Washington and Dallas Metros Defy the Cooldown in the U.S. Housing Market
(Bloomberg) -- Recent declines in U.S. housing market indicators are hinting at an economic slowdown. However, four major cities are bright spots in a somewhat gloomy forecast.
The Washington, Dallas, New York and Chicago metro areas are experiencing increases in both new home construction and maintenance spending, according to a report by property data provider BuildFax.
"It’s yet to be seen whether housing activity in these cities will eventually slow as it has on a national level or if these will be key metros to watch as the U.S. potentially heads toward an economic slowdown," wrote BuildFax CEO Holly Tachovsky in the report published today.
Chicago saw the most housing activity among the 10 largest metro areas with a 19.5 percent increase in maintenance spending and 60.2 percent climb in new construction. The growth might be related to the city’s strategic five-year housing plan to fight affordability concerns in the region, according to the report.
On a nationwide level, housing data shows a different story. Single-family housing authorizations fell 5.8 percent in February from the same time period last year. Repeat declines for this metric confirm the housing market slowdown is persisting, the report said. Existing housing maintenance and remodeling volumes also continued to decline at 5.5 percent and 10.1 percent, respectively.
"The bifurcation between national decreases and metro-level increases in new construction and maintenance is fairly recent," Tachovsky said. "We’ll need a few more months to understand whether construction in Dallas, Chicago, Washington D.C. and New York City will continue increasing or if these metro areas are simply lagging a few months behind national trends."
If the metro areas continue to see growth in construction, that’s a sign that some cities may be able to mitigate the effects of a housing slowdown, Tachovsky added.
As the housing market cools nationwide, once-hot areas like Seattle, Denver and San Francisco are becoming buyer-friendly. In these cities, bidding wars are vanishing, houses are staying on the market longer and prices are flattening or in some cases falling.
Five of the 10 largest metro areas mirror the national trend, with blanket declines across maintenance and new construction. Philadelphia is the only area with mixed performance: maintenance rose 5.6 percent while new construction dipped 13.4 percent. The gap between the two measures could be a result of affordability concerns. If homeowners can’t afford to re-enter the housing market, they may decide to re-invest in their current home instead. Of course, home improvement projects aren’t cheap.
Homeowners are spending more on remodels and maintenance than ever before. Even though the volume of home remodels is declining, homeowners are spending more per improvement project. An aging U.S. housing stock and older population of homeowners are factors behind the record spending levels. In Washington, the average owner spent $4,860 on home improvement projects in 2017. Additionally, recent increases in construction labor and material costs have contributed to the increased spending.
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