Housing market activity in the first quarter of 1999 continued at the vigorous record-setting pace of 1998. Production is high; sales and marketing continue at record or near-record levels; and interest rates, prices, and incomes are supporting favorable affordability.
Housing production in the first quarter of 1999 improved over both the fourth and first quarters of 1998 while setting some new records for first-quarter activity.
The NATIONAL ASSOCIATION OF REALTORS® Composite Housing Affordability Index was at 137.9, unchanged from the fourth quarter of 1998. The stability of the index value results from unchanged prices for existing homes, a small increase in the interest rate (6 basis points), and a 1-percent increase in the median family income.
During the first quarter, the homeownership rate was 66.7 percent, an increase of 0.3 percent from the fourth quarter of 1998. This is the highest first-quarter rate ever recorded and the second-highest quarterly rate.
The multifamily (5+ units) housing market seems strong, with slightly falling permits, an increasing vacancy rate, and an increasing absorption rate.
HUD's field economists report that the major housing markets in their regions are off to a strong start this year. Single-family building permit activity was up in every region but the Northwest, where first-quarter activity was only slightly behind the 1998 level for the same period. First-quarter home sales met or exceeded expectations. Sales of existing homes are up almost 10 percent in many areas. The New York State Association of REALTORS® reported three consecutive months of increased sales. Mid-Atlantic existing home sales were boosted by gains of more than 20 percent in the Richmond area and 15 percent in the Washington, D.C., metropolitan area. Home sales continued to boom in the Southeast, Southwest, and Rocky Mountain markets.
Rental housing markets throughout much of the Nation also continued to record high levels of multifamily construction, good occupancy levels, and good absorption. New England markets, in general, were tight; 5 of the 12 States in the Nation having the lowest vacancy rates are located in this region. Conditions in the Mid-Atlantic region's major rental markets were mostly balanced to tight. Apartment markets generally remained in good condition throughout the Midwest, with occupancy in the 92- to 97-percent range.
The Southwest region's apartment occupancy rates dropped slightly with the significant increases in new units, but absorption rates were still at or above expectations. Conditions in the Rocky Mountain region's three big rental markets remained balanced to tight. A recent survey in Colorado found that tight market conditions were easing in medium-size metropolitan areas. In the Pacific region, California recorded a 48-percent increase in multifamily permits comparing 1999's first quarter with last year's. Rental market conditions in the Phoenix area remained balanced, with vacancy rates in larger properties (100 or more units) running at about 6 percent and at up to 9 percent in some submarkets with high volumes of new units. The Las Vegas area's rental market remained very strong.
There is concern, especially in the Southeast, Midwest, Rocky Mountain, and Northwest regions, about the rapid growth of the inventory of high-rent, assisted-living developments for seniors. Reports from the Atlanta area warned of slowed rent-ups and declining occupancy. An increasingly competitive market environment is anticipated in other markets because of the large supply of these projects in development. Many smaller communities in the Rocky Mountain and Northwest regions are thought to have reached their capacity for this type of housing.