With new home sales up by 26 percent, new home inventories slightly increasing, new home prices on the way up, and existing-home sales hitting a nine-year high, National Association of Home Builders (NAHB) Chief Economist and SVP David Crowe declared April to be a "good month for housing."
In the NAHB's Eye on Housing blog earlier this week, Crowe cited a number of positive housing statistics that indicate that April was a prosperous month for the industry in spite of the U.S. economy contracting at an annualized rate of minus 7 percent in Q1. The lack of economic growth in Q1 did nothing to damper economists' predictions about housing recovery for 2015, however, largely because of strong April numbers.
The U.S. Census Bureau and HUD reported that new home sales grew at an annualized rate of 517,000 in April, which was an increase of 6.8 percent. The pace of new home sales in Q1 was up 26 percent from the same quarter in 2014. New home inventories increased up to 205,000 in April, which is still two-thirds of the 50-year average of 317,000 but well above the low experienced in August 2012. An industry shift to move-up buyers has largely been responsible for an 8.3 percent year-over-year increase in new home prices, according to Crowe.
The National Association of Realtors' Pending Home Sales Index increased by 14 percent year-over-year in April up to a nine-year high; home sales should rise in the coming months, considering an improving labor market and a pending home sales measure increase. The Bureau of Labor Statistics (BLS) reported on Thursday that 344 out of 387 metropolitan areas reported lower unemployment rates in April than a year earlier, while the national unemployment rate in April was 5.1 percent (not seasonally adjusted), down from 5.9 percent in April 2014. On Friday, the BLS reported job gains of 280,000 in May and 3.01 million jobs added over the last 12 months.
"First-quarter data suggest improvements for a persistent headwind for residential construction growth: availability of acquisition, development and construction (AD&C) loans. NAHB analysis of FDIC data indicated that the stock of AD&C loans grew by 4.8 percent during the first quarter, with a year-over-year increase of 17 percent," Crowe said. "NAHB survey data also indicate ongoing easing conditions for AD&C funds, particularly for constructions loans."
The stock of AD&C loans remains more than 73 percent lower than in Q1 2008, which indicates that a lending gap remains, Crowe said. Also, tight credit for the purposes of development has created a building lot shortage.
"A May 2015 NAHB industry survey found that 62 percent of builders reported that the supply of lots in their areas was low or very low, up from a 43 percent response in September 2012. Shortages are most acute among desirable 'A' location lots," Crowe said.
However, data from the Census Bureau indicates that single-family construction spending increased by 9 percent year-over-year in April, which is an indication that homebuilding is growing, according to Crowe.