Summary of U.S. Housing Market Conditions: 4Q2018
At the March 20 PD&R Quarterly Update, PD&R’s chief housing market analyst Kevin Kane discussed the state of the nation’s housing markets in the fourth quarter of 2018.
Each quarter, the Office of Policy Development and Research (PD&R) produces a report that highlights key statistics and trends in the housing market, including housing starts and completions, home sales and prices, rental affordability, and mortgage interest rates. To create these reports, PD&R compiles and analyzes data from HUD as well as from the U.S. Census Bureau, the National Association of REALTORS®, the Federal Housing Finance Agency (FHFA), the Mortgage Bankers Association, the U.S. Bureau of Economic Analysis, and other sources. The following summary examines the state of the nation’s housing markets in the fourth quarter of 2018 as PD&R’s chief housing market analyst Kevin Kane discussed at the March 20 PD&R Quarterly Update.
Nonfarm payrolls in the United States increased by 1.8 percent during the fourth quarter of 2018, up from a growth rate of 1.5 percent a year ago. This increase reverses a trend of slowing growth rates from 2015 to 2017. Every region in the country added jobs during the fourth quarter, with the Rocky Mountain Region showing the strongest gain at 2.6 percent. Utah, Wyoming, and Colorado are among the nation’s top 10 fastest-growing states with growth rates of 3.1, 2.8, and 2.7 percent, respectively. The national unemployment rate declined to 3.6 percent in the fourth quarter from 3.9 percent a year ago. Unemployment rates ranged from 2.6 percent in the Great Plains Region to 4.1 percent in the Pacific and Northwest regions. Compared with a year ago, unemployment rates were down in nine regions and up 0.2 percentage points to 3.2 percent in the Rocky Mountain Region.
Sales Market Conditions
Sales market conditions generally range from balanced to tight throughout much of the country. All three major home price indexes (Standard and Poor’s Case-Shiller Index, the FHFA House Price Index, and CoreLogic HPI) indicate that during the fourth quarter, home sales prices were 5 to 6 percent higher than the previous year. According to CoreLogic data, home prices were up in all states (including the District of Columbia) except for North Dakota, where prices declined by 1 percent. The largest price increases were in Idaho (12 percent), Nevada (11 percent), and Utah (9 percent). The median price of a new home in the fourth quarter was $317,400, down 6 percent from a year ago (U.S. Census Bureau), and the median price of an existing home was $257,600, up 4 percent from a year ago (National Association of REALTORS®).
According to CoreLogic data, total home sales in 2018 decreased 1 percent from 2017 levels. Home sales increased in three regions, with the largest percentage gains in the Southwest Region, which was up 3 percent. Sales fell over the past year in the other 7 regions, with declines ranging from 2 percent in the New England and Rocky Mountain regions to 5 percent in the Pacific. Two states had double-digit percentage gains in home sales: Wyoming, which increased by 15 percent, and Louisiana, which was up by 13 percent. The largest decline occurred in Hawaii, where home sales fell 14 percent. Based on the nation’s current rate of home sales, there was a 6.6 months’ supply of new homes during the fourth quarter, up from a 5.5 months’ supply a year ago. There was a 3.7 months’ supply of existing homes, up from a 3.1 months’ supply a year ago. According to the U.S. Census Bureau, the overall sales vacancy rate was 1.5 percent during the first quarter, down from 1.6 percent a year ago.
The U.S. foreclosure rate continues to decline. As of December 2018, an average of 1.7 percent of all home loans were 90 or more days delinquent, in foreclosure, or real estate owned (REO), down from 2.4 percent a year ago. Although the rate of home loans that were 90 or more days delinquent, in foreclosure, or in REO in the New York-New Jersey Region, at 3.1 percent, remains the highest in the country, the region’s rate was down 1.1 percentage points from a year ago, the largest decline in the nation.
Single-family homebuilding, as measured by the number of homes permitted, remained unchanged during the fourth quarter of 2018 compared with a year ago, with 165,000 homes permitted. The number of homes permitted rose in two regions, led by a 21 percent gain in the New York-New Jersey Region. The number of homes permitted decreased in seven regions, with the largest declines occurring in the Great Plains Region (down 11 percent) and New England Region (down 8 percent). Permit activity in the Southwest Region was unchanged. The number of multifamily units permitted was 5 percent greater than a year ago. The number of multifamily units permitted increased in four regions, ranging from a 7 percent increase in the Southwest Region to a 47 percent increase in the Southeast Region. The number of multifamily units permitted fell in the other six regions, with declines ranging from 2 percent in the Northwest Region to 24 percent in the Great Plains Region.
Rental Market Conditions
Apartment market conditions are relatively balanced across the country. Conditions in several Mid-Atlantic Region markets that previously were slightly tight have become balanced, with increased apartment construction in Philadelphia; Baltimore; and Washington, DC. Many markets in the Pacific Region have tightened a bit, with declines in vacancy rates in many major markets. According to data from Reis Inc., the national apartment vacancy rate was 4.9 percent during the fourth quarter, up from 4.6 percent a year ago. Vacancy rates were up in all regions except for the Southwest Region, which remained unchanged. Apartment rents were up by 5 percent from a year ago (Reis, Inc.). Rents rose in all regions, ranging from a 4.3 percent increase in the Midwest and New York-New Jersey regions to 6.3 percent in the Rocky Mountain Region. At the metropolitan level, rents increased in 271 of the 274 market areas reported by Reis and declined in the remaining 3 areas. The largest rent gain occurred in Odessa-Midland, where rents were up 21 percent from a year ago.