Summary

The U.S. housing market had a very strong second quarter in 2001, with production, marketing, and affordability all at very strong levels. Although there was some slippage in permits from the first quarter, production remained at fairly high levels. In the marketing area, both new home and existing home sales continued to be strong components. Prices rose, but not exceptionally quickly, and inventories remained reasonable given the sales levels. Affordability was still being kept strong by historically low interest rates. The picture for multifamily housing was not as clear with production down, apartment leasing or absorption down, and the vacancy rate up.

Housing production remained strong in the second quarter. Both permits and starts were at about 1.6 million per year. Permits declined from the first quarter but were above 2000's second-quarter level. Starts increased from both the first quarter of 2001 and the second quarter of 2000. Meanwhile, completions increased, although the level was not as high as that of starts and permits. Finally, the manufactured home sector continues to languish, with placements and shipments at levels not seen in the past 10 years.

  • Housing permits were issued in the second quarter for 1,592,000 units (seasonally adjusted annual rate, or SAAR), 5 percent below the first-quarter rate but up 2 percent from the second quarter of 2000. Single-family permits were issued for 1,214,000 (SAAR) units in the second quarter, down 2 percent from the first quarter but up 3 percent from the second quarter of 2000. Although this pace was down slightly, the level of permits remained very high.
  • Second-quarter housing starts, at 1,631,000 (SAAR) units, remained at the pace set in the first quarter and were 3 percent above the rate of the second quarter of 2000. There were 1,295,000 (SAAR) single-family starts in the second quarter, up 1 percent from the first quarter and up 5 percent from the second quarter of 2000. This level of starts represented a high level of activity.
  • Housing completions in the second quarter were at a pace of 1,565,000 (SAAR) units, up 6 percent from the first quarter but down 2 percent from the second quarter of 2000. Single-family completions set a pace of 1,236,000 (SAAR) units, 6 percent ahead of the first-quarter pace but 3 percent lower than the second quarter of 2000. Just as with permits and starts, the level of completions was very high from a long-run perspective.
  • Manufactured homes shipped in the second quarter of 2001 were at a seasonally adjusted annual rate of 191,000, up 10 percent from the first quarter of 2001 but down 28 percent from the second quarter of 2000. Placements of new manufactured homes at 183,000 (SAAR) units in the first quarter were down 13 percent from the fourth quarter of 2000 and down 37 percent from the first quarter of 2000. Such low levels of manufactured housing activity have not been seen in the past decade.

Housing marketing remained strong in the second quarter despite some retrenching from the record-setting pace of the first quarter. New home sales, although down from the first quarter, still were up over last year. Existing home sales, at 5.3 million, were up from the first quarter of 2001 and the second quarter of 2000. Prices, although mixed, were generally higher than they were in 2000. Inventories are low to moderate given the sales paces for new and existing homes.

  • Builders sold 911,000 (SAAR) new single-family homes in the second quarter of 2001, down 4 percent from the record-setting first quarter but up 10 percent from the second quarter of 2000. Year-to-date activity suggests that new home sales will set a new record in 2001.
  • REALTORS sold 5,303,000 (SAAR) existing single-family homes in the second quarter, up 1 percent from the record-setting first quarter and up 4 percent from the second quarter of 2000. If activity continues at the pace of the first two quarters, 2001 could be a record-setting year.
  • New home prices were mixed compared to the first quarter. The median price of $172,200 was up 1 percent from the first quarter while the average price of $207,100 was down 2 percent. Compared to the second quarter of 2000, both the median and average prices have risen at 6 percent and 2 percent, respectively.
  • Existing home prices increased as the median price rose 5 percent to $146,900 while the average price also increased 5 percent to $184,600. Similar increases were posted compared to 2000's prices—6 percent for the median and 5 percent for the average price.
  • Inventories are quite low compared to sales volumes for both new and existing homes. At the end of the second quarter, there were 292,000 new homes available for sale, which represents 3.9 months of sales at the current sales volumes. This was unchanged from the first quarter but is 19 percent lower (by 0.9 month) than in 2000 at this time. The industry has now gone 7 straight months with less than 4 months of inventory. There were 1,680,000 existing homes available for sale at the end of the second quarter. This inventory was up 6 percent from the first quarter and up 27 percent from the second quarter of 2000. This inventory represents 3.8 months of sales at the current sales pace, up 9 percent from the first quarter and up 23 percent from the second quarter of 2000.
  • The National Association of Home BuildersTM member panel exhibited unchanged attitudes from the first quarter but less optimism than in 2000. The Housing Market Index stood at 57 in the first and second quarters of 2001 compared to 60 in the second quarter of 2000.

Housing affordability remained favorable in the second quarter owing in large part to low mortgage interest rates. The NATIONAL ASSOCIATION OF REALTORS composite affordability index was 138.4 in the second quarter, 4.4 points lower than in the first quarter but up 11.8 points from the second quarter of 2000. This decline resulted from a 5.1-percent increase in the median price of an existing home not being offset by a drop of 6 basis points in the 30-year fixed interest rate and a 1.2-percent increase in median family income. The homeownership rate returned to the record level of 67.7 percent, up 0.2 percentage point from the first quarter of 2001 and up 0.5 percentage point from the second quarter of 2000.

Multifamily housing markets showed mixed results during the second quarter. Two of the three production indicators—permits and starts-posted declines, but levels of production remained high. The apartment vacancy rate worsened, as did the apartment absorption rate.

  • Multifamily permits were issued for 308,000 (SAAR) units in the second quarter, 16 percent below the first-quarter level and 5 percent below the level of the second quarter of 2000. Multifamily starts totaled 295,000 (SAAR) in the second quarter, 6 percent below both the first quarter of 2001 and the second quarter of 2000.
  • During the second quarter there were 286,000 (SAAR) multifamily completions, the same as in the first quarter but down 5 percent from the second quarter of 2000.
  • In the second quarter, 66 percent of the 43,500 apartments completed in the first quarter were leased. This absorption rate was down 1 percentage point from the first quarter and down 7 percentage points from the second quarter of 2000.
  • Rental vacancy rates were up to 8.3 percent in the second quarter, up 0.1 percentage point from the first quarter and up 0.3 percentage point from the second quarter of 2000.

2000 Census Results: Housing Trends 1990-2000


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