Tag Archives: Housing Market Index

Builder Confidence increases in December, Highest since April 2006

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.

HMI and Starts CorrelationClick 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

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Builder Confidence Continues Rise in November

Builder Confidence Continues Rise in November

by David Crowe — Eye on Housing 

The NAHB/Wells Fargo Housing Market Index rose another five points to a 6-year high of 46 in November. The component measuring traffic remained unchanged at 35; the component measuring current sales rose 8 points to 49 while the component measuring future demand rose two points to 53. The expectation component has been above the tipping point of 50 for three consecutive months (above 50 being the point where more builders see a better market ahead than see a poorer market).
Regional three-month moving average index levels also rose two to four points, Northeast to 31, Midwest to 45, South to 43 and West to 47. The Northeast index is the only region that has hesitated in the last several months, remaining in a narrow band of 29 to 31 for six months. Single-family permits have behaved similarly, running between 40,000 and 45,000 since March 2012. The FHFA price index changes for the two divisions within the Northeast region have been among the lowest recently. The Northeast is the only region with a higher unemployment rate now than one year ago and in two months ago.
Builders report continued difficulties with buyers qualifying for mortgages and low appraisals below the contract price. But the source of the increasing optimism centers on improved buyers’ attitudes. Builders report buyers who are able to obtain a mortgage are ready to buy after postponing their purchase for years. Low inventory or the wrong inventory in the existing home market has also benefited home builders. Over the past year, new home sales have increased 27% while existing home sales have increase 11% as the available and appropriate inventory of existing homes dries up.
The new home inventory is also very low but builders are able to respond to orders, at least as the market begins to recover. Lot inventory is low and in some markets will soon become a limiting factor to continued expansion. Material prices, particularly lumber and wood products, have risen and in a few markets construction labor and subcontractor availability has begun to worry builders. A continued home building expansion will require attracting the resources, materials, labor and land, from their current usage and that will likely mean a rise in home prices.

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Builders’ Sentiment Continues to Rise

Builders’ Sentiment Continues to Rise

by David Crowe — Eye on Housing 

The NAHB/Wells Fargo Housing Market Index for October increased one point to 41, the sixth consecutive month for an increase.  Two of the three components to the index remained the same, current and expected sales, while the traffic index rose five points to 35, the highest in over six years.  The index, however, remains below the tipping point of 50 where an equal number of builders see better conditions as see poorer conditions.

NAHB/Wells Fargo Housing Market Index

Comments of concern continue around tight credit conditions for borrowers and builders as well as appraisals below the contracted price.  Some markets are also beginning to feel the pitch from little or no development taking place for five or six years.  The inventory of buildable lots is declining rapidly and the supply of new lots is still some years off as the development and approvals must start up again while credit remains tight for this kind of activity.  As lot prices increase, builders are being squeezed by higher input costs, including some building materials, but only slight increases in housing prices.

The slowdown in builder sentiment is appropriate given the uncertain future of tax and government spending policy.  Until elementary federal spending policies are settled, buyers and builders are appropriately cautious and a full housing recovery will have to wait for more clarity on these issues.

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NAHB: Builders Continue Optimism

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.

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Home Builder Confidence Reaches Five-Year High

Eye on the Economy: Home Builder Confidence Reaches Five-Year High

by David Crowe — Eye on Housing 

*Eye on the Economy is an NAHB newsletter that is published every two weeks and takes a larger view of recent economic and housing policy news.

Recent economic data indicate that the overall economy has entered a slow growth period. Nonetheless, during this period economic indicators have generally suggested that housing, and home building in particular, is an important source of economic growth. The question is whether the building recovery in housing will be affected by the slowing of the rest of the economy. In general, while NAHB expects occasional ups and downs for housing, the forecast calls for continued improvement for housing markets.

Housing starts data for the month of July offer a good illustration.Construction of new homes slowed slightly in July to an annual rate of 746,000, down 1.1% from the revised June rate of 754,000, which was a seven-year high. The decline was concentrated in the single-family sector where starts fell 6.5% to an annual rate of 502,000, again down from an elevated rate of 537,000 in June, which was the highest since the end of the home buyer tax credit in 2010.

However, the decline in single-family starts is more likely an adjustment to a very healthy June rate, than it is a sign that the budding housing revival is in trouble. NAHB expects the annual rate of housing starts in the third quarter to be 765,000 or about a 15% increase over the third quarter of 2011.

Recent survey data of single-family home builders provide supporting evidence. The August NAHB/Wells Fargo Housing Market Index (HMI) reached a five-year high of 37, with all three components (present conditions, six-month forward-looking conditions and prospective traffic of buyers) of the index at similar highs. The expectation component of the index increased to 44, the highest since March 2007 when it was at 50, a level where equal numbers of builders foresee a good market as see a poor market.

Similarly, the NAHB’s 55+ HMI survey, which reports 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 has more than doubled from 13 to 29. The present sales measure more than doubled, while both the components for expected sales for the next six months and traffic of prospective buyers rose.

The survey results suggest buyers are returning to the 55+ housing market as home prices begin to improve, helping to unlock some of the pent-up demand from 55+ consumers. Additionally, the 55+ multifamily rental indices recovered substantially last year, and are now holding steady.

While single-family starts were down in July, multifamily construction continues to expand. Housing starts of units in buildings with five or more apartments came in at 229,000 seasonally adjusted annual rate, up 9.6% from the revised figure for June. The three-month moving average has been very stable, hovering between 205,000 and 210,000 for the past quarter. On a year-over-year basis, housing starts for 5+ units are up strongly, 30% since July of 2011.

Existing home sales increased 2.3% from June, and are up 10.4% from the same period a year ago. The National Association of Realtors reported July 2012 total existing home sales were at a seasonally adjusted rate of 4.47 million combined for single-family homes, townhomes, condominiums and co-ops. That compares to 4.05 million units from the same period a year ago.

The total housing inventory at the end of July increased 1.3% from the previous month to 2.4 million existing homes for sale. At the current sales rate, the July 2012 inventory represents a 6.4-month supply which is down from a 6.5-month supply in June, and very much improved from the 9.3-month supply of homes a year ago.

Supporting economic conditions for housing continue to be mixed however, offering both good and bad news. For example, the NAHB/Wells Fargo Housing Opportunity Index (HOI) fell slightly in the second quarter of 2012, down to 73.8, from the all-time record high of 77.5 recorded in the first quarter of the year. Firming home prices in most metro areas – in general, a good thing for the economy– contributed to the small decline in affordability. The HOI is the share of new and existing homes sold in a quarter affordable to a family earning the median income.  An HOI of 73.8 means that 73.8% of all homes sold during the second quarter were affordable to families earning national median income ($65,000).

The Mortgage Bankers Association’s National Delinquency Survey revealed a surprising increase in the seasonally adjusted delinquency rate during the second quarter of 2012. The total share of first-lien residential mortgages with past due payments increased 18 basis points to 7.58%. In addition, all three delinquency buckets registered increases compared to the first quarter, with the largest quarter-to-quarter jump occurring among loans 90+ days past due (3.06% up to 3.19%).

Foreclosure starts were unchanged or lower compared to the first quarter of 2012 in 31 states, but a handful of states registered very large quarter-to-quarter increases in foreclosure actions. In total, five states (Florida, California, Illinois, New York and New Jersey) account for just above half of the nation’s foreclosure inventory, but represent less than 32% of all serviced loans in the U.S.

Inflation remains in check. The Bureau of Labor Statistics reported thatthe Consumer Price Index for All Urban Consumers (CPI-U) held steady in July. Overall, the CPI-U has remained either unchanged or declined in each of the last four months. Energy prices slipped 0.3% in July, putting more downward pressure on topline CPI.  The next couple months of readings on overall CPI will likely be stronger, however, as gasoline and natural gas prices have surged in recent weeks.

The shelter index, which serves as a rough measure of overall housing costs, rose for the 28th consecutive month; however, each of those increases have been modest (including the 0.1% gain in June), leaving the shelter index only 2.1% above its year-ago level. To more closely assess trends in rental housing costs, NAHB constructs a real rent index from the CPI for rent of primary residences and overall CPI. This metric has registered four consecutive month-to-month increases, with the latest gain coming in at 3.3% on an annualized basis.

Finally, NAHB economists examined issues related to the age of the housing stock, and its implications for future demand for both remodeling and new home construction. One analysis took a look at the quality of insulation, as reported by households. The survey findings indicate that overall, nearly 39% of occupants of single-family homes consider their homes well insulated. Households reporting the highest level of satisfaction with the insulation of their homes were those who occupied homes built after 2004, for whom 67% reported that their home was well insulated.

Related to these research findings, another analysis examined the geographic distribution of the median age of the housing stock.For the typical housing unit, the oldest homes are found in the Northeast. With the exception of the District of Columbia, the state with the highest median age is New York, at 57 years.  Rhode Island is next at 56. The newest housing is present in the southern parts of the nation, where population growth has been the highest in recent decades.

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HMI – Builder Confidence Continues Rise

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.

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Home Builder Confidence Continues Increase in July

Home Builder Confidence Continues Increase in July

by NAHB — Eye on Housing

The July NAHB/ Wells Fargo Housing Market Index jumped six points to a level of 35.  The new level is the highest in more than five years and the largest one-month increase since the recession recovery in 2002.  All three components and four regions increased as well.  The current sales sub-component rose six points to 37 and the expectations for sales in the next six-months rose 11 points, both the highest in over five years.  The 11 point gain in the expectation component is the largest in the 27 year history of the index.  The traffic component rose six points, hitting a level last seen six years ago.

The increase was accompanied by a large number of builder comments about increased buyer interest.  Builders commented that buyers were more serious and feeling some urgency to act as interest rates remained low but inventory of new homes also remained low.  Buyers remain very price conscious and continue to search for bargains just as builders are feeling price pressures on some rising material prices.

Credit access remains a problem for builders and buyers as well as low appraisals and competition from distressed properties.  A number of builders also offered some concern that the supply pipeline of developed lots and development dried up over the past several years and that price competition in markets with little supply was possible.

The forecast for the rest of 2012 calls for continued modest increases in production as more buyers realize home prices have stabilized and are beginning to rise in many markets.

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