Summary

The closing year of the last millennium was exceptionally good for the overall economy and for the housing sector. The U.S. economy is experiencing the longest expansion since the end of World War II—107 months since April 1991. Unemployment is at its lowest level in 30 years, consumer confidence is at a record high, stock prices are breaking through to new levels, the Federal Government is in the black, and inflation remains in check.

Preliminary estimates now available indicate that 1999 was another very good year for the housing industry and for the housing consumer. We have repeated this statement in our last five annual summaries. In 1999, new records were set, and others were nearly surpassed.

  • New-home sales set a new record at 904,000 housing units in 1999, up 2 percent from the previous record of 886,000 set in 1998.

  • Existing-home sales also set a new record with 5,197,000 resales marking the fourth consecutive record-breaking year, according to the NATIONAL ASSOCIATION OF REALTORS. This is nearly 5 percent ahead of the 4,970,000 sold in 1998.

  • Homeownership set a new annual record with 66.8 percent of American households owning their own homes, surpassing the record of 66.3 percent set last year.

  • Housing production in 1999 was at near-record levels. Permits totaled 1,638,000, the highest number since 1986. Starts were also at their highest level since 1986 with 1,663,000 homes started in 1999. High levels of completions during the year (1,663,000 housing units) made 1999 the best year since 1987.

  • The National Association of Home Builders index of builders' confidence averaged 73 points in 1999. This overturns the previous record of 70 points set last year.

  • Interest rates averaged 7.44 percent in 1999 and, although up 49 basis points from 1998, are the third-lowest annual average in the past 27 years.

  • The index of housing affordability in 1999 fell off slightly from 1998 but remains the second-best level in the past 26 years.

  • Data on shipments of new manufactured homes through November suggest that shipments will be below last year's record but that 1999 will be among the industry's 4 best years.

The 1999 fourth-quarter statistics suggest neither an upward nor a downward path for the housing market. Permits, starts, and completions were slightly ahead of the third quarter, but starts and permits were down from the fourth quarter of 1998. Shipments and placements of new manufactured housing units were down from the last quarter and from 1998. Sales of new and existing homes were down this quarter but were at very high levels. Interest rates were still below 8 percent, unchanged from the third quarter of 1999, although up more than 100 basis points from the fourth quarter of 1998. Affordability was up for the quarter, and the homeownership rate was at the second-highest quarterly level ever, even after having taken a slight seasonal dip.

  • Builders took out permits to build 1,606,000 housing units at a seasonally adjusted annual rate (SAAR) in the fourth quarter. This was up 1 percent from the third quarter but down 6 percent from the fourth quarter of 1998. Single-family permits were taken out at a seasonally adjusted annual rate of 1,200,000, down 1 percent from the third quarter and down 4 percent from the fourth quarter of 1998. Both these statistics are at the high levels experienced in the past 2 years.

  • Builders started construction on 1,651,000 (SAAR) homes in the fourth quarter, nearly the same as the third quarter but down 3 percent from the fourth quarter of 1998. Single-family construction accounted for 1,347,000 (SAAR) of these housing units, up 3 percent from the last quarter and even with the fourth quarter of 1998. As with permits, these were at the very high levels experienced in the past 2 years. Prior to 1998, one would need to go back 12 years or more to see such high production levels.

  • Housing production finished off the year with 1,642,000 (SAAR) newly completed housing units, up 1 percent from the fourth quarter and up 10 percent from the third quarter of 1998. Single-family completions ran at a rate of 1,314,000 (SAAR) in the fourth quarter, up 2 percent from last quarter and up 10 percent from the fourth quarter of 1998. Again, both were at the high levels of the past 2 years—levels that have not been experienced in the past decade.

  • Manufactured housing activity in the third quarter decreased, with shipments of 332,000 (SAAR) units and placements of 276,000 (SAAR) housing units, both down 8 percent from the second quarter. Shipments were down 11 percent from 1998's third quarter, and placements decreased 27 percent.

Housing marketing and sales continued at the strong levels of the past 2 years, though off from last quarter and from 1998. Prices were fairly stable compared with last quarter but were up from the fourth quarter of 1998. Inventories were mixed-the new-home inventory moved up while the existing home inventory dropped. Builders were still optimistic, although less so than in the last quarter in 1998.

  • Builders sold 893,000 (SAAR) single-family homes in the fourth quarter, down 1 percent from last quarter and down 6 percent from the fourth quarter of 1998. Sales were thus close to the record level set for all of 1999.

  • REALTORS sold 4,997,000 (SAAR) homes in the fourth quarter, down 5 percent from the third quarter and down 2 percent from the fourth quarter of 1998. As with new-home sales, existing-home sales were near the record level set for all of 1999.

  • Price changes from the third quarter were mixed, but there was an upward trend from the fourth quarter of 1998. The median price for new homes was $163,000 in the fourth quarter, up 2 percent from the third quarter and up 7 percent from the fourth quarter of 1998. The price of a constant-quality new house was unchanged from the third quarter but up 4 percent from the fourth quarter of 1998. The median price for existing homes was $133,000 in the fourth quarter, down 2 percent from the third quarter but up 4 percent from a year ago.

  • The inventory situation was mixed, although conditions remain favorable. The inventory of new homes available for sale was 322,000 units at the end of the fourth quarter, up 4 percent from last quarter and up 9 percent from the fourth quarter of 1998. However, when expressed in terms of sales, this inventory would support 4.4 months of sales; this was down from the 4.5 months recorded in the third quarter. The inventory of existing homes for sale at the end of the fourth quarter was 1,580,000, down 20 percent from the third quarter and down 18 percent from the end of the fourth quarter of 1998. In terms of sales, this inventory would support 3.7 months of sales, down from the 4.9 months of inventory available at the end of the third quarter.

  • The National Association of Home Builders Housing Market Index, which captures builders' attitudes, stood at 72 points in the fourth quarter, down from 73 in the third quarter and 76 in the fourth quarter of 1998. Although the index showed less optimism than the recent past, any value over 70 is high when viewed in a longer perspective.

Housing affordability improved in the fourth quarter, as steady interest rates allowed income gains and price softening to improve the index. The composite housing affordability index was 129.7 in the fourth quarter, up from 127.1 in the third quarter but down from 140.4 in the fourth quarter of 1998. The quarter-over-quarter improvement resulted from a 2-percent decline in the median price of an existing home and a 1-percent increase in median family income, more than offsetting the 8-basis-point interest rate increase. Such favorable affordability conditions allowed 66.9 percent of American households to own their own homes—the second-highest quarterly rate ever.

In the fourth quarter, multifamily housing (5+ units) was generally stronger than in the third quarter, though not as strong as in the fourth quarter of 1998. Permits increased, starts were down, but absorption and vacancies improved.

  • Multifamily permits totaled 340,000 (SAAR) units in the fourth quarter, up 8 percent from the third quarter but down 12 percent from the fourth quarter of 1998.


  • Construction starts on multifamily units totaled 278,000 (SAAR) in the fourth quarter, down 5 percent from the third quarter and down 12 percent from the fourth quarter of 1998.

  • Completion of multifamily units totaled 297,000 (SAAR) in the fourth quarter, down 2 percent from the third quarter but up 12 percent from the fourth quarter of 1998.

  • In the fourth quarter, 74 percent of the 66,600 new rental apartments completed in the third quarter were leased-up within 90 days of completion, 4 percentage points ahead of the third quarter and 2 percentage points ahead of the fourth quarter of 1998.

  • Rental vacancies declined, going from 8.2 percent in the third quarter to 7.9 percent in the fourth quarter. The fourth-quarter rate was slightly higher (0.1 percentage point) than the rate in the fourth quarter of 1998.

Regional Perspective

HUD's field economists reported the end of another good year for housing. Single-family building permits were up in every region but the Northwest. Continued strong performances were recorded for sales of new and existing homes in most markets, with many achieving records. Existing-home sales were up 14 percent in New Jersey and 12 percent in the Washington, D.C., metropolitan area. Atlanta continued its record-setting pace of last year as the Nation's busiest housing market, with increases in both single-family and multifamliy building permit activity. Homebuilders in Indianapolis reported that 1999 was their best year in the past 20 years. Chicago's existing-home sales set a record for the sixth consecutive year. Sales were very strong in the Rocky Mountain, Southwest, and Pacific regions.

Multifamily building permits for 1999 were down in 7 of the 10 HUD regions. Only New York/New Jersey, the Midwest, and the Southeast reported increases over the previous year. The field economists report balanced-to-tight rental-housing market conditions in many of the Nation's major areas, with strong demand for new apartments. However, some of the hottest markets, including the Dallas-Fort Worth, Denver, Houston, and Phoenix areas, are experiencing production adjustments in reaction to increased competition and large production pipelines.


What's Happened to Homeownership?


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