October 2003

Planning

Copyright by American Planning Association

Home Sales, Prices, Building Near Record Levels

Americans are buying and selling houses and apartments at an unusually high rate, and at higher prices, according to a number of real estate reports. Builders are keeping up the pace by planning, starting, and completing more residential units.

Housing construction reached a 17-year high last summer, the highest rate since April 1986. If the seasonally adjusted rate holds up, housing starts for 2003 will total 1.87 single- and multifamily units, the Commerce Department reported in August.

That will exceed the total for 2002. Residential construction this year is "now very likely to beat last year's healthy housing production of 1.7 million units," says David Seiders, chief economist for the National Association of Home Builders. Seiders cites "an average rate of 1.76 million housing starts for the first seven months of this year and the considerable strength of the NAHB Housing Market Index."

Data for the month of July and for the second quarter of the year support similar projections. Building permits issued in July for privately owned housing held strong at a seasonally adjusted annual rate of almost 1.8 million units, the Census Bureau reported.

Completion of privately financed housing was also high. Based on July figures, the Census Bureau and the Department of Housing and Urban Development estimated a seasonally adjusted rate of almost 1.7 million units brought to completion.

Buying and selling of existing properties was also high. The annualized rate nationwide was 6.79 million units — single-family houses and condominium, cooperative, and town house units — for the second quarter of the year.

This is the second highest annual rate since 1981, when the National Association of Realtors began tracking resales by state, the association reported.

Big ticket prices

Home prices have gone up, too. For the first time since reporting began in 1982, prices in the second quarter rose in 126 metropolitan statistical areas — all those for which data are available — compared with the same period a year earlier, according to the latest NAR survey.

This is the most exceptional home price survey NAR has reported, says the association's chief economist, David Lereah. "Normally even in very strong sales markets, there are about a half-dozen metros somewhere in the country that for one reason or another have a temporary price decline," Lereah says. "Not only is every market positive, but also a record number of metropolitan areas are experiencing double-digit price gains."

The national median price for existing homes in the second quarter was $168,900, NAR reports. This is 7.4 percent higher than the same quarter last year, when the median price was $157,300.

Not surprisingly, housing affordability conditions slipped in the second quarter, the NAR reported, but they were still at the second highest level since 1973. Low interest rates are the biggest factor in affordability conditions, Lereah says.

The NAR index shows that the typical household, with an estimated median income of $53,285, had 143 percent of the income needed to buy a home at the second quarter median price for an existing residence, which was $168,900.

With the exception of housing, many sectors of real estate remain lackluster in terms of development opportunities, according to the mid-year Real Estate Forecast made by the Urban land Institute. Through mid-2004, the report says, development prospects nationwide are likely to be strongest for owner-occupied housing.

A ULI survey of 258 members and other real estate experts predicts "moderately good" development prospects for middle-income detached single-family, attached single-family, infill housing, master-planned communities, high-income single-family, and multifamily condominium products.