Latest Posts:
Tag

single-family

Browsing
In Research & Trends

Single-Family Housing Starts Hit 12-Month High in February

No Comments


Limited existing inventory helped single-family starts to post a solid gain in February, but builders are still grappling with elevated construction costs stemming from tariff issues and persistent shortages related to buildable lots and labor.

Overall housing starts increased 11.2% in February to a seasonally adjusted annual rate of 1.50 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The February reading of 1.50 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months.

Within this overall number, single-family starts increased 11.4% to a 1.11 million seasonally adjusted annual rate, the highest pace since February 2024. The multifamily sector, which includes apartment buildings and condos, increased 10.7% to an annualized 393,000 pace.

While solid demand and a lack of existing inventory provided a boost to single-family production in February, our latest builder survey shows that builders remain concerned about challenging housing affordability conditions, most notably elevated financing and construction costs as well as tariffs on key building materials.

On a regional and year-to-date basis, combined single-family and multifamily starts were 4.7% lower in the Northeast, 21.5% lower in the Midwest, 8.3% lower in the South and 20.2% higher in the West.

Overall permits decreased 1.2% to a 1.46-million-unit annualized rate in February and were down 6.8% compared to February 2024. Single-family permits decreased 0.2% to a 992,000-unit rate and were down 3.4% compared to the previous year. Multifamily permits decreased 3.1% to a 464,000 pace.

Looking at regional permit data on a year-to-date basis, permits were 30.1% lower in the Northeast, 2.3% higher in the Midwest, 2.1% lower in the South and 12.5% lower in the West.

The number of single-family homes under construction in February was down 6.7% from a year ago, at 640,000 homes. In February, the count of apartments under construction increased 0.3% to an annualized 772,000 pace. It marks the first gain after 18 months of consecutive declines but was still down 20% from a year ago.

There were 526,000 multifamily completions in February, down 15% from the previous year. For each apartment starting construction, there are 1.5 apartments completing the construction process.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

Builders’ Profit Margins Improved in 2023

No Comments


Profitability for single-family home builders reached the highest levels in more than a decade in 2023.  Industrywide profit benchmarks are important because they allow companies to compare their financial performance against the entire industry.  Doing so can guide resource allocation, budgeting, and target setting for costs and expense lines.  More broadly, understanding industry benchmarks can lead to an improved business strategy and to higher financial results. 

On average, builders reported $11.3 million in total revenue for fiscal year 2023.  Of that, about $9.0 million (79.3%) was spent on cost of sales (i.e., land, direct and indirect construction costs), which translates into an average gross profit margin of 20.7%.  Operating expenses (i.e., finance, S&M, G&A, and owner’s compensation) cost builders an average of $1.4 million (12.0% of revenue), leaving them with an average net profit margin of 8.7%.  This post summarizes the results from NAHB’s most recent edition of the Builders’ Cost of Doing Business Study.

Based on historical survey data (performed every three years), the 20.7% average gross profit margin in 2023 was the highest registered since 2006 (20.8%).  As a point of reference, builders’ gross margin sank to a record low of 14.4% in 2008 (i.e., during the housing recession), but bounced back steadily through 2017 (19.0%).  The onset of COVID-19 in 2020 increased costs, causing builders’ average gross margin to drop (18.2%) for the first time since 2008.

The 8.7% average net profit margin for fiscal year 2023 is the highest in this survey’s recent history, exceeding the 7.7% reported in 2006.  However, increased use of financial incentives, such as mortgage rate buydowns, and cuts in home prices are likely to have caused this margin to shrink in 2024.

The Cost of Doing Business Study also tracks builders’ balance sheets.  On average, builders reported $7.2 million in total assets on their 2023 balance sheets.  Of that, $4.5 million (62%) was financed by liabilities (either short- or long-term) and the other $2.7 million (38%) by equity builders held in their companies.

Historical data show the average $7.2 million in total assets in 2023 was 23% lower than in 2020 ($9.4 million), and builders’ lowest asset level since 2010 ($6.2 million).  But perhaps more important than fluctuations in the size of their balance sheets, the data reveal a long-term decline in builders’ reliance on debt to finance their operations: in 2006, 74% of their assets were backed up by debt; by 2020, the share was down 10 points to 64%; and by 2023, it dropped to a record low of 62%. Logically, the latter means builders are using more of their own capital to run their companies, as illustrated by their equity share rising from 26% of assets in 2006 to 38% in 2023.

The NAHB Economics team will conduct a Cost of Doing Business Study for residential remodelers in the spring of 2025. If that is your firm’s primary activity, please consider participating in this confidential survey. We simply can’t produce benchmarks without your input.  To participate, please complete this form. A summary of the most recent profitability benchmarks for residential remodelers is available in this blog post.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

New Home Sales Slow in January 2025

No Comments


New home sales decreased in January to a three-month low, as housing affordability continues to sideline potential home buyers. Mortgage rates are expected to remain above 6% throughout 2025, coupled with elevated home prices, creating a significant affordability challenge for both first-time buyers and those looking to upgrade.

Sales of newly built, single-family homes in January decreased 10.5% to a 657,000 seasonally adjusted annual rate from an upwardly revised December number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in January is down 1.1% compared to a year earlier.

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the January reading of 657,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in January continued to rise to a level of 495,000, up 7.4% compared to a year earlier. This represents a 9 months’ supply at the current building pace.

Completed ready-to-occupy inventory was at a level of 118,000, up 39% compared to a year ago.

While the monthly supply of new homes is 9 months, there is currently only a 3.4 months’ supply of existing single-family homes on the market. NAHB estimates the combined new and existing total months’ supply rose to a 4.2 months’ supply in January. The market has not been near a 6 months’ supply, which represents a balanced market, since 2012.

The median new home sale price in January was $446,300, up 3.7% from a year ago. It is the highest median sale price since October 2022. The Census data reveals a decrease in new home sales priced between $300,000 and $399,999, which made up 24% of new home sales in January, compared to 29% a year ago.

Regionally, on a year-to-date basis, new home sales are down 60.0% in the Northeast, and up 7.1% in the West. New home sales remain unchanged in the Midwest and South.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

Single-Family Home Size Increases

No Comments


An expected impact of the virus crisis was a need for more residential space, as people used homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower. As markets expect some decline for long-term interest rates, will new single-family home size reverse and move higher in 2025? Data from the end of 2024 suggests this may be occurring.

According to fourth quarter 2024 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was 2,205 square feet, the highest reading since mid-2023. Average (mean) square footage for new single-family homes registered at 2,417 square feet.

The average size of a new single-family home, on a one-year moving average basis, trended higher to 2,373 square feet, while the median size is at 2,162 square feet.

Home size increased from 2009 to 2015 as entry-level new construction lost market share. Home size declined between 2016 and 2020 as more starter homes were developed. After a brief increase during the post-COVID building boom, home size has trended lower due to declining affordability conditions. As interest rates decline, new home size could level off and increase on a sustained basis in the quarters ahead.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

Gains for Custom Home Building

No Comments


NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates gains for custom home builders after a period slight softening of market share. The custom building market is less sensitive to the interest rate cycle than other forms of home building.

There were 47,000 total custom building starts during the fourth quarter of 2024. This marks a 7% increase compared to the fourth quarter of 2023. Over the last four quarters (2024 as a whole), custom housing starts totaled 181,000 homes, just below a 2% increase compared to the prior four quarter total (178,000 in 2023).

Currently, the market share of custom home building, based on a one-year moving average, is approximately 18% of total single-family starts. This is down from a prior cycle peak of 31.5% set during the second quarter of 2009 and the 21% local peak rate at the beginning of 2023, after which spec home building gained market share.

Note that this definition of custom home building does not include homes intended for sale, so the analysis in this post uses a narrow definition of the sector. It represents home construction undertaken on a contract basis for which the builder does not hold tax basis in the structure during construction.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

Townhouse Construction Expanded in 2024

No Comments


Townhouse construction expanded 10% during 2024, outpacing the rest of the single-family home building market.

According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the fourth quarter of 2024, single-family attached starts totaled 44,000. Over the last four quarters (2024 as a whole), townhouse construction starts totaled a strong 174,000 homes, which is 10% higher than the prior four-quarter period (158,000 in 2023). Townhouses made up 19% of single-family housing starts for the fourth quarter of the year, a data series high.

Using a one-year moving average, the market share of newly-built townhouses stood at 17.3% of all single-family starts for the fourth quarter. With recent gains, the four-quarter moving average market share is near the highest on record, for data going back to 1985.

Prior to the current cycle, the peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6% on a one-year moving average basis. This high point was set after a fairly consistent increase in the share beginning in the early 1990s.

The long-run prospects for townhouse construction are positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities. Where it can be zoned, it can be built.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

Housing Starts Retreat at the Start of 2025

No Comments


Constrained housing affordability conditions due to ongoing, elevated interest rates led to a reduction in single-family production to start the new year.

Overall housing starts decreased 9.8% in January to a seasonally adjusted annual rate of 1.37 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The January reading of 1.37 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months.

Within this overall number, single-family starts decreased 8.4% to a 993,000 seasonally adjusted annual rate; the January pace was 1.8% lower than a year ago. The multifamily sector, which includes apartment buildings and condos, decreased 13.5% to an annualized 373,000 pace.

As mirrored in the NAHB/Wells Fargo HMI, high construction costs, elevated mortgage rates and challenging housing affordability conditions are causing builders to approach the market with caution. There are competing upside and downside risks, including discussed tariffs and regulatory reform. Given persistent affordability concerns, reducing inefficient regulatory costs would offer the best policy path to improve attainable housing supply and bring down shelter inflation.

On a regional basis compared to the previous month, combined single-family and multifamily starts are 27.6% lower in the Northeast, 10.4% lower in the Midwest, 23.3% lower in the South and 42.3% higher in the West.

Overall permits increased 0.1% to a 1.48 million unit annualized rate in January. Single-family permits were at a 996,000 annual unit rate, remaining unchanged compared to the previous month. Multifamily permits increased 0.2% to an annualized 487,000 pace.

Looking at regional permit data compared to the previous month, permits are 6.1% lower in the Northeast, 1.8% higher in the Midwest, 0.1% lower in the South and 2.3% higher in the West.

The number of single-family homes under construction in January is down 6.3% from a year ago, to 641,000 units. The number of multifamily units under construction is down 22.1% from a year ago, to 768,000 units.

There were 669,000 multifamily completions in January, up 11% from January 2024. For each apartment starting construction, there are 1.8 apartments completing the construction process.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

Builder Confidence Falls on Tariff and Housing Cost Concerns

No Comments


Builder sentiment fell sharply in February over concerns on tariffs, elevated mortgage rates and high housing costs.

Builder confidence in the market for newly built single-family homes was 42 in February, down five points from January and the lowest level in five months, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations in the most recent HMI. Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023.

With 32% of appliances and 30% of softwood lumber coming from international trade, uncertainty over the scale and scope of tariffs has builders further concerned about costs. Reflecting this outlook, builder responses collected prior to a pause for the proposed tariffs on goods from Canada and Mexico yielded a lower HMI reading of 38, while those collected after the announced one-month pause produced a score of 44. Addressing the elevated pace of shelter inflation requires bending the housing cost curve to enable adding more attainable housing.

Incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers. The latest HMI survey also revealed that 26% of builders cut home prices in February, down from 30% in January and the lowest share since May 2024. Meanwhile, the average price reduction was 5% in February, the same rate as the previous month. The use of sales incentives was 59% in February, down from 61% in January.

Derived from a monthly survey that NAHB has been conducting for more than 35 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three of the major HMI indices posted losses in February. The HMI index gauging current sales conditions fell four points to 46, the component measuring sales expectations in the next six months plunged 13 points to 46, and the gauge charting traffic of prospective buyers posted a three-point decline to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points in February to 57, the Midwest moved two points lower to 45, the West edged one-point lower to 39 and the South held steady at 46. The HMI tables can be found at nahb.org/hmi.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

Builders’ Top Challenges for 2025

No Comments


The most significant challenge builders faced in 2024 was high interest rates, as reported by 91% of builders in the latest NAHB/Wells Fargo Housing Market Index survey.  A smaller, albeit still significant share of 78% expect interest rates to remain a problem in 2025. The next four most serious issues builders faced in 2024 were rising inflation in the U.S. economy (80%), buyers expecting prices/interest rates to decline (77%), the cost/availability of developed lots (63%), and the cost/availability of labor (61%).  Builders don’t expect much improvement in these challenges in 2025, except for rising inflation, which ‘only’ 52% see as a serious problem in the year ahead.

In addition to those top tier challenges, 55% to 60% of builders also reported facing serious problems in 2024 with gridlock/uncertainty in Washington (60%), building material prices (57%), concern about employment/economic situation (55%), impact/hook-up/inspection and other fees (55%), and negative media reports making buyers cautious (55%). Looking ahead at 2025, significantly fewer builders expect gridlock/uncertainty in Washington (32%) or have concerns about the employment/economic situation (39%).  In contrast, more builders are expecting building material prices to be a problem in 2025 (64%) and about the same expect continuing problems with impact and other fees (58%).

Builders have been asked about their most serious challenges every year since 2011. High interest rates have been a problem for a negligible share of builders (under 10%) during most years, except for 2022 (66%), 2023 (90%), and 2024 (91%).  When first introduced to the survey in 2021, 63% of builders reported challenges with rising inflation in the U.S. economy, but the share grew to at least 80% in 2022, 2023, and 2024. Prior to 2022, relatively few builders reported problems with buyers expecting prices or interest rates to fall, but that share rose to 49% in 2022, 71% in 2023, and 77% in 2024.

The cost/availability of developed lots has been a serious challenge to most builders in nine of the 14 years of the series history. In 2022, 51% of builders faced this problem; by 2024, 63% did—tying a record high set in 2019. Meanwhile, more than half of builders have reported the cost/availability of labor as a serious problem for the past 11 years in a row. While 82% and 85% of builders faced this challenge in 2021 and 2022, respectively, the share has eased to 73% in 2023 and to 61% in 2024.

For additional details, including a complete history for each reported and expected problem listed in the survey, please consult the full survey report.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
In Research & Trends

Limited Existing Inventory Provides a Boost for New Home Sales

No Comments


A limited amount of existing inventory along with solid demand helped new home sales end the year on an up note, even as buyers continue to grapple with housing affordability challenges.

Sales of newly built, single-family homes in December increased 3.6% to a 698,000 seasonally adjusted annual rate from an upwardly revised November number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in December was up 6.7% compared to a year earlier.

New home sales ended 2024 2.5% higher over the 2023 total. NAHB is forecasting a slight gain for sales in 2025 given ongoing solid macroeconomic conditions, particularly for the labor market. Furthermore, builders are cautiously optimistic about the building market given a post-election policy reset that seeks to eliminate unnecessary regulations

A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the December reading of 698,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in December continued to rise to a level of 494,000, up 10% compared to a year earlier. This represents an 8.5 months’ supply at the current building pace.

Completed ready-to-occupy inventory is up 46% to a level of 118,000, compared to a year ago.

NAHB estimates the combined new and existing total months’ supply (8.5 months’ supply for new homes while the much larger resale market was at 3.1) fell to just a 4 months’ supply in December, the lowest since April 2024. The market has not been near a 6 months’ supply, which represents a balanced market, since 2012.

The median new home sale price in December was $427,000, up 2.1% from a year ago.

Regionally, on a year-to-year basis for 2024 totals, new home sales were strongest in the Midwest, up 19% in 2024. Sales also rose 1.7% in the Northeast and 2.6% in the West but declined 0.2% in the South.

Discover more from Eye On Housing

Subscribe to get the latest posts sent to your email.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

Read More
By
Load More
Pin It