Despite growing housing affordability concerns, builder confidence in the single-family market remains solid, according to National Association of Home Builders (NAHB) Chief Economist Robert Dietz. The NAHB/Wells Fargo Housing Market Index came in at a level of 67 in August, a one-point drop from last month. This matched the relatively flat pace of construction in July, with total housing starts up less than 1 percent from the previous month.
However, market demand remains healthy, with starts up more than 6 percent thus far in 2018 on a year-to-date basis. And this positive trend should continue, with residential construction loan growth up 8 percent year-over-year as of the second quarter, according to NAHB analysis.
Affordability issues were reflected in recent sales data. Existing single-family home sales dipped in July from the previous month, and were down 1.5 percent compared to a year ago – marking the fourth-straight month of year-over-year declines. Sales volume is soft due to lack of inventory and recent price gains. Sales of newly built single-family homes were down almost 2 percent in July, though sales totals are up 7 percent thus far in 2018 on a year-to-date basis.
However, not all submarkets are experiencing flat growth conditions. For example, townhouse construction (single-family attached housing) surged in the second quarter to a total of 36,000 starts – 44 percent above first quarter totals.
Over the last year, construction has begun on more than 116,000 townhouses, a 23 percent increase compared to the prior year. This activity, including gains for single-family built-for-rent construction, suggests individual submarkets continue to grow as more builders offer housing that helps buyers and renters contend with rising affordability issues.
It takes 400 tons of aggregates to construct the average modern home, according to the National Stone, Sand and Gravel Association.