Preliminary estimates for the year 2000 indicate that the housing market performed very well. Although not as strong as the previous year, many indicators put 2000 right behind the record-breaking year 1999. One possible problem is that the year was stronger in the first half than in the second half. Nevertheless, 2000 will be considered one of the best years for housing in the past decade.

• Permits issued for new housing units totaled 1,569,700 in 2000, 5.6 percent lower than the 1,663,500 permits issued in 1999. However, 2000 was the third best year in the past 14 years, following 1998 and 1999.
  
  
• Builders started construction on 1,593,800 housing units in 2000, 4.4 percent lower than the 1,666,500 units started in 1999. For starts this was the third best year in the past 13 years, following 1998 and 1999.
  
  
• A total of 1,605,800 housing units were completed in 2000, a 2-percent decrease from 1999. This was the second highest year in the past 13 years.
  
  
• Sales of new single-family homes totaled 898,000 in 2000, making it the second best year in history for new home sales and only 1 percent lower than the 907,000 new homes sold in 1999.
  
  
• Existing home sales finished the year at 5,031,000, making 2000 the second best year for existing home sales since the 5,197,000 sold in 1999.
  
  
• The national homeownership rate set a new annual record, and, in 2000, 67.4 percent of American households owned their own homes.
  
  
• Interest rates on 30-year, fixed-rate mortgages averaged 8.05 percent in 2000, 61 basis points higher than in 1999. This interest rate increase led to a decrease in housing affordability for 2000. However, 2000 ended with interest rates in December approximately 90 basis points below the January level, and this improved affordability at the close of the year.

• Builders’ attitudes worsened over the year so that the National Association of Home Builders™ (NAHB) Housing Market Index averaged 62 points in 2000, 11 points lower than in 1999. Although there is significant decline, it was from 1999’s all-time record of 73 points.
  
  
• Shipments of manufactured homes declined through the first 11 months of 2000 and will most likely total approximately 250,000 homes for the year. This would put manufactured shipments back to levels experienced in 1993.

The fourth quarter of 2000 showed signs of both strengthening and weakening. Production increased over the third quarter, sales were mixed (new home sales increased while existing home sales decreased slightly), price movements were mixed (new home prices increased while existing home prices decreased), affordability improved as a result of declining interest rates, and the homeownership rate decreased slightly from the record set in the third quarter.

Housing production in the fourth quarter generally posted increases. Overall, in the fourth quarter permits increased for single-family and for multifamily (5+ units). Total housing starts increased, because increased single-family starts balanced out decreased multifamily starts. Finally, total completions for both single-family and multifamily were unchanged from the third quarter.

• Housing permits were issued at a seasonally adjusted annual rate (SAAR) of 1,546,000 units in the fourth quarter of 2000, 3 percent above the third quarter’s level but 7 percent below the fourth quarter of 1999. Single-family permits were issued for 1,173,000 (SAAR) housing units in the fourth quarter of 2000, 3 percent above the third quarter but 5 percent below the fourth quarter of 1999. The levels of both single-family and total permits are at reasonably high levels from a historical perspective.
  
  
• Housing starts in the fourth quarter totaled 1,558,000 (SAAR) housing units, 2 percent above the third quarter but 8 percent below the fourth quarter of 1999. Starts of single-family housing units were at a seasonally adjusted annual rate of 1,261,000. This level is 4 percent above the third quarter but 8 percent below the fourth quarter of 1999. As was true for permits, such levels are reasonably high when reviewing the history of this data series.
  
  
• Housing completions in the fourth quarter totaled 1,562,000 (SAAR), unchanged from the past quarter but 5 percent below the fourth quarter of 1999. Completions of single-family housing units totaled 1,255,000 (SAAR), up 2 percent from the third quarter but down 5 percent from 1999’s fourth quarter. Single-family completions are at very high levels compared with earlier periods.
  
  
• Manufactured homes were shipped in the third quarter at a seasonally adjusted annual rate of 244,000, which is 8 percent below the second quarter and 27 percent below the third quarter of 1999. This decline continued into the fourth quarter of 2000 with declines posted for October and November. The last year in which shipments were below 300,000 was 1993.

Housing marketing and sales are still strong in the fourth quarter. Price changes are mixed, and inventories are at or below 4 months of sales for both new and existing homes.

• Builders sold 920,000 (SAAR) new single-family homes in the fourth quarter, up 2 percent from the third quarter and up 2 percent from the fourth quarter of 1999. This fourth quarter 2000 rate is a very high level of new home sales— higher than any annual rate ever recorded.
  
  
• REALTORS^® sold 5,043,000 (SAAR) existing homes in the fourth quarter, down 1 percent from the third quarter’s sales but nearly equal to sales in the fourth quarter of 1999. As with new home sales, this fourth-quarter rate is higher than any annual rate ever recorded.
  
  
• New home prices generally have increased, although the results are somewhat mixed. The median price of new homes was $169,000 in the fourth quarter, unchanged from the past quarter but up 2 percent from the fourth quarter of 1999. The average price was $210,200, up 3 percent from the third quarter and up 2 percent from the fourth quarter of 1999. The price for a constant-quality new home was $195,500, up 2 percent from the past quarter and up 6 percent from the fourth quarter of 1999.
  
  
• Existing home prices have decreased in the fourth quarter. The median price of $139,400 is down 2 percent from the third quarter but up 5 percent from the fourth quarter of 1999. The average price for an existing home was $177,800 in the fourth quarter, down 1 percent from the third quarter but up 6 percent from a year earlier.
  
  
• The inventory situation is strong; inventories of new homes are unchanged, and inventories of existing homes have decreased. In both cases, the inventories are modest compared with sales levels. There were 310,000 new homes available for sale at the end of the fourth quarter, unchanged from the past quarter but down 3 percent from the fourth quarter of 1999. This inventory will support only 3.9 months of sales, down 5 percent from the third quarter’s 4.1 months. The inventory of existing homes was 1,600,000 at the end of the fourth quarter, down 6 percent from 1,710,000 at the end of the third quarter. In terms of monthly sales, this inventory would last 3.9 months, down 3 percent from the third quarter’s 4.0 months.
  
  
• According to NAHB, its members were less pessimistic about housing market activity than in the third quarter but were less optimistic than they were in the last quarter of 1999. The composite Housing Market Index stood at 62 during the fourth quarter, up from 60 in the third quarter. However, the index is down 10 points from 1999’s fourth-quarter level of 72.

Housing affordability improved in the fourth quarter in response to a 29-basis-point decrease in interest rates. The NATIONAL ASSOCIATION OF REALTORS^® Composite Housing Affordability Index was 133.0 percent in the fourth quarter of 2000, up 8.2 points from the third quarter and down 1.6 points from the fourth quarter of 1999. The increase results from the 2.3-percent decrease in the median house price, a 1.2-percent increase in median family income, and a 29-basis-point drop in interest rate to 7.81 percent. The homeownership rate declined 0.2 percentage point to 67.5 from the record 67.7 percent set in the third quarter.

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

• Multifamily permits were issued for 311,000 (SAAR) apartments in the fourth quarter of 2000, up 2 percent from the third quarter but down 14 percent from the fourth quarter of 1999. Starts of multifamily units in the fourth quarter totaled 261,000 (SAAR), down 2 percent from the third quarter and down 9 percent from the fourth quarter of 1999.
  
  
• Completions of multifamily units in the fourth quarter of 2000 were at 281,000 units (SAAR), down 9 percent from the third quarter and down 5 percent from the fourth quarter of 1999.
  
  
• In the fourth quarter, 74 percent of the 67,400 apartments completed in the third quarter were leased. This absorption rate is unchanged from the past quarter and 3 percentage points higher than the same period in 1999.
  
  
• Rental vacancies during the fourth quarter were 7.8 percent of the available stock, 0.4 percentage point lower than the third quarter and 0.1 percentage point lower than the fourth quarter of 1999.

Regional Perspective

HUD’s field economists report that home sales for 2000 were less than last year’s home sales in many major markets throughout the Nation, but demand remained very strong. Single-family building permit activity for the year was down approximately 5 percent from its high 1999 volume. The decline in activity ranged from 2 percent in the Rocky Mountains to 13 percent in the Great Plains region. However, the Southwest and Pacific regions recorded slight increases of less than 2 percent. In the Mid-Atlantic, permits were off only 4 percent, and existing home sales in the Washington area increased 11 percent over 1999. In the Midwest, the Building Industry Association of the Twin Cities reported that 2000 was the second-most active year for local homebuilders in the past 10 years, and builders expect 2001 to be another good year. The Chicago Association of REALTORS^® reported another big year for existing home sales, and the market for new sales in housing was even stronger, local sources say. In the Southwest, the demand for new homes continued to increase in Texas markets. Single-family permit activity for the year was up 13 percent in the Austin area and 12 percent in the Dallas area. Further west, the strong California economy supported a 4-percent increase in homebuilding, the fifth consecutive year of increased activity, and existing home sales volume was un-changed from 1999’s record pace. Sales of existing single-family homes in the Seattle metropolitan area declined 3 percent in 2000, compared with 1999. However, existing condominium sales increased 2 percent.

Rental housing markets also were very strong in 2000. Almost all of the Nation’s major markets reported either balanced or tight conditions. Rental markets in New England continued to tighten with vacancy rates in many areas below 3 percent. Multi-family permit activity in the New York City metropolitan area increased 26 percent in 2000. To meet demand in the suburbs, developers actively are converting vacant commercial buildings and industrial sites for luxury residential complexes. The Northern Virginia market continued to be the hottest market in the Mid-Atlantic, with absorption of new units at its highest level in the past 10 years. In Philadelphia, with demand high in the Center City and a tight market, conversions of low- and midrise office buildings to both condominiums and rental units are booming. The Chicago area rental market continued to exhibit tight conditions and strong de-mand for new units. The overall apartment vacancy rate as of the fourth quarter was one of the lowest on record. In the Southwest the major markets are balanced but competitive. There was a substantial decline in multifamily building permit activity in 2000, reflecting builder cutbacks in response to the large number of units in the pipeline. In Colorado, during the second half of 2000, the Denver and Colorado Springs rental markets tightened significantly. Market conditions in California changed little in 2000. The San Francisco Bay area markets remained very tight, and Southern California’s rental markets were either balanced or tight. In the Seattle metropolitan area, tight market conditions and low vacancy rates (4 percent overall) prevailed. In close-in neighborhoods, rates of 3 percent or less are reported.