Builder Confidence declines in April due to higher costs
by Bill McBride on 4/15/2013
The National Association of Home Builders (NAHB) reported the housing market index (HMI) decreased 2 points in April to 42. Any number under 50 indicates that more builders view sales conditions as poor than good.
From the NAHB: Rising Costs Put Squeeze on Builder Confidence in April
Facing increasing costs for building materials and rising concerns about the supply of developed lots and labor, builders registered less confidence in the market for newly built, single-family homes in April, with a two-point drop to 42 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today.
“Supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues,” explained NAHB Chief Economist David Crowe. “That said, builders’ outlook for the next six months has improved due to the low inventory of for-sale homes, rock bottom mortgage rates and rising consumer confidence.”
While the HMI component gauging current sales conditions declined two points to 45 and the component gauging buyer traffic declined four points to 30 in April, the component gauging sales expectations in the next six months posted a three-point gain to 53 – its highest level since February of 2007.
Looking at three-month moving averages for regional HMI scores, the Northeast was unchanged at 38 in April while the Midwest registered a two-point decline to 45, the South registered a four-point decline to 42 and the West posted a three-point decline to 55.
Click on graph for larger image.
This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the April release for the HMI and the February data for starts (March housing starts will be released tomorrow). This was below the consensus estimate of a reading of 45.
As I noted last week, lumber prices are near the housing bubble high, and it appears highers costs are impacting builder confidence.
Read more at http://www.calculatedriskblog.com/2013/04/builder-confidence-declines-in-april.html#DcTF9VALOx5AY9XT.99
Builder Confidence increases in December, Highest since April 2006
by Bill McBride on 12/18/2012
The National Association of Home Builders (NAHB) reported the housing market index (HMI) increased 2 points in December to 47. Any number under 50 indicates that more builders view sales conditions as poor than good.
From the NAHB: Builder Confidence Continues Improving in December
Builder confidence in the market for newly built, single-family homes rose for an eighth consecutive month in December to a level of 47 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This marked a two-point gain from a slightly revised November reading, and the highest level the index has attained since April of 2006.
“While there is still much room for improvement, the consistent upward trend in builder confidence over the past year is indicative of the gradual recovery that has been taking place in housing markets nationwide and that we expect to continue in 2013,” noted NAHB Chief Economist David Crowe.
Two of the HMI’s three component indexes are now above the critical midpoint of 50. The component gauging current sales expectations rose two points to 51 in December, while the component gauging sales expectations in the next six months slipped one point, to 51. The component measuring traffic of prospective buyers increased one point, to 36.
Click on graph for larger image.
This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the December release for the HMI and the October data for starts (November housing starts will be released tomorrow). This was at the consensus estimate of a reading of 47.
Read more at http://www.calculatedriskblog.com/2012/12/builder-confidence-increases-in.html#KwBHwV3CQxwZTWhQ.99
NAHB: Builder Confidence in the 55+ Housing Market Increases in Q3
by Bill McBride on 11/08/2012
This is a quarterly index from the the National Association of Home Builders (NAHB) and is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008, so all readings are very low.
From the NAHB: Builder Confidence in the 55+ Housing Market Continues to Improve in the Third Quarter
Builder confidence in the 55+ housing market for single-family homes showed significant improvement in the third quarter of 2012 compared to the same period a year ago, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI) released today. The index more than tripled year over year from a level of 12 to 36, which is the highest third-quarter reading since the inception of the index in 2008.
The 55+ multifamily condo HMI had a significant increase of 13 points to 23, which is the highest third-quarter reading since the inception of the index in 2008; however, condos remain the weakest segment of the 55+ housing market. All 55+ multifamily HMI components increased considerably compared to a year ago as present sales rose 13 points to 22, expected sales for the next six months jumped 19 points to 29 and traffic of prospective buyers climbed 11 points to 22.
“Like other segments of the housing industry, the market for 55+ housing is continuing on a steady upward path, driven by improving conditions in additional markets around some parts of the country” said NAHB Chief Economist David Crowe “While we expect the upward trend to continue as the recovery broadens, the speed of the recovery is being constrained by factors as tight mortgage credit, making it difficult for potential 55+ customers to sell their current homes, and shortages of inputs to construction such as buildable lots that are beginning to emerge in some market areas.”
Click on graph for larger image.
This graph shows the NAHB 55+ HMI through Q3 2012. All of the readings are very low for this index, but there has been a fairly sharp increase over the last year.
This is going to be a key demographic for household formation over the next couple of decades – if the baby boomers can sell their current homes!
There are two key drivers: 1) there is a large cohort moving into the 55+ group, and 2) the homeownership rate typically increases for people in the 55 to 70 year old age group.
The second graph shows the homeownership rate by age for 1990, 2000, and 2010. This shows that the homeownership rate usually increases until 70 years old or so.
So demographics should be favorable for the 55+ market – if these people can sell their current homes.
Read more at http://www.calculatedriskblog.com/2012/11/nahb-builder-confidence-in-55-housing.html#oe9OfwdTSxyO85R8.99
Builders Continue Optimism
by David Crowe — Eye on Housing
The NAHB/Wells Fargo Housing Market Index (HMI) rose another three points to a level of 40 in September, the highest in more than six years and extending to five the number of consecutive months of increase. All three components also increased to levels last seen five or six years ago. The component measuring expectations for the next six months broke the 50-threshold landing at 51. The HMI and components are diffusion indexes ranging from zero to 100 where 50 represents an equal number of builders who see better as who see poorer conditions.
The three-month moving average indexes for all four Census regions also increased from two to five points to 30 for the Northeast, 40 for the Midwest, 36 for the South and 43 for the West. For the Midwest, the September level is the highest since November 2005. The South and West were last above their current levels in May 2007 and September 2006 respectively. The Northeast saw a one-point higher peak in July 2012.
The steady rise from a recent low of 14 in September is a strong signal that builders continue to see more serious customers in their models and offices. The increases in builder confidence in the face of more modest housing permit and starts data does foretell continued production increases if the relationship that has existed for over 25 years continues. Builders continue to express concern about inadequate access to credit for their customers. Tight credit standards for buyers and inaccurate appraisals have knocked out potential sales.
Additional emerging hurdles that may be causing the optimism and production to diverge include a shortage of lots because the development pipeline has been shut down for so long and rising costs of some building materials. In a few healing markets, good building lots ready for construction are becoming rare but developers are not bringing new ground to the market because of their lack of access to credit. Building materials including wood panels, dimension lumber and drywall have seen significant increases recently as suppliers hold back on opening new production facilities until future housing production trends are more certain.
Builder Confidence Continues Rise
by David Crowe — Eye on Housing
The August NAHB/Wells Fargo Housing Market Index rose to a five year high of 37. All three components of the index also increased to five or more year highs. Builders report continued greater home buyer interest in purchasing a new home while interest rates remain low, house price movements appear to have turned positive and builders offer competitive prices.
The expectation component of the index increased to 44, the highest since March 2007 when it was at 50, a level where equal number of builders foresee a good market as see a poor market. At its depth in January 2009, the expectation component was 6 and was in single digits for five straight months during that history-making trough in home building.
This month, NAHB also introduced a three-month moving average series for the four regional Housing Market Indexes. The monthly indexes will continue but because the regional sample size can be smaller, especially for the Northeast and West, a longer term look at these sub-indexes may provide additional understanding of what is happening. In that regard, the smoothing does show a more consistent trend in each region, which may be a more reliable indicator of regional sentiment than the saw-toothed monthly numbers.
Builder Confidence in the 55+ Market Improves in the Second Quarter
by Paul Emrath — Eye on Housing
According to NAHB’s latest 55+ Housing Market Index (HMI) survey, builder confidence in the market for new 55+ single-family homes increased significantly in the second quarter of 2012. Compared to the same period a year ago, the 55+HMI for new single-family homes more than doubled from 13 to 29. (Because the survey results are not yet seasonally adjusted, numbers should only be compared year-over-year.)
The 55+ single-family HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic). An index number below 50 indicates that more builders view conditions as poor than good.
The 55+ single-family HMI is a weighted averages of current sales, traffic and expected sales. Although the index components remain below the break-even point of 50, all have increased considerably from a year ago. Present sales more than doubled (from 12 to 30), while expected sales for the next six months increased 17 points to 35 and traffic of prospective buyers rose nine points to 22.
Meanwhile, the 55+ multifamily rental indices recovered substantially last year, and are now holding steady: present production climbed three points to 31, expected future production increased three points to 32, current demand for existing units dropped one point to 42 and expected future demand decreased two points to 42.
Buyers are likely returning to the 55+ housing market as home prices begin to improve, helping to unlock some of the pent-up demand from 55+ consumers who have been sitting on the sidelines until they are able to sell their current homes at a more favorable price.
For more information about NAHB’s 55+ HMI survey see
Steady Builder Confidence in June
by David Crowe —Eye on Housing
The NAHB/Wells Fargo Housing Market Index rose one point to 29 from a revised May level of 28. The index is at its highest point in five years, since May 2007. Of the three components, the current sales index increased two points to 32, the highest since April 2007 and the other two components remained level.
Builders continue to compete against foreclosed properties and their downward pressure on prices. Credit for buyers and builders remains tight so some sales are cancelled because buyers’ failure to qualify and the inventory of new homes is very low because builders cannot obtain financing to replenish their sales.
The index rose steadily from September 2011 to March 2012 and has been holding steady since indicating builders remain at similar levels of confidence through the early spring even in the face of some disappointing national economic news. One reason for the leveling is that the housing recovery is coming from smaller metropolitan areas and not from big powerhouse markets in the west and south. As more local markets remove excess distressed inventory and house prices increase, builder confidence will be more widespread and will again see modest increases.
NAHB expects a 19% increase in new home sales in 2012 compared to 2011. The Housing Market Index is a reasonable predictor of single-family housing starts, as the graph indicates, so we should continue to see modest increases in construction starts over the rest of the spring and into the summer.