America's housing industry is on the way to a third consecutive year of growth. The first quarter this year was the best in history for U.S. single-family home builders.
Residential builders maintained their momentum despite harsh weather east of the Mississippi and the sudden rise in mortgage interest rates.
Nevertheless, both housing demand and the pace of new home construction remained relatively strong as winter turned to spring.
Building permit volume in the first quarter left no doubt as to the strength of the market. Single-family builders pulled 16% more permits than they had in the same period a year earlier.
U.S. permit offices issued 235,028 one-family permits in the three months, surpassing the previous record of 233,742 single-family units authorized in the first quarter of 1987.
The single-family sector is no longer carrying the industry's momentum alone, as it had for the past few years. In 1994, multifamily developers are mounting a recovery of their own.
In the first quarter, multifamily activity ran one-third ahead of the 1993 pace. The April permit numbers confirmed the surge. More than 26,000 units were authorized in the month, raising volume above 75,000 units for the first one-third of the year -- a 42% increase.
Multifamily Starts Up 55%
Single-family housing starts for the first four months this year were 15% above their 1993 level, and multifamily starts leaped 55% for the period.
The latest data on new home sales support the stepped-up activity by the nation's home builders. Through the first four months of the year, new-home sales nationally ran 11% ahead of last year, in spite of a 23% slippage in the Northeast. Sales in the West topped their year-ago level by 20%. The new-home sales numbers in the Midwest showed an 18% gain from 1993, and in the South the numbers ran 9% above a year ago.
Notwithstanding the higher mortgage rates prevailing this year, a stronger U.S. economy -- and the accompanying job growth necessary to reassure would-be homebuyers -- will drive the housing industry to further advances.
Most of the numerical growth this year will be in the multifamily sector, but single-family builders will show gains, too.
We expect full-year 1994 building permit volume to exceed 1.3 million units for an overall gain of at least 8% from the final total of 1,199,063 units permitted last year.
As might be expected, homebuilding volume in the country's hottest major market has continued to soar. One-family permits in Las Vegas have jumped about 40% above the year-ago number. A reinvigorated multifamily sector has helped push total permit volume past 9,000 units for the first four months this year -- up nearly 60% from the same period of 1993.
Challenge from Naples
In the last four quarters, builders in Las Vegas have pulled 22.1 permits per 1,000 residents, by far the hottest pace in the country among larger metro markets. That Hotness Index of 22 is challenged only by the much smaller Naples market in Florida -- 21 permits per 1,000 residents in 1993.
Next in the U.S. Housing Markets Hotness ranking is Florida's Fort Myers-Cape Coral area, with almost 15 permits per 1,000 population during the past four quarters.
Generally speaking, a Market Hotness index in double figures identifies a growth market where builders are working ahead to meet expected future housing demand.
Other metro areas with Market Hotness numbers in this category include Orlando (12.4 permits per 1,000 residents during the past four quarters); Phoenix (12.2); Raleigh-Durham (11.5) and Atlanta (11.0). West Palm Beach (9.9) and Florida's Space Coast (9.6) are just below double figures in Market Hotness.
Resales in the first quarter were higher in all regions, the National Association of Realtors said, with adjusted annual rates up 8% from a year earlier in the Midwest, 11% in the Northeast, 14% in the South, and 21% in the West.
The fundamentals improved for multifamily development. The U.S. vacancy rate for all rental units dipped to 7.5% in the first quarter from 7.8% a year earlier, according to the Commerce Department.
Only the Midwest recorded a higher vacancy rate for the quarter. Even so, apartment construction is running higher this year in all major Midwest markets except Detroit.
