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US market: single-family homes see 2.6% growth

by Donato Grosser
The situation in the US housing sector is good although there is still plenty of room for further improvement. The main sources of data are the US Census Bureau and the National Association of Realtors. The US Census Bureau publishes data on Housing Starts, Building Permits and Housing Completions. The National Association of Realtors publishes data on Existing Home Sales, selling prices and their variations, and sales by price range.

Housing starts
The data for housing starts are perhaps the most important for the sector as they determine the prospects for the market and demand for new homes. The most recent figures for the month of August point to 918,000 housing starts, 11% up on the same period the previous year. Growth was particularly strong in the single-family home segment (627,000 units, +20.6%), whereas multi-family houses saw contractions. Examining the trend in housing starts by region, there were 125,000 in the Northeast, 161,000 in the Midwest, 413,000 in the South and 219,000 in the West. 
The Northeast saw a 52.4% increase over the previous year, the Midwest 25.8% growth, while in the South there was a 4% fall and in the West 17.1% growth.

Existing home sales
The figures for existing home sales are updated to September 2013. Nationwide sales saw year on year growth of 10.7% to reach a seasonally adjusted annual level of 5,290,000 units. In the Northeast there were 690,000 sales (+15.0%), in the Midwest 1,250,000 (+12.6%), in the South 2,100,000 (+9.9%) and in the West 1,250,000 (+7.8%).

Rise in selling prices
House prices are an important predictor. If prices fall, house owners are reluctant to sell, so the supply of homes decreases. When prices rise, builders have an incentive to build and are able to make profits from the construction of new homes. In September 2013 the average selling price of existing homes rose to US $199,200, 11.7% up on the previous year. In the Northeast region the average price was $240,900 (+2.3%), in the Midwest $158,400 (+9.0%), in the South $171,600 (+13.9%) and in the West $286,300 (+16.8%).
It should be noted that 17.4% of houses are sold at prices below $100,000. By far the largest percentage of houses (44.4%) are sold at prices of between $100,000 and $250,000. Some 27.1% are sold between $250,000 and $500,000; 7% between $500,000 and $750,000; 2.1% between $750,000 and $1 million and 2.1% at prices above $1 million.

Remodelling activities
Remodelling work is closely linked to existing home sales. After buying a house, the owners tend to change the carpet, paint the walls, purchase new appliances and often entirely refurbish the bathrooms and kitchens. Since the U.S. Bureau of Census stopped publishing estimates for the performance of the sector in 2008, indexes have been published by economic research firms. In the third quarter of 2013, the Residential Remodeling Index of Metrostudy, a research subsidiary of Hanley-Wood, recorded 2% growth with respect to the second quarter to reach 93.3 (based on 100 for Spring 2007). According to Metrostudy, “The year 2013 is seeing the strongest remodelling activity since 2007”. The situation varies, sometimes drastically, between the 366 metropolitan areas included in the index. In North Dakota, where oil has been discovered, the index forecast for next year is 159, in other words 59% higher than the average. Metrostudy expects the index to return to 100 in the autumn of 2015, corresponding to more than 12 million remodelling projects. A total of 11.14 million remodelling projects are forecast for 2013.

Close correlation between ceramic tiles and the building industry
As has been observed in the past, ceramic tile consumption is strongly linked to new buildings, sales of new homes and remodelling projects. Following the housing sector recovery, consumption of ceramic tiles rose by 11.7% in the first half of 2013 compared to the same period in 2012. Tile consumption began to recover in 2010, although it was not until 2013 that the rate of recovery exceeded 10%.
The forecasts for the rest of 2013 are positive with an anticipated level of consumption of between 11% and 12%. Interestingly, imports rose by 14.7% in the first half of 2013 whereas sales by local manufacturers increased by just 4.7%.
Tile imports from Italy rose by 14% in the first eight months of 2013 compared to the same period the previous year to exceed 19 million square metres and are expected to reach 27 million square metres by the end of 2013.

grosserconsulting@gmail.com
December 2013