Housing production in the third quarter of 2002 was very robust. Permits, starts, and completions increased to or continued at near-record levels. Given the year-to-date progress, permits, starts, and completions are likely to be among the highest since the mid-1980s. On the other hand, as in past three quarters, manufactured housing shipments continued to decrease and may have reached a record low.

• Permits were issued for 1,702,000 (seasonally adjusted annual rate (SAAR)) new housing units in the third quarter of 2002, 2 percent higher than in the second quarter and 7 percent higher than in the third quarter of 2001. (Quarterly permits have exceeded 1,700,000 only four times in the past 16 years.) Of these permits, 1,305,000 (SAAR) were for single-family homes, 2 percent higher than in the second quarter and 7 percent higher than in the third quarter of the past year. This is the second highest quarterly total for single-family permits and is right behind 2002’s first quarter when 1,306,000 (SAAR) permits were issued.

• Builders started construction on 1,707,000 (SAAR) housing units in the third quarter of 2002, 2 percent higher than in the second quarter and 7 percent higher than in the third quarter of 2001. This is the fourth highest quarterly value for total starts since 1987. Single-family starts in the third quarter totaled 1,349,000 (SAAR) units, 2 percent higher than in the second quarter, 6 percent higher than in the third quarter of 2001, and the third highest quarterly value since 1978.

• During the third quarter builders completed construction of 1,639,000 (SAAR) housing units, basically unchanged from the second quarter and 3 percent above the third quarter of 2001. This figure represents the third highest quarterly value in the past 15 years. Single-family completions totaled 1,297,000 (SAAR) units in the third quarter, basically unchanged from the second quarter, 2 percent above the third quarter of 2001, and the 12th highest in the 35-year history of the series. The past 4 quarters are among the top 12 quarters in number of completions.

• Manufactured home shipments in the third quarter totaled 168,000 (SAAR) units, 4 percent lower than in the second quarter of 2002, 16 percent below the second quarter of 2001, and one of the lowest shipment levels since the early 1990s.

Housing marketing and sales were at or near record-setting levels in the third quarter, and new records will be set for the year. New home sales set a new quarterly record with August and September having the two highest monthly levels ever reported. Existing home sales are down slightly from the second quarter but continue at high levels with the expectation that 2002 will be a record-breaking year. Prices are mixed with lower new home prices but higher existing home prices. Inventories of both new and existing homes increased slightly in the third quarter but are lower relative to sales. Builders’ attitudes are unchanged from the second quarter, but they are more optimistic about prospective buyer traffic.

• Builders sold 997,000 (SAAR) new single-family homes in the third quarter of 2002, 5 percent higher than in the second quarter, 15 percent higher than in the third quarter of 2001, and the highest quarterly value in the history of this series, which began in 1963. The last 2 months of the quarter saw the two highest monthly values ever recorded for this series. New home sales in 2002 should be at the highest annual level ever reported.

• REALTORS^® sold 5,357,000 existing homes in the third quarter of 2002, down 3 percent from the second quarter but up 2 percent from the third quarter of 2001. Year-to-date sales suggest that existing home sales in 2002 will break the record set in 2001 by approximately 5 percent with sales totaling approximately 5.6 million homes.

• New home prices decreased for a second consecutive quarter. The median price of a new single-family home was $175,200 in the third quarter of 2002, 6 percent lower than in the second quarter but 2 percent higher than in the third quarter of 2001. The average sales price was $218,200 in the third quarter of 2002, 4 percent lower than in the second quarter but 5 percent higher than in the third quarter of 2001. The constant-quality price of homes sold in the third quarter was $206,200, unchanged from the second quarter but 4 percent higher than the third quarter of 2001.

• Existing home prices increased in the third quarter according to data provided by the NATIONAL ASSOCIATION OF REALTORS^®. The median price of an existing home sold in the third quarter was $161,800, 3 percent higher than in the second quarter and 7 percent higher than in the third quarter of 2001. The average sales prices for existing homes sold in the third quarter was $205,600, up 2 percent from the second quarter and up 8 percent from the third quarter of last year.

• Inventories of new and existing homes available for sale at the end of the third quarter increased from the second quarter but continue to be low in terms of sales pace. There were 332,000 new homes available for sale at the end of the third quarter, up a slight 1 percent from the second quarter and up 7 percent from the third quarter of 2001. However, this inventory of new homes would be sold within 4 months at the current sales pace, down from 4.2 months at the end of the second quarter and from 4.4 months at the end of the third quarter of 2001. The inventory of existing homes available for sale at the end of the third quarter was 2,350,000, up 4 percent from the end of the second quarter and up 8 percent from the end of the third quarter of 2001. This inventory would last 5.2 months at the current sales pace, down from 5.3 months at the end of last quarter but unchanged from the end of the third quarter of 2001.

• Builders’ attitudes have not changed from the previous quarter, although they have improved from a year ago according to the Housing Market Index published by the National Association of Home Builders. In the third quarter the index was 60, unchanged from the second quarter but up 3 points from the third quarter of 2001. Components of the overall index suggest that builders are more optimistic about prospective buyer traffic and less optimistic about current sales activity.

Housing affordability has improved because of declining mortgage interest rates and growth in family incomes and continues at very favorable levels, according to the housing affordability indexes published by the NATIONAL ASSOCIATION OF REALTORS^®. Interest rates declined 42 basis points from the second quarter to average 6.41 percent in the third quarter. In addition, median family income in the third quarter was $52,689, up 0.5 percent from the second quarter. The median price of an existing home was $161,800, up a modest 2.5 percent from the second quarter. As a result of these changes, a family earning the median income in the third quarter has 135.5 percent of the income needed to purchased the median-priced existing home, 3 percentage points higher than in the second quarter and 2.3 percentage points higher than in the third quarter of 2001. Such low interest rates and affordability conditions supported homeownership for 68 percent of U.S. households, up from 67.6 percent in the second quarter and down slightly from the record-level 68.1 percent set in the third quarter of 2001.

Multifamily housing (5 or more units) was generally strong in the third quarter with activity between 300,000 and 325,000 units. Production increases were posted for starts and completions compared with the second quarter, although permits declined slightly. All third-quarter production statistics increased from 2001’s third-quarter levels. Rental market conditions were mixed with improved absorption but an increased vacancy rate.

• Multifamily housing permits were issued for 322,000 (SAAR) units in the third quarter of 2002, a decrease of 1 percent from the second quarter but a 5-percent increase from the third quarter of 2001.

• Construction was started on 325,000 (SAAR) multifamily housing units in the third quarter of 2002, an 8-percent increase from the second quarter and a 13-percent increase from the third quarter of 2001.

• Multifamily completions totaled 307,000 (SAAR) units in the third quarter, a 3-percent increase from the second quarter and an 8-percent increase from the third quarter of last year.

• In the third quarter, 62 percent of the 57,500 new, unsubsidized, unfurnished multifamily apartment units were rented, an increase from the 60-percent absorption rate of the second quarter but a decrease from the 65-percent absorption rate of the third quarter of 2002.

• The rental vacancy rate was 9.1 percent in the third quarter of 2002, a 0.6-percentage-point increase from the 8.5-percent vacancy rate of the second quarter and a 0.7-percent increase from the third quarter of 2001.