Housing continues to be part of the current economic expansion now entering its 10th year. The first quarter of the new millennium reveals a strong housing market, although some unfavorable signs surfaced as the quarter closed. Housing production for the quarter was strong, with increases in permits, starts, and completions. Shipments of manufactured housing were off. Marketing was somewhat mixed: new home sales were at near-record levels, whereas existing home sales retreated from 1999's record pace. Interest rates exceeded the 8-percent threshold and may have impacted affordability, although homeownership reached a new record high.

Housing production in the first quarter of 2000 was strong, with permits, starts, and completions at high levels—all three above-mentioned indicators increased from the fourth quarter of 1999. These housing production levels are among the highest in the last 15 years. Whether they will continue is uncertain because March ended the quarter with declines in permits and starts.

• Housing permits were issued at a seasonally adjusted annual rate (SAAR) of 1,668,000 housing units in the first quarter of 2000, which is 4 percent higher than in the fourth quarter of 1999 but 3 percent below the peak of the first quarter of 1999. There were 1,254,000 (SAAR) single-family permits during the first quarter—4 percent above the fourth quarter of 1999 but 2 percent below the first quarter of 1999. Single-family permit levels greater than 1,200,000 are historically high.
  
  
• Housing starts totaled 1,718,000 (SAAR) during the first quarter, which is 2 percent above the fourth quarter of 1999 but 2 percent below the first quarter of 1999. Single-family starts were at a seasonally adjusted annual rate of 1,326,000—4 percent below both the first and fourth quarters of 1999.
  
  
• Housing completions during the first quarter totaled 1,692,000 (SAAR)—3 percent above the fourth quarter and 4 percent above the first quarter of 1999. Single-family completions were 1,353,000 seasonally adjusted annual rate—3 percent above the fourth quarter of 1999 and 4 percent above the first quarter of 1999.
  
  
• Manufactured home shipments during the first quarter totaled 295,000 (SAAR)—6 percent below the fourth quarter of 1999 and 23 percent below the first quarter of 1999.

Housing marketing and sales in the first quarter were strong, with new home sales having the second-best quarter ever. Existing home sales, however, showed less strength than in 1999. Prices were nearly unchanged from the fourth quarter of 1999 but were up moderately from the first quarter of 1999. Inventories were still at low levels and were slightly lower than in 1999's fourth quarter. Builders are less optimistic than they were last year.

• Builders sold 940,000 (SAAR) new single-family homes in the first quarter of 2000. This is 4 percent above the fourth quarter of 1999 and 5 percent above the first quarter of 1999. March new home sales were at the second-highest monthly level ever recorded, and the first quarter level was the second highest quarterly value ever recorded. If this level continues throughout the year, 2000 will be the best year ever for new home sales.
  
  
• REALTORS® sold 4,680,000 (SAAR) homes in the first quarter of 2000, down 7 percent from the fourth quarter of 1999 and down 10 percent from the first quarter of 1999. Although the level of sales was down from 1999's record level, it was still a high level historically.
  
  
• Prices for new homes dropped from the fourth quarter of 1999—the median price in the first quarter of 2000 was $162,000 (down 2 percent), whereas the average price was $199,600 (down 3 percent). Compared with prices in the first quarter of 1999, the median price of new homes was up 3 percent, and the average was up 6 percent. The price of a constant-quality new home rose 1 percent to $185,800 in the first quarter, which is 2 percent above the constant-quality price in the first quarter of 1999.
  
  
• The median price of an existing home was $133,400 in the first quarter, unchanged from the fourth quarter and up 3 percent from the first quarter of 1999.
  
  
• Inventories of new and existing homes went in opposite directions, as they did last quarter. There were 322,000 new single-family homes in builders' inventories at the end of the first quarter of 2000—up 1 percent from the fourth quarter and up 8 percent from the first quarter of 1999. This inventory will support 4.1 months of sales, which is down from last quarter's 4.3 months. The inventory of existing homes was 1,340,000 homes at the end of the first quarter of 2000—down 11 percent from the fourth quarter of 1999 and 36 percent from the first quarter of 1999. This inventory will support 3.3 months of sales, down from the 3.5 months at the end of the fourth quarter of 1999.
  
  
• According to the National Association of Home Builders™, its members are less optimistic than they were in the first and fourth quarters of 1999. During the first quarter of 2000, the composite Housing Market Index was 67 points, down 5 points from last quarter and 6 points from the first quarter of 1999.

Housing affordability continued to decline as interest rates reached 8 percent. The NATIONAL ASSOCIATION OF REALTORS® Composite Housing Affordability Index was 131.1 in the first quarter of 2000—down 3.5 points from the fourth quarter of 1999 and down 14.1 points from the first quarter of 1999. This decline was the result of a 36-basis-point increase in the interest rate to 8.02 percent and a slight price increase that was not offset by the 1-percent increase in the median family income. Despite this decline in affordability, the homeownership rate rose to 67.1 percent in the first quarter of 2000, which is a new quarterly record. The first-quarter rate was 0.2 percentage point higher than the fourth-quarter rate and 0.4 percentage point above the first quarter of 1999.

Multifamily market conditions were fairly strong, although they reflect the volatile nature of this market. Multifamily (five or more units) permits, starts, completions, and rental absorption improved from the fourth quarter. Vacancy rates were steady.

• Multifamily permits were issued for 349,000 (SAAR) units in the first quarter of 2000, up 2 percent from the fourth quarter of 1999 but down 7 percent from the first quarter of 1999.
  
  
• Starts of multifamily units totaled 361,000 in the first quarter of 2000—up 26 percent from the fourth quarter and up 6 percent from the first quarter of 1999.
  
  
• Completions of multifamily units stood at 315,000 during the first quarter of 2000, up 7 percent from the fourth quarter and up 13 percent from the first quarter of 1999.
  
  
• In the first quarter of 2000, 74 percent of the 57,200 apartments completed in the fourth quarter of 1999 were leased. This absorption rate is 2 percentage points above the fourth quarter of 1999 and 1 percentage point above the first quarter of 1999.
  
  
• The first quarter rental vacancy rate was 7.9 percent, which is unchanged from last year's fourth quarter but down 0.3 percentage point from last year's first quarter.

Regional Perspective

HUD's field economists report that market conditions during the first quarter of 2000 presage a healthy but somewhat slower sales housing market in the first half of this year compared with last year. Although the national total of single-family home building permits for the first 3 months of the year was virtually unchanged from the same period last year, 7 of 10 regions actually experienced declines. Significant increases in the Midwest and Southwest largely offset the declines, however. Despite higher interest rates and prices, first-quarter sales of both new and existing homes remain robust in most markets. Analysts throughout much of the Nation are positive about the prospects for a strong Spring.

Rental housing market conditions also remain strong in many of the Nation's major rental markets, but there are large pipelines of construction and planned activity as well as reports of increasingly competitive market conditions. Multifamily housing building permits were down somewhat during the first quarter of the year, compared with the same period last year, continuing the trend that began in the second half of 1999. Significant reductions in multifamily permit totals have occurred in the Southeast, especially Florida, and in the Southwest, principally in the Dallas and Houston areas. The Rocky Mountain region, led by Colorado, and the Pacific region, reflecting the comeback in California, had major first quarter gains in multifamily permit activity.