quarter and from the third quarter last year. This inventory will support only 3.9 months of sales, down 17 percent from the second quarter’s 4.7 months. The inventory of existing homes was 1,720,000 at the end of the third quarter, up 17 percent from 1,470,000 at the end of the second quarter. In terms of monthly sales, this inventory would last 4.0 months, up 21 percent from the second quarter’s 3.3 months.
  
  
• According to the National Association of Home Builders™, its members’ views of housing market activity are unchanged from last quarter and are less optimistic than they were last year. The composite Housing Market Index stood at 60 during the third and second quarters. However, the index is down 13 points from last year’s third-quarter level of 73.

Housing affordability declined somewhat in the third quarter in spite of a 9-basis-point decrease in interest rates. The NATIONAL ASSOCIATION OF REALTORS® Composite Housing Affordability Index was 124.8 percent in the third quarter of 2000, down 0.7 point from the second quarter and down 7 points from the third quarter of 1999. The decline results from the 3.5-percent increase in the median house price not being offset by the 1.2-percent increase in median family income and the 9-basis-point drop in the interest rate to 8.1 percent. The homeownership rate continues to increase, and a new record, 67.7 percent, was set in the third quarter.

Multifamily housing market conditions are mixed. Multifamily (5+ units) permits and starts are down, but completions are up. Rental vacancies are up, but absorption of new rental units has improved.

• Multifamily permits were issued for 306,000 (SAAR) apartments in the third quarter of 2000, down 6 percent from the second quarter and down 8 percent from the third quarter of 1999. Starts of multifamily units in the third quarter totaled 260,000 (SAAR), down 16 percent from the second quarter and down 11 percent from the third quarter of 1999.
  
  
• Completions of multifamily units in the third quarter of 2000 were at 305,000 units (SAAR), up 5 percent from the second quarter and up 1 percent from the third quarter of 1999.
  
  
• In the third quarter, 76 percent of the 57,200 apartments completed in the second quarter were leased. This absorption rate is 3 percentage points higher than in the past quarter and 5 percentage points higher than in the same period in 1999.
  
  
• Rental vacancies during the third quarter were 8.2 percent of the available stock, up 0.2 percentage point from the second quarter but unchanged from the third quarter of last year.

Regional Perspective

HUD’s field economists report that although home sales slowed during the first 9 months of 2000 compared with the same period last year, sales housing markets throughout the Nation remain very healthy. A robust economy has continued to boost demand in the Washington, D.C. metropolitan area, where existing home sales so far this year are up 10 percent. Homebuilding remains robust in the Midwest region, and 2000 will be another big year for home sales in the Chicago area. Dallas-Fort Worth area home sales and housing starts in the third quarter exceeded all previous third quarter records. Farther west, existing home sales in California remain at near record levels. Higher prices have slowed sales in the Seattle area, but they are up 12 percent in the adjacent, more affordable Tacoma area.

Rental housing markets are holding firm across the country. New England’s large markets are tight. The Mid-Atlantic’s major rental markets are balanced to tight, and demand is very strong in the Washington, D.C. suburbs. Good market reception for new units continues in much of the Southeast, with apartment occupancy rates remaining at high levels. Multifamily housing construction activity in the Midwest has held up so far this year; Illinois building permits are up 10 percent because of increased activity in the Chicago area. Southwest rental markets are balanced to tight. The Dallas-Fort Worth area is sustaining high occupancy in apartments, but there are more than 15,000 units in the pipeline. Multifamily building permit activity in the Pacific region is up significantly so far this year.