Builder Confidence In The 55+ Housing Market Shows Positive Signs In The Second Quarter

August 7, 2014

Builder confidence in the single-family 55+ housing market for the second quarter is up year over year, according to the National Association of Home Builders' (NAHB) 55+ Housing Market Index (HMI) released today.  Compared to the second quarter of 2013, the single-family index increased three points to a level of 56, which is the highest second quarter reading since the inception of the index in 2008 and the 11th consecutive quarter of year over year improvements.

"We have seen steady improvement in the 55+ housing sector as buyers and renters are attracted to new homes that offer many of the luxuries and conveniences they desire," said Steve Bomberger, chairman of NAHB's 50+ Housing Council and president of Benchmark Builders Inc. in Wilmington, Delaware.  "55+ buyers are very selective and have high expectations, and new construction can meet their needs and discerning tastes."

There are separate 55+ HMIs for two segments of the 55+ housing market: single-family homes and multifamily condominiums.  Each 55+ 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.

Two of the components of the 55+ single-family HMI posted increases from a year ago: present sales climbed seven points to 61 and expected sales for the next six months rose one point to 61.  Meanwhile, traffic of prospective buyers dropped six points to 42.

Although the 55+ multifamily condo HMI dipped five points to 38, it is still the second highest reading for the second quarter since the inception of the index.  All three components of the index decreased for the second quarter: present sales dropped five points to 39, expected sales for the next six months fell four points to 42 and traffic of prospective buyers dropped three points to 35.

The indices tracking production and demand of 55+ multifamily rentals moved in different directions in the second quarter.  Present production rose three points to 53, expected future production increased one point to 53, while current demand for existing units dropped three points to 59 and future demand fell two points to 61.

"One of the factors contributing to the positive signs in the 55+ housing market is the slow but steady increase in existing home sales in the last three months," said NAHB Chief Economist David Crowe.  "The 55+ market is strongly driven by consumers being able to sell their existing homes at a favorable price in order to buy or rent in a 55+ community.

Source: National Association of Home Builders

Housing Recovery Continues At Slow Pace According To Latest Leading Markets Index

August 7, 2014

Markets in 56 of the approximately 350 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity, according to the National Association of Home Builders/First American Leading Markets Index (LMI), released today.  This represents a year-over-year net gain of seven markets.

The index's nationwide score moved up slightly to .89, meaning that based on current permit, price and employment data, the nationwide average is running at 89 percent of normal economic and housing activity.  Meanwhile, 78 percent of markets have shown an improvement year-over-year.

"Things are gradually improving," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "As the job market grows, we expect to see a steady release of pent up demand of home buyers."

Baton Rouge, Louisiana continues to top the list of major metros on the LMI, with a score of 1.39 - or 39 percent better than its last normal market level.  Other major metros leading the list include Honolulu; Oklahoma City; Houston and Austin, Texas.  Rounding out the top 10 are Los Angeles; San Jose, California; Salt Lake City; Des Moines; and New Orleans.

"With the national tally only reaching 43 percent of normal, single-family housing permits continue to be the lagging component of the index," said NAHB Chief Economist David Crowe.  "The big bright spot is employment, where the number of metro areas having reached or exceeded their norms grew from 26 to 46 in a year."

"In the 22 metros where permits are at or above normal, the overall index indicates that these markets have fully recovered," said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., which co-sponsors the LMI report.  "This finding shows the impact that an uptick in permits can have on the overall health of markets."

Looking at smaller metros, both Odessa and Midland, Texas, boast LMI scores of 2.0 or better, meaning their markets are now at double their strength prior to the recession.  Also leading the list of smaller metros are Bismarck, North Dakota; Grand Forks, North Dakota; and Casper, Wyoming, respectively.

The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of economic and housing activity.  More than 350 metro areas are scored by taking their average permit, price and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth.  For single-family permits and home prices, 2000-2003 is used as the last normal period, and for employment, 2007 is the base comparison.  The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics.  An index value above one indicates that a market has advanced beyond its previous normal level of economic activity.

Source: National Association of Home Builders 

A $1,000 Increase In Home Prices Keeps More Than 200,000 Households Out Of The Market

August 4, 2014

Each $1,000 increase in the cost of a new median-priced home price forces 206,000 prospective buyers out of the marketplace, according to a new study by the National Association of Home Builders (NAHB).

The number of households affected varies across states and metro areas and largely depends on their population, income distribution and new home prices.

Among the states, the number of households who would no longer be eligible to qualify for a mortgage based on a $1,000 increase to a median-priced home ranges from a low of 313 in Wyoming to a high of 18,250 in Texas.

"This study highlights the real effects that building regulations have on housing affordability," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "Local, state and federal government officials need to know that higher regulatory costs have real consequences for working American families.  Oftentimes, these government regulations end up pushing the price of housing beyond the means of many teachers, police officers, firefighters and other middle class workers."

Based on national mortgage underwriting standards and incorporating the latest income distribution data from the American Community Survey and the U.S. Department of Housing and Urban Development, the report contains detailed results for more than 300 metro areas.

The analysis found that every $833 increase in fees paid during the construction process - such as the price of a construction permit or an impact fee - adds an additional $1,000 to the final price of the home.

Measured by local metro areas, the number of households who would be priced out of the market based on a $1,000 increase range from a low of 19 in Napa, California to a high of 5,742 in the New York-Northern New Jersey-Long Island, New York-New Jersey-Pennsylvania area.

Looking at affordable metro areas, where roughly 50 percent or more of households can afford new homes, the priced out effects are typically large and can often disqualify thousands of new home buyers, as in the case of Houston-Sugar Land-Baytown, Texas (4,234); Atlanta-Sandy Springs-Marietta, Georgia (4,135); and Las Vegas-Paradise, Nevada MSA (2,044).

Source: National Association of Home Builders

Remodeler Confidence Regains Momentum

July 24, 2014

The National Association of Home Builders (NAHB) Remodeling Market Index (RMI) rose three points to 56 in the second quarter of 2014, regaining the momentum built in 2013.  This is the fifth consecutive quarter for an RMI reading above 50.

An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower.  The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.

"With many home owners on better financial footing, home remodeling has become more popular," said NAHB Remodelers Chair Paul Sullivan, CAPS, CGR, CGP, of Waterville Valley, New Hampshire.  "The completion of postponed work has helped remodelers in all regions regain confidence in the remodeling market."

The RMI's future market conditions index rose to 56 from 52 in the previous quarter, under the strength of an increase in all four of its subcomponents: calls for bids, amount of work committed for the next three months, backlog of jobs and appointments for proposals.

The current market conditions component of the RMI increased three points to 56 this quarter.  Remodeling jobs valued at $25,000 or more rebounded to 54, the same level as the end of 2013.  Smaller remodeling jobs and maintenance and repair components performed well this quarter with readings of 56 and 58, respectively.

"The recent improvement in the job market has helped restore remodelers' confidence after a dip in the first quarter that was probably in part weather-related.  As homeowners feel more secure about their economic situation, they become more willing to undertake remodeling projects - especially larger, discretionary projects," said NAHB Chief Economist David Crowe.  "In addition, fewer new home builders are looking to remodeling as a way to supplement their revenue, and this has somewhat reduced competition for remodeling projects."

Source: National Association of Home Builders 

New Home Sales Down 8.1 Percent In June

July 24, 2014

Sales of newly built, single-family homes fell 8.1 percent to a seasonally adjusted annual rate of 406,000 units in June, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Sales numbers for May were revised downward to 442,000.

"The numbers are a little disappointing, but May was unusually high and some pull back isn't completely unexpected," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.  "Our surveys show that builders are confident about the future and we are still seeing a gradual upward trajectory in housing demand."

"With continued job creation and economic growth, we are cautiously optimistic about the home building industry in the second half of 2014," said NAHB Chief Economist David Crowe.  "The increase in existing home sales also bodes well for builders, as it is a signal that trade-up buyers can move up to new construction."

Regionally, new home sales were down across the board.  Sales fell 20 percent in the Northeast, 9.5 percent in the South, 8.2 percent in the Midwest and 1.9 percent in the West.

The inventory of new homes for sale held steady at 197,000 units in June.  This is a 5.8 month supply at the current sales pace.

Source:  National Association of Home Builders

South Pushes Nationwide Housing Starts Down 9.3 Percent In June

July 17, 2014

Nationwide housing production fell 9.3 percent to a seasonally adjusted annual rate of 893,000 units in June, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  The drop was due primarily to a nearly 30 percent decline in the South.  All other regions posted monthly gains.

"A modest 2.6 percent increase in single-family permits falls in line with the general optimism that we are hearing from our builders," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

Single-family housing starts were down 9 percent to a seasonally adjusted annual rate of 575,000 units in June, while multifamily production fell 9.9 prcent to 318,000 units.

Regionally in June, combined single and multifamily housing production rose in the Northeast, the Midwest and the West, with respective gains of 14.1 percent, 28.1 percent and 2.6 percent.  Total production fell by 29.6 percent in the South, the nation's largest region.

"Take away the South and the nationwide housing starts would have been in positive territory this month," said NAHB Chief Economist David Crowe.  "This sharp regional decline could be due in part to lots and labor shortages, which are particularly acute in that part of the country.  However, the general direction of housing production is trending upward, and we expect 2014 to be a positive year."

Issuance of building permits registered a 4.2 percent decline to a seasonally adjusted annual rate of 963,000 units in June.  Multifamily permits dropped 14.9 percent to 332,000 units while single-family permits increased 2.6 percent to 631,000 units.

The Northeast, South and West registered overall permit losses of 15.5 percent, 6.3 percent and 1.8 percent, respectively, while the Midwest posted a 6.6 percent gain.

Source: National Association of Home Builders 

Builder Confidence Surpasses Key Benchmark In July

July 16, 2014

Builder confidence in the market for newly built single-family homes reached an important milestone in July, rising four points to a reading of 53 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.  Any reading over 50 indicates that more builders view sales conditions as good than poor.

"This is the first time that builder confidence has been above 50 since January and an important sign that it is strengthening as pent-up demand brings more buyers into the marketplace," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

"An improving job market ges hand-in-hand with a rise in builder confidence," said NAHB Chief Economist David Crowe.  "As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home."

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales expectations for the next six months as "good," "fair" or "poor."  The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low."  Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components posted gains in July.  The index gauging current sales conditions increased four points to 57, while the index measuring expectations for future sales rose six points to 64 and the index gauging traffic of prospective buyers increased three points to 39.

The HMI three month moving average was up in all four regions, with the Northeast and Midwest posting a one-point and two-point gain to 35 and 48, respectively.  The West registered a five-point gain to 52 while the South rose two points to 51.

Source: National Association of Home Builders

New Home Sales Up 18.6 Percent In May

June 24, 2014

Sales of newly built, single-family homes rose 18.6 percent to a seasonally adjusted annual rate of 504,000 units in May, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  This is the highest rate since May 2008.

"These numbers are in line with our recent builder surveys, which indicate that more consumers are getting off the fence and coming back into the marketplace," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

"This increase is a welcome sign after a slow start to 2014," said NAHB Chief Economist David Crowe.  "As job creation continues, we can expect further release of pent-up demand and continued gradual growth in the housing recovery."

Regionally, new home sales were up across the board.  Sales rose 54.5 percent in the Northeast, 34 percent in the West, 14.2 percent in the South and 1.4 percent in the Midwest.

The inventory of new homes for sale held steady at 189,000 units in May.  This is a 4.5 month supply at the current sales pace.

Source: National Association of Home Builders

Housing Production Falls 6.5 Percent In May

June 17, 2014

Declines in both single and multifamily starts pushed nationwide housing production down 6.5 percent in May to a seasonally adjusted annual rate of just over 1 million units, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  However, single-family permits, which can be an indicator of future building activity, rose 3.7 percent.

"The dip in single-family production shows builders continue to move carefully in adding inventory," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.  "They are also facing supply chain issues, such as access to lots and labor."

Single-family housing starts were down 5.9 percent to a seasonally adjusted annual rate of 625,000 units in May.  Meanwhile, multifamily production fell 7.6 percent to a seasonally adjusted annual rate of 376,000 units.

"The encouraging news is that single-family permits are up by almost 4 percent," said NAHB Chief Economist David Crowe.  "The modest increase is evidence that builders expect continued release of pent-up demand and a gradual expansion of the housing market.  We are still forecasting a 12 percent increase in total housing starts for the year."

Regionally in May, combined single and multifamily housing production fell in the Northeast, the Midwest and the West, with respective losses of 25.2 percent, 16.5 percent and 16.3 percent.  Meanwhile, the South posted a 7.3 percent gain.

Issuance of building permits registered a 6.4 percent decline to a seasonally adjusted annual rate of 991,000 units in May.  This was due entirely to a decrease in the multifamily sector, where permits registered a 19.5 percent loss to 372,000 units.  Single-family permits increased to 619,000 units.

The Northeast and Midwest registered overall permit gains of 3.5 percent and 3.8 percent, respectively, while the South and West posted respective losses of 7.3 percent and 15.2 percent.

Source: National Association of Home Builders

Builder Confidence Rises Four Points In June

June 16, 2014

Builder confidence in the market for newly built, single-family homes rose four points in June to reach a level of 49 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.  It remains one point shy of the threshold for what is considered good building conditions.

"After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "However, builders are facing strong headwinds, including the limited availability of labor."

"Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase," said NAHB Chief Economist David Crowe.  "Builders are reacting accordingly, and are moving cautiously in adding inventory."

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor."  The survey also asks builders to rate traffic of prospective buyers as "high to very high," average" or "low to very low."  Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three index components posted gains in June.  Most notable, the component gauging current sales conditions increased six points to 54.  The component gauging sales expectations in the next six months rose three points to 59 and the component measuring buyer traffic increased by three to 36.

Looking at the three month moving averages for regional HMI scores, the South and Northeast each edged up one point to 49 and 34, respectively, while the West held steady at 47.  The Midwest fell a single point to 46.

Source: National Association of Home Builders

Leading Markets Index Shows 56 Metros At Or Above Normal Levels

June 5, 2014

Of the approximately 350 metro markets nationwide, 56 returned to or exceeded their last normal levels of economic and housing activity, according to the National Association of Home Builders/First American Leading Markets Index (LMI), released today.  This represents a net gain of nine metros year over year.

The index's nationwide score of .88 held steady from the previous month.  This means that based on current permit, price and employment data, the nationwide average is running at 88 percent of normal economic and housing activity.  Meanwhile, 30 percent of metro areas saw their score rise this month and 83 percent have shown an improvement over the past year.

"Markets are gradually returning to normal levels of housing and economic activity," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "When we see more sustainable levels of job growth, this will unleash pent-up demand and bring more buyers into the marketplace."

Baton Rouge, Louisiana, continues to top the list of major metros on the LMI, with a score of 1.4 - or 40 percent better than its last normal market level.  Other major metros at the top of the list include Honolulu; Oklahoma City; Austin, Texas and Houston.  Rounding out the top 10 are Los Angeles; San Jose, California; Harrisburg, Pennsylvania; Pittsburgh and Salt Lake City - all of whose LMI scores indicate that their market activity now equals or exceeds previous norms.

"Of the three components in the LMI, the one lagging is single-family housing permits, which is only 43 percent of the way back to normal while home prices are 26 percent above their last normal level and employment is at 95 percent of its previous norm," said NAHB Chief Economist David Crowe.  "In the 22 metros where permits are at or above normal, the overall index indicates that these markets have fully recovered."

"Well over one-third of all markets are operating at a level of at least 90 percent of previous norms, and this bodes well for a continuing housing recovery in the year ahead," said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co., which co-sponsors the LMI report.

Looking at smaller metros, both Odessa and Midland, Texas, boast LMI scores of 2.0 or better, meaning their markets are now at double their strength prior to the recession.  Also at the top of the list of smaller metros are Bismarck, North Dakota; Casper, Wyoming; and Grand Forks, North Dakota, respectively.

The LMI shifts the focus from identifying markets that have recently begun to recover, which was the aim of a previous gauge known as the Improving Markets Index, to identifying those areas that are now approaching and exceeding their previous normal levels of economic and housing activity.  More than 350 metro areas are scored by taking their average permit, price and employment levels for the past 12 months and dividing each by their annual average over the last period of normal growth.  For single-family permits and home prices, 2000-2003 is used as the last normal period, and for employment, 2007 is the base comparison.  The three components are then averaged to provide an overall score for each market; a national score is calculated based on national measures of the three metrics.  An index value above one indicates that a market has advanced beyond its previous normal of economic activity.

Source: National Association of Home Builders

Green Homes Show Growth In A Recovering Market

June 5, 2014

Residential construction is a key engine behind growth in the United States.  According to McGraw Hill Construction's Dodge Construction Market Forecast, single and multifamily housing projects account for about 45% of the value of all construction projects started in the United States in 2014.  With that market forecasted to grow rapidly in coming years, the green activity and drivers in the market are critical.  The SmartMarket Report of the single and multifamily builder and remodeler community released today contains this new intelligence.

The report, "Green Multifamily & Single Family Homes: Growth in a Recovering Market," surveys builder and remodeler members of the National Association of Home Builders and reveals the evolution of green building for single family homes from boom to bust to recovery through comparisons with previous studies from 2006 to 2011, and includes new data on multifamily housing to provide a comprehensive review of the sector.

According to the latest study:

• 62% of firms building new single family homes report that they are doing more than 15% of their projects green.  By 2018, 84% of them expect this level of green activity.
• 54% of firms building new multifamily projects report that they are doing more than 15% of their projects green.  There is also growth expected - with 79% reporting the same level of activity anticipated by 2018.
• In the single family market, the most striking shift is in those firms dedicated to green building (doing more than 90% of their projects green).  That percentage is already at 19%, and by 2018, it is expected to double to 38%.

The study finds that builders and remodelers in both the single family and multifamily sectors report that the market is recognizing the value of green: 73% of single family builders (up from 61% since the last report) and 68% of multifamily builders say consumers will pay more for green homes.

"Greater consumer interest in green homes has contributed to the ongoing growth, leading us to anticipate that by 2016, the green single family housing market alone will represent approximately 26% to 33% of the market, translating to an $80 billion to $101 billion opportunity based on current forecasts.  The findings also suggest that lenders and appraisers may be starting to recognize the value of green homes, making it a factor that could help encourage the market to grow if there is more widespread awareness across the U.S.," said Harvey Bernstein, vice president, Industry Insights and Alliances for McGraw Hill Construction.

The study also examines the triggers for green building activity.  "This new study demonstrates phenomenal growth in green building, with more builders engaging in sustainable building practices than ever before," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "While growth in green in the single family market is driven more by high utility incentives, as well as enhancing their competitive position and corporate image.  All are compelling reasons for the industry to engage with this continuously growing market."

The SmartMarket Report also reveals a vigorous and growing renewables market in the residential sector.  65% of the respondents - both single family and multifamily - currently use renewables on at least some of their projects, and the percentage that incorporate them in all of their projects is expected to grow from 8% in 2013 to 20% by 2016.

"Green Multifamily & Single Family Homes: Growth in a Recovering Market" was produced by McGraw Hill Construction in partnership with the National Association of Home Builders, with the support of Waste Management and Menck Windows.

Source: National Association of Home Builders

Apartment And Condominium Market Shows Positive Growth In First Quarter

May 29, 2014

Production of apartments and condominiums showed positive growth in the first quarter of 2014, according to the latest Multifamily Production Index (MPI), released today by the National Association of Home Builders (NAHB).  The index increased three points to 53, which is the ninth consecutive quarter with a reading of 50 or above.

The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100.  The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.

Th MPI provides a composite measure of three key elements of the multifamily housing market: construction of market-rate rental units, low-rent units and "for-sale" units, or condominiums.  In the first quarter of 2014, the MPI component tracking builder and developer perceptions of low-rent units increased one point to 48 and for-sale units jumped eight points to 54.  Meanwhile, the index tracking market-rate rental properties slipped one point to 59, but has remained consistently above 50 since the fourth quarter of 2010.

"Developer confidence in market-rate units has been pretty stable for quite some time," said W. Dean Henry, CEO of Legacy Partners Residential in Foster City, California, and chairman of NAHB's Multifamily Leadership Board.  "Now we're really starting to see confidence in the condo market start to catch up - a segment that had been delayed in its recovery - along with the single-family market."

The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, dropped one point to 37.  With the MVI, lower numbers indicate fewer vacancies.  The MVI improved consistently through 2010 and has been at a fairly moderate level since 2011 after peaking at 70 in the second quarter of 2009.

"The MPI shows stable production of apartments and condos, which is what our forecast calls for," said NAHB Chief Economist David Crowe.  "In 2014, we expect multifamily starts to grow about 6 percent over 2013, to about 326,000 units."

The MPI and MVI have continued to perform well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.

For data tables on the MPI and MVI, visit www.nahb.org/mms.

Source: National Association of Home Builders 

New Home Sales Rise 6.4 Percent In April

May 23, 2014

Sales of newly built, single-family homes rose 6.4 percent to a seasonally adjusted annual rate of 433,000 units in April, according to newly released data from HUD and the U.S. Census Bureau.  The gain builds on an upward revision of sales numbers reported for the previous month.

"Builders are gradually increasing sales but tight credit conditions, particularly for first-time home buyers, are impeding a more robust recovery," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.

"In a positive development, builders are adding inventory in anticipation of a further release of pent-up demand," said NAHB Chief Economist David Crowe.  "We are only about half-way back to what could be considered a normal market, but relatively low mortgage rates and affordable home prices are other factors that should help keep starts and sales on a slow upward trajectory in the months ahead."

On a regional basis, new home sales rose 47.4 percent in the Midwest and 3.1 percent in the South and held steady in the West.  The Northeast posted a 26.7 percent decline.

The inventory of new homes for sale increased to 192,000 units in April.  This is a 5.3 month supply at the current sales pace.

Source: National Association of Home Builders

Housing Affordability Edges Higher In First Quarter

May 13, 2014

Slightly lower median home prices along with steady mortgage rates contributed to higher housing affordability in the first quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today.

In all, 65.5 percent of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $63,900.  This is slightly higher from the 64.7 percent of homes sold that were affordable to median-income earners in the fourth quarter.

Meanwhile, the national median home price dipped from $205,000 in the fourth quarter to $195,000 in the first quarter while average mortgage interest rates were virtually unchanged, moving from 4.54 percent to 4.57 percent in the same period.

"Housing affordability remains strong and this is an encouraging sign as the spring home building season moves into high gear," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.

"As home prices and mortgage interest rates are unlikely to go down, the first quarter HOI is another indicator that this is an opportune time to buy," said NAHB Chief Economist David Crowe.

Syracuse, New York was the nation's most affordable major housing market, as 93.7 percent of all new and existing homes sold in this year's first quarter were affordable to families earning the area's median income of $67,700.  Meanwhile, Cumberland, Maryland-West Virginia claimed the title of most affordable smaller market, with 96.3 percent of homes sold in the first quarter being affordable to those earning the median income of $54,100.

Other major U.S. housing markets at the top of the affordability chart in the first quarter included Buffalo-Niagara Falls, New York; Youngstown-Warren-Boardman, Ohio-Pennsylvania; Harrisburg-Carlisle, Pennsylvania; and Dayton, Ohio; in descending order.

Smaller markets joining Cumberland at the top of the affordability chart included Springfield, Ohio; Kokomo, Indiana; Mansfield, Ohio; and Lima, Ohio.

For a sixth consecutive quarter, San Francisco-San Mateo-Redwood City, California held the lowest spot among major markets on the affordability chart.  There, just 13.3 percent of homes sold in the first quarter were affordable to families earning the area's median income of $100,400.

Other major metros at the bottom of the affordability chart included Santa Ana-Anaheim-Irvine, California; Los Angeles-Long Beach-Glendale, California; New York-White Plains-Wayne, New York-New Jersey; and San Jose-Sunnyvale-Santa Clara, California; in descending order.

All of the five least affordable small housing markets were in California.  At the very bottom of the affordability chart was Santa Cruz-Watsonville, where 21.1 percent of all new and existing homes sold were affordable to families earning the area's median income of $77,900.  Other small markets at the lowest end of the affordability scale included Napa, Salinas, San Luis Obispo-Paso Robles, and Santa-Petaluma, respectively.

Source: National Association of Home Builders 

Multifamily Surge Propels Housing Starts Over 1 Million Mark In April

May 16, 2014

Soaring production of multifamily apartments pushed nationwide housing starts above the million-unit mark in April, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.  Total housing production rose 13.2 percent for the month to a seasonally adjusted annual rate of 1.07 million units, due entirely to a 39.6 percent increase on the multifamily side, while single-family production held steady.

"The flat single-family data confirm our latest surveys, which show that single-family builders remain concerned that tight credit availability and uncertain conditions are keeping potential buyers on the sidelines," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Delaware.  "However, demand for apartment construction still remains high."

Single-family housing starts rose 0.8 percent to a seasonally adjusted annual rate of 649,000 units in April.  Meanwhile, multifamily production jumped 39.6 percent to a seasonally adjusted annual rate of 423,000 units - their fastest pace since January 2006.

"The growth in multifamily production is a very positive development as it shows an expected increase in household formations from young people renting apartments and taking the first step into the housing market," said NAHB Chief Economist David Crowe.  "These young households will form the demand for ownership in the future."

All four regions posted gains in combined single and multifamily housing production in April, with the Northeast posting a 28.7 percent gain, the Midwest registering a 42.1 percent increase, the West posting an 11.1 percent increase and the South noting a 1.5 percent gain.

Issuance of building permits, which can be an indicator of future building activity, rose 8 percent to a seasonally adjusted annual rate of 1.08 million units in April.  This was due entirely to an increase in the multifamily sector, where permits registered a 21.8 percent gain to 453,000 units.  Single-family permits registered a marginal 0.3 percent gain to 602,000 units.

Source: National Association of Home Builders

Builder Confidence Remains In Holding Pattern

May 15, 2014

Builder confidence in the market for newly built, single-family homes in May fell one point to 45 from a downwardly revised April reading of 46 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.

"After four months in which the HMI has shown little signs of fluctuation, it is clear that builder sentiment is becoming more in line with the market reality of a continuing but modest recovery," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Delaware.  "However, builders expressed some optimism that sales will pick up in the coming months."

"Builders are waiting for consumers to feel more secure about their financial situation," said NAHB Chief Economist David Crowe.  "Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence."

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor."  The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low."  Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The index's components were mixed in May.  The component gauging sales expectationsin the next six months rose one point to 57 and the component measuring buyer traffic increased two points to 33.  The component gauging current sales conditions fell two points to 48.

Looking at the three-month moving averages for regional HMI scores, the South rose one point to 48 while the Midwest fell a single point to 47 and the West posted a four-point drop to 47.  The Northeast held steady at 33.

Source: National Association of Home Builders 

Single Family 55+ HMI Rises To Highest First Quarter Reading Since 2008

May 8, 2014

Builder confidence in the single-family 55+ housing market for the first quarter of 2014 is up year over year, according to the National Association of Home Builders' (NAHB) latest 55+ Housing Market Index (HMI) released today.  Compared to the first quarter of 2013, the single-family index increased 4 points to a level of 50, which is the highest first quarter reading since the inception of the index in 2008 and the 10th consecutive quarter of year over year improvements.

"There are many factors contributing to the positive signs in the 55+ housing market," said Steve Bomberger, chairman of NAHB's 50+ Housing Council and president of Benchmark Builders Inc. in Wilmington, Delaware.  "Rising house prices and low interest rates are helping baby boomers sell their existing homes at a favorable price and in turn, purchase a new home more suited to their current lifestyles."

There are separate 55+ HMIs for two segments of the 55+ housing market: single-family homes and multifamily condominiums.  Each 55+ 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.

Two of the components of the 55+ single-family HMI posted increases from a year ago: present sales rose six points to 52 and expected sales for the next six months climbed nine points to 62.  Meanwhile, traffic of prospective buyers held steady at a reading of 41.

The 55+ multifamily condo HMI increased one point to 39, which is the highest first-quarter reading since the inception of the index.  Two of the 55+ multifamily condo HMI components showed increases compared to a year ago: present sales increased four points to 41 and expected sales for the next six months rose five points to 48.  Traffic of prospective buyers, however, decreased six points to 32.

Three of the four 55+ multifamily rental indices showed slight declines in the first quarter.  Present production dipped one point to 42, expected future production decreased three points to 45 and current demand for existing units dropped one point to 55.  Future demand did show an increase of one point to 59.

"The 55+ segment of the housing market is stronger now than it was a year ago," said NAHB Chief Economist David Crowe, "helped by factors like rising house prices, which has increased owners' equity and allowed them to buy in a 55+ community.  But there are still some headwinds hampering a stronger recovery, as builders in many markets are facing tight credit conditions and a lack of lots and labor."

Source: National Association of Home Builders

Severe Winter Constrains First Quarter Remodeling Market Index

April 24, 2014

Against the backdrop of unusually severe winter weather, the Remodeling Market Index (RMI) declined to 53 in the first quarter of 2014, according to the National Association of Home Builders (NAHB).  This reading is down from the historically high level of 57 in the two most recent quarters, but remains above the key break-even point of 50.

An RMI above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower.  The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity.

"Remodelers remain confident in the continued growth of the home improvement market," said NAHB Remodelers Chair Paul Sullivan, CAPS, CGR, CGP, of Waterville Valley, New Hampshire.  "As we head into spring, the gradual rise in home equity levels will continue to help clients better afford to remodel their homes."

Smaller renovation jobs continue to show strength.  The home maintenance and repair component of the RMI increased two points to 59 in the first quarter, a historically high reading.  Overall, the current market conditions of the RMI declined three points to 53 this quarter.

While the RMI's future market conditions index fell from 58 in the previous quarter to 52, all of the four major components of the RMI's future market conditions index remained at or above 50 in the first quarter of 2014.  Calls for bids was 52, the amount of work committed for the next three months was 50, the backlog of remodeling jobs was 55 and appointments for proposals was 52.

"An uncommonly harsh winter and continued labor shortage created a drag on many parts of the housing market, including remodeling, in the first months of 2014," said NAHB Chief Economist David Crowe.  "The two components of the RMI that declined the most in the first quarter, calls for bids and appointments for proposals, are the ones most likely to respond to weather conditions.  Going forward, we expect gradual, but steady growth in the market for remodeling as there is still some pent-up demand from the housing downturn waiting to be released."

Source: National Association of Home Builders 

Housing And The Economy To Continue On An Upward Path, Economists Say

April 24, 2014

A growing economy, pent-up demand, competitive mortgage rates and affordable home prices will keep housing on an upward trajectory through 2015.  However, several obstacles including tight consumer credit, shortages of lots and labor and rising materials prices are hindering a more robust recovery, according to economists who participated in yesterday's National Association of Home Builders (NAHB) 2014 Spring Construction Forecast Webinar.

"Housing needs an improved economy," said NAHB Chief Economist David Crowe, adding that the economy is expected to respond as payroll employment continues to grow and the unemployment rate slowly recedes from 6.7 percent in the first quarter of this year to 6.2 percent by the fourth quarter of 2015.

Consumer confidence is back to pre-recession levels and the purchase of motor vehicles and home furnishings are on the rise, indicating that consumers are increasingly willing to buy big ticket items such as houses.

Reflecting an increase in credit demand and economic growth, mortgage interest rates are projected to rise to 5 percent by the end of 2014 and 6 percent by the end of next year.  Noting that these rates are still low by historical standards, Crowe said this would "not be a significant deterrent to expansion in the housing market."

With new home sales averaging just 8.8 percent of total home sales, barely half the historical average of 16.1 percent, Crowe observed that "this is another reason to believe that the new home market will have to make up existing ground."

However, he cautioned that builders continue to face a number of headwinds.

"Supply constraints related to lots and labor and rising lumber, gypsum and OSB (oriented strand board) prices are hurting the ability of builders to meet demand," he said.  "Moreover, creditworthy borrowers, particularly younger families and first-time home buyers, are having difficulties in getting home loans."

Remodeling, Sales and Starts on the Rise

The NAHB Remodeling Index, which averages ratings of current remodeling activity with indicators of future activity, stands at 53 in the first quarter of 2014 and has been above 50 for six of the past seven quarters.  A reading above 50 indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower.

NAHB is forecasting that residential remodeling will post a 3.8 percent increase in 2014 over last year and rise an additional 2.4 percent in 2015.

New home sales are expected to climb 29 percent from 431,000 in 2013 to 557,000 this year.

Single-family housing production is projected to increase 22 percent from 621,000 last year to 760,000 in 2014 and surge an additional 55 percent to 1.18 million units in 2015.

On the multifamily side, production is expected to rise 8 percent from 308,000 in 2013 to 331,000 this year, reaching what is considered a normal level of production.

Banks Awash in Cash

Agreeing that the economy is on an upward trajectory, Maury Harris, managing director and chief U.S. economist at UBS, said that financial lending institutions are sitting on a mountain of cash.

"Banks have over $2 trillion of excess reserves.  That's with a 't'," he said.  "Banks would like to put that money to work and increase lending, which will help the economy."

In the aftermath of the Great Recession, Harris said that normal household formations have fallen short by about 2.5 million as graduating college students were forced to move back in with their parents and young adults were doubling up in apartments.

"As unemployment comes down and credit availability eases, Millennials (the 25-34 age group) will feel better about their economic circumstances," said Harris.  "I think we will see the shared household rate come down, less doubling up and a pickup in household formations."

Harris is forecasting 1.15 million housing starts this year (700,000 single-family and 450,000 multifamily) and 1.35 million next year (900,000 single-family and 450,000 multifamily).

A Gradual Climb to Normal

Looking at the state statistics behind the national numbers, Robert Denk, NAHB's assistant vice president for forecasting and analysis, cited a range of differences among the states in the amount of distress suffered during the recession and the progress that is being made in recovering.

Housing production nationwide bottomed out at an average of 27 percent in early 2009 and reached 45 percent in the first quarter of 2014.

In the worst hit states, housing fell to 10 to 15 percent of normal production while production only fell by half in other states with a better underlying economy.

"The hardest hit states were the bubble states - Arizona, Florida, California and Nevada - along with the industrial Midwest, which struggles with challenges in the auto industry and a declining manufacturing sector," said Denk.

"Where individual states stand now has a lot to do with how far they fell when the Great Recession hit", Denk added.

Fueled by a booming energy sector that is producing solid job and economic growth, Texas, Louisiana, Oklahoma, Wyoming, North Dakota and Montana are at the forefront of the housing recovery, with North Dakota now the first state to surpass its normal level of housing production.

"On a national basis, single-family housing starts are projected to get back to 70 percent of normal production by the end of this year and 93 percent of normal by the end of 2015," Denk said.

In another way of looking at the long road back to normal, by the end of 2015 the top 40 percent of states will be back to normal production levels, compared to the bottom 20 percent, which will still be below 80 percent.

Source: National Association of Home Builders