In January, there were 284 single-family home permits issued in metro Detroit, according to the Home Builders Association of Southeastern Michigan in Bingham Farms. The results were 19 percent higher than the association’s forecast of 238 permits.
The report includes permits issued in Macomb, Oakland, St. Clair, and Wayne counties.
“Here in Michigan, new home permit activity is clearly seasonal, but a milder than average January, combined with strong existing home sales, is keeping demand for new home product high,” says Michael Stoskopf, CEO of the association. “This trend should continue well into 2021, presuming economic pressures don’t negatively impact consumer purchasing power.”
Interest rates at historic lows and low existing home inventories are driving activity. Softwood lumber prices, however, are 110 percent higher than they were in June 2020. The cost for a new home framing lumber package, including sheathing, engineered wood tresses, and more, has more than doubled, creating a cost increase of more than $16,000 for the framing package of an average single-family detached home.
In the past year, the average sales price of existing homes in the region has escalated by 11.1 percent to $242,391, driven mainly by limited inventory. This is down 4.4 percent from the previous month. New home permit values have increased year-over-year by 19.4 percent to $333,349, primarily due to increased material prices. This is flat compared to the previous month.
Crude oil prices also are rising and are at their highest level since March 2020 — $47.74, a decrease of 22 percent from the previous year but an increase of 13.3 percent from the previous month. The effects of increased energy prices are wide ranging and include reducing household disposable income and increasing manufacturing and delivery costs.
“These potential impacts noted, we believe strong consumer demand will help drive new homes permits above the 500-permit per month level in both May and June 2021 for the first time since October 2018,” Stoskopf says.
The number of people employed is down 6.8 percent from the previous year and 3.6 percent from the previous month to 1,808,858. The workforce stayed flat with small drops of 0.1 percent from the previous year and 2.3 percent from the previous month to 2,014,481 people.
North American vehicle production is down 10.8 percent from the previous year but up 9 percent month-over-month to 1,252,386 units.