Nationwide Housing Starts & Permits Posted Substantial Gains in June

by Joel Barkman, NVBIA Fauquier County Chapter President

It seems that our local economy may be turning the corner and it is with a happy heart that the National Association of Home Builders (NAHB) reports that nationwide housing starts and permits posted substantial gains in June. Home builders responded to improved market conditions and the impending expiration of the first-time buyer tax credit, according to data released by the U.S. Commerce Department last week. Commerce reported a 3.6 percent gain in overall housing starts to a seasonally adjusted annual rate of 582,000 units and an 8.7 percent gain in permit issuance to 563,000 units.

"The upcoming expiration of the first-time home buyer tax credit on December 1st is encouraging some builders to get homes started now so that they can be completed in time for clients to take advantage of this attractive buying incentive," said NAHB Chairman Joe Robson.

"Builders are seeing slightly better sales conditions this month as consumers take advantage of the first-time buyer tax credit, low interest rates and attractive home prices, but many remain quite concerned about the road that lies ahead," Robson continues. "A true recovery in the housing market and overall economy cannot take place until the continuing foreclosure crisis is abated and a decent flow of credit is restored to housing production. Meanwhile, the stalled jobs market is a major concern to builders and potential home buyers alike."

"[The] report was in keeping with our forecasts for some glimmers of improvement on the single-family side in the second quarter," said NAHB Chief Economist David Crowe.

Single-family housing starts rose for a fourth consecutive month in June, posting a 14.4 percent gain to a seasonally adjusted annual rate of 470,000 units, while single-family permits rose for a third consecutive month, posting a 5.9 percent gain to 430,000 units.

Regionally, housing starts were mixed, with the Northeast and Midwest posting big gains of 28.6 percent and 33.3 percent, respectively, and the South and West posting declines of 1.4 percent and 14.8 percent, respectively. However, the declines in both the South and West were entirely driven by dips in multifamily production.

Permit issuance was up across the board in June, with the Northeast posting a 5.4 percent gain, the Midwest a 3.4 percent gain, the South a nearly 14 percent gain and the West a nearly 2 percent gain.

"Builders recognize the recovery is going to be a slow one and that we are facing a number of substantial negative forces." said NAHB Chief Economist, "Many remain very cautious, however, in the face of the severe tightening of credit for acquisition, development and construction financing and increased instances of low appraisals tied to improper use of distressed properties as comps, both of which threaten to derail a housing and economic recovery going forward."

For example, a quarter of all new-home sales are falling through due to appraisal issues that are tied to the use of distressed and foreclosed properties as comps. "This is a tremendous obstacle for a housing market that is struggling to get back on its feet, as is the lack of available credit for acquisition, development and construction financing."

Still, The report is encouraging news that helps confirm the market is at or around a bottom, and hopefully the day is nearing when I can say, "for more positive news, Just Ask a Builder."

For more information about NAHB economic surveys and reports e-mail joel@goldenrulebuilders.com or write to "Ask a Builder" at P.O. box 294, Catlett, VA 20119

Barkman is president of the Fauquier Chapter of The Northern Virginia Building Industry Association.

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