The month of July, 2014, bodes well for the health of the real estate market in the United States according to the National Association of Home Builders. 1st quarter, 2014, construction numbers were cause for alarm after a harsher-than-normal winter essentially shut down the construction industry and crippled recovery numbers for the housing industry. 2nd quarter of 2014 began to show a slight increase in home construction permits and new starts, but July numbers had analysts breathing a sign of relief when housing starts increased by 8.3% year-over-year for July and a 15.7% increase from June’s dip in new housing starts. There were housing starts increases for 3 out of 4 regions in the U.S., with one market – Midwest “breaking even” and matching typical national averages for this time of year.
Construction starts were especially fantastic for multi-family construction which reached 437,000, the highest since February, 2006. Multifamily construction permits were at 412,000 which was a 21.5% increase from June, when starts and permits dipped slightly. Overall, building permits were up 8.1% over June’s permit numbers, and single-family home building permits were up 3.9% over July, 2013.
Meanwhile, housing affordability went down slightly in the 2nd quarter. Anything that goes down in the housing industry – except for interest rates, taxes, and insurance – has, in this uncertain housing market, been a cause for alarm. However, the dip in affordability actually pushes the real estate market to pre-2000’s numbers in home pricing and affordability. Markets in the United States are evaluated for their affordability based on the median income and monthly home sales numbers. In June, home affordability was slightly over 65%. In July, this number dropped almost 3 points to 62.6%. The latest readings reflect a slow but steady march toward historically normal appreciation and interest rates, producing a more typical HOI. The HOI is the Housing Opportunity Index that is monitored and produced by a partnership between the National Association of Home Builders and Wells Fargo. More good news is that interest rates actually did go down in July from 4.57% to 4.44% This was good news for the refinance market where homeowners were waiting to see if interest rates would end up dropping again.
Overall, the NAHB is predicting that the real estate market will continue to thrive at least to the end of 2014. Locally, home prices continue to rise in the New Orleans area. Small and medium-sized businesses have steadily been moving into the Central Business District (CBD), which has caused an influx of employees and a rise in demand for housing in downtown New Orleans areas. Many Realtors and owners have become embroiled in bidding wars, just 24 hours after homes have gone on the market. Real estate activity throughout the rest of the Greater New Orleans area has seen a steady increase with higher than normal sales numbers in busier real estate months of the year.