NAHB: Home Builders Remain Confident

Posted in Market Outlook by Michigan Real Estate Expert on September 18th, 2019

NAHB Home Builders Remain ConfidentThe National Association of Home Builders Housing Market Index shows steady builder confidence in housing market conditions. September’s index reading of 68 was one point higher than August’s reading. Any reading over 50 indicates that most home builders surveyed view housing market conditions as favorable. August’s original index reading was adjusted upward by one point.

Component readings for the Housing Market Index were mixed. Builder confidence in current market conditions rose two points to index reading of 75; this was the highest reading year-over-year. Builder confidence in home sales over the next six months fell by one point to 70. The gauge of buyer traffic in single-family housing developments held steady at 50. Readings for buyer traffic seldom exceed 50; September’s reading suggested higher builder confidence than the numerical reading suggested.

Average New Home Size Decreases, Builders Confident In Housing Markets

In recent months, builders have focused on producing larger homes, which has limited the number of affordable homes available to middle-income and first-time home buyers. High demand for homes caused by slim inventories of homes for sale and factors including competition with cash buyers sidelined would-be buyers. Home builders scaled down the size of new homes by 4.30 percent during the second quarter of 2019. This trend is expected to encourage potential home buyers into the market as lower home prices and mortgage rates combine to encourage more buyers into the housing market.

Lower Home Prices And Mortgage Rates Increase Affordability

Analysts and real estate pros have long said that the only way to ease demand for homes is by building more homes within all price ranges. Builders did not immediately respond to calls for more homes, but if current builder confidence and a new focus on building affordable homes continues, high demand for homes and short supplies of available homes may ease toward evenly balanced market conditions, but the unknown factor is mortgage rates. If they rise, affordability will be challenged and buyer interest in new homes could slow.

New home prices typically fall as peak buying season ends. Current trends toward building smaller homes, low mortgage rates and lower home prices combined to provide more choices and affordable options for home buyers. If general economic conditions remain strong, more home shoppers could become homeowners.

 

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NAHB: Housing Market Index Rises 1 Point in July

Posted in Market Outlook by Michigan Real Estate Expert on July 17th, 2019

NAHB Housing Market Index Rises 1 Point in JulyHome Builder sentiment rose one point in July according to the National Association of Home Builders Housing Market Index. 2019 builder confidence in housing market condition continued to fall short of 2018 levels. July’s Housing Market Index reading of 65 was one point higher than June’s reading.

Component readings also rose one point each. Builder confidence in current housing market conditions rose to 72; the reading for builder confidence in market conditions for the next six months rose to 71. Builder confidence in buyer traffic in new housing developments rose to an index reading of 48; buyer traffic readings seldom exceed the neutral reading of reading of 50.

2019 Builder Confidence Is Lagging Behind 2018 Readings

Year to date, builder confidence index readings averaged 63 as compared to a reading of 67 in 2018 and 68 in 2017. Ongoing headwinds affecting builders were familiar concerns over materials prices and shortages of buildable lots and labor. Analysts said that builders remain leery of building to many homes after having large inventories of unsold homes after the Great Recession.

Builders also noted that increasing regulation and local building codes are impacting some areas. Builders are under pressure to produce affordable homes, but are log-jammed by “not in my backyard” zoning restrictions when they apply to build mixed developments of single and multi-family homes.

There may be good news on the horizon. Oregon passed state legislation banning exclusively single-family zoning. Depending on population, local jurisdictions will be allowed to build duplexes and larger multi-family units. If other states and communities follow Oregon’s lead, builders may find new options for building multiple units on lots formerly zoned for single family homes. Building affordable homes would help to ease housing shortages and ease demand for homes.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted home mortgage and real estate professionals. 

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NAHB: Builder Confidence Slips in June

Posted in Market Outlook by Michigan Real Estate Expert on June 20th, 2019

NAHB Builder Confidence Slips in JuneHomebuilder confidence dropped two points in June according to the National Association of Home Builders Housing Market Index. June’s index reading was 64, which indicates strong sentiment among home builders for current housing market conditions.

NAHB component readings also dropped in June with builder confidence in current home sales one point lower at an index reading of 71. Home builder confidence in home sales conditions over the next six months dropped two points to 70 and builder confidence in buyer traffic was one point lower at 48. Buyer traffic readings seldom exceed the NAHB benchmark reading of 50. Index readings over 50 indicate that most builders have positive sentiment toward conditions surveyed.

Home Builders Cite Ongoing Concerns and Growing Worry Over Tariffs

Home builders surveyed for June’s Housing Market Index cited continued concerns over shortages of labor and buildable lots, but also worried over increased materials costs resulting from recent tariffs. Analysts said that high demand for homes is driven by a current shortage of several million available homes; demand should be driving builder sentiment and housing starts much higher than current levels. Builder sentiment reported in the Housing Market Index typically drove housing starts, but this hasn’t been the case in the aftermath of the housing crisis. Severe shortages of homes for sale drive home prices up; this creates competition between buyers and sidelines first-time and moderate income home buyers.

While buyer traffic is robust, headwinds including high home prices and concerns about general economic conditions could be keeping would-be buyers on the fence. Low mortgage rates, which may drop further if the Federal Reserve lowers its key lending rate, could prompt more buyers to enter the market, but rapidly rising home prices in recent years have caused would-be buyers to hold off on buying homes. Faced with few options and high home prices, buyers may be waiting until more homes come on the market. Industry leaders have long said that building more homes is the only way to resolve the shortage of homes and high demand from home buyers.

Faced with rising materials costs and strict zoning rules, builders are tasked to find affordable housing solutions when fewer buildable lots and zoning rules discourage higher density affordable housing developments.

 

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NAHB: May Home Builder Confidence Hits Highest Level in 7 Months

Posted in Market Outlook by Michigan Real Estate Expert on May 16th, 2019

NAHB May Home Builder Confidence Hits Highest Level in 7 MonthsThe National Association of Home Builders reported the highest builder confidence reading in seven months for May. May’s reading exceeded expectations for an index reading of 64 and rose three points to 67.

Component readings for the main NAHB reading were also higher. Builder confidence in current housing market conditions rose three points to 72; confidence in housing market conditions for the next six months rose one point to 72 and the reading for buyer traffic in single-family housing developments rose two points to 49.

Any reading over 50 indicates most builders are positive about housing market conditions, but the reading for buyer traffic is often lower than 50. May’s reading suggests that builders were expecting solid buyer traffic as the peak home buying season started. The average NAHB Housing Market Index reading for 2018 was 67; 2019’s average reading is 62.

March housing starts were the lowest in two years. Lower mortgage rates could increase demand for homes and possibly compel builders to ratchet up construction, but there are no guarantees that low mortgage rates will hold steady over the long run.

Builders Cite Ongoing Obstacles Including Tariffs And Labor Costs

Home builders continued to experience higher materials and labor costs. Tariffs were cited as a cause of higher materials costs that are passed on to buyers by raising home prices. While would-be buyers may enter the market due to lower mortgage rates, higher home prices are likely to sideline first-time and moderate income buyers who are concerned with affordability and strict mortgage qualification requirements.

Freddie Mac reported that based on its survey of recent buyers, about 16 percent of recent home buyers relied on seller assistance. While seller contributions to home buyers are carefully regulated, this type of transaction can help buyers get into a home without spending their last dollar.

Rapidly rising home prices and buyer competition have skewed housing markets in favor of sellers in high-demand markets, but slower growth of home prices in recent months could help more renters buy homes. Continued trade negotiations and increased tariffs on China could impact housing costs depending on terms of negotiations and tariffs imposed.

 

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NAHB: Home Builder Confidence Rises in April

Posted in Market Outlook by Michigan Real Estate Expert on April 18th, 2019

NAHB: Home Builder Confidence Rises in AprilHome builder confidence increased in April to an index reading of 63, which was one point higher than for March and the highest reading in six months. Analysts said that April’s reading revealed more about housing market conditions in the past six months than it was an indicator of future market conditions.

November’s builder confidence reading was the lowest since housing markets tanked in 2008, Builder confidence recovered over the past few months despite headwinds including higher materials costs and shortages of labor and buildable lots.

Home Builder Confidence Holds Steady Despite Headwinds

NAHB Housing Market Index readings over 50 indicate that most home builders are confident about housing market conditions. While April’s reading was comfortably above the benchmark, the average reading so far in 2019 is 61 as compared to 2018’s annual average reading of 67.

Component readings of the Housing Market Index were mixed in April. Builder confidence in current housing market conditions rose one point to 69; confidence in housing market conditions over the next six months dropped one point to 71 and the reading for builder confidence in buyer traffic rose three points to an index reading of 47. Readings for builder confidence in buyer traffic seldom exceeds 50.

Market Conditions Expected to Improve, but Obstacles Persist

Improving weather conditions and the peak home-buying season should boost builder confidence and housing market conditions, but rapidly rising home prices and affordability concerns could dampen housing markets and builder enthusiasm. Analysts report that no major changes are expected to mortgage rates in 2019. If this holds true, potential homebuyers are likely to take advantage of lower rates to buy homes. Analysts also said that initial impact of new tax laws has faded; more home buyers are expected to enter the market.

Market conditions depend on buyers and sellers; their motivations, resources and ability to “stay put” impact individual home sales. Buyers who depend on financing their home purchases are competing with increasing numbers of cash buyers; the National Association of Realtors ® traditionally reported about 10 percent of home sales were cash transactions, in recent years cash sales have increased to approximately 20 percent of home sales.

Homeowners are more likely to accept cash offers rather than accepting offers from buyers who must qualify for mortgages under a lengthy and precise approval process. Trends indicate that more homeowners are choosing to stay in their homes; this and exclusionary zoning laws in some areas are reducing the number of homes available.

 

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NAHB: Housing Market Index Flat in March

Posted in Real Estate by Michigan Real Estate Expert on March 20th, 2019

NAHB Housing Market Index Flat in MarchBuilder sentiment held steady in March as headwinds in housing markets affected homebuilder confidence, but National Association of Home Builders Chairman Greg Ugalde said that builders were looking forward to a “solid spring home-buying season.” Builder sentiment mirrored February’s index reading of 62; analysts expected an uptick to 63.

Any Housing Market Index reading over 50 indicates that more builders than fewer have a positive outlook on housing market conditions. The average reading for 2018 was 67, which indicated that builders were less confident current market conditions for new homes than in 2018.

HMI Component Readings Mixed in March

Three sub-readings used to calculate the monthly Housing Market Index reading showed builder confidence in current market conditions rose two points to 68; Builder confidence in market conditions over the next six months rose three points to 71 and homebuilder confidence in buyer traffic dipped four points to 44. Readings for buyer traffic seldom exceed the benchmark reading of 50.

The National Association of Home Builders said in a statement that housing markets are “stabilizing,” but did not say that housing markets were growing. Economists and housing market analysts rely on the Housing Market Index for clues about future housing production. Demand for new homes has been strong for years, but headwinds including tariffs on building materials and labor shortages continued to impact construction rates. More new homes on the market could ease pent-up demand for homes, but rapidly rising home prices are making home ownership less feasible for first-time and moderate-income home-buyers.

Imbalance Between New Homes Built and Consumer Needs

Analysts called out a problematic trend in meeting demands for new homes. Price points are frequently beyond affordable for most buyers, and new housing developments often trend toward larger homes with higher prices. Analysts said that from 2010 to 2017, the average size of new homes increased by 300 square feet while household size decreased over the same period. Lower mortgage rates benefit homebuyers concerned over affordable house payments, but strict mortgage qualification requirements limit the number of potential home buyers that can qualify for mortgage amounts needed to buy homes.

If you are in the market for a new home or interested in selling your current property, be sure to contact your trusted real estate professional.

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NAHB: Home Builder Confidence Grows After Lowest Level in 3 Years

Posted in Real Estate by Michigan Real Estate Expert on January 17th, 2019

NAHB Home Builder Confidence Grows After Lowest Level in 3 YearsAfter two months of declining builder confidence, the National Association of Home Builders Housing Market Index gained two points in January with a reading of 58. Component readings of the HMI were also higher with builder confidence in current market conditions rose two points to an index reading of 63. Builder confidence in housing market conditions over the next six months rose three points to 64.

The index for buyer traffic in new housing developments rose one point to 44. While index readings above 50 indicate positive market conditions, the index reading for buyer traffic is typically lower than 50.

Lower Mortgage Rates Compel Home Buyers to Act

Falling mortgage rates contributed to the uptick in home builder confidence, but affordability continued to impact first-time and moderate-income home buyers. Robert Dietz, NAHB chief economist, said: “Builders need to continue to manage rising construction costs to keep home prices affordable, particularly for young buyers at the entry level of the market.”

Analysts suggested that builders could consider offering deeper discounts and incentives to buyers to increase sales of new homes. Homes not sold during November and December added to current inventories of new homes available, which provides home buyers with more choices and less competition for homes.

Home Builders Expect More Buyer Traffic

Lennar Corporation, a major home builder said that increased buyer traffic indicated that 2019 home sales would increase and that improving economic conditions were expected to improve housing market conditions and home sales in 2019.

Builders expect to face continued headwinds in 2019; affordability tops the list, but relatively low inventories of homes in some areas dampen buyer enthusiasm. Single-family housing starts are also expected to be lower than the long-term yearly average. As economic conditions improve for would-be home buyers, a slim supply of homes and high home prices present obstacles to buyers.

Your trusted real estate agent is one of your best partners in your next home buying or selling transaction. Be sure to contact them to discuss market conditions in your area.

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NAHB: Home Builder Confidence Rises in May

Posted in Mortgage Rates by Michigan Real Estate Expert on May 17th, 2017

The National Association of Homebuilders reported a two-point increase in builder confidence in May. The NAHB Housing Market Index reading increased from 68 in April to 70, which was the second-highest reading since the economic recovery started. May’s reading exceeded analyst expectations of a flat reading for May. Builder confidence rose as demand for homes continued to rise; this factor overrode builder obstacles including higher prices for lots and ongoing labor shortages. A new tariff on lumber was also expected to dampen builder confidence.

Component Readings Suggest Strong Builder Confidence in Current and Future Housing Markets

The monthly Housing Market Index is comprised of three components. Builder confidence in current housing market conditions rose two points to 76; the reading for builder confidence in market conditions for the next six months rose four points to 79. Builder confidence in buyer traffic in new homes dropped one point to 51, but overall, builder confidence in market conditions is strong as any NAHB Housing Market Index reading over 50 is considered positive.

Fewer Mortgage Applications: Home Buyers Dont Share Builder Optimism

According to the Mortgage Bankers Association, mortgage applications dropped 4.30 percent year-over-year in April, and were 20 percent lower than in March. While the Mortgage Bankers Association doesn’t report seasonal adjustments, fewer applications for purchase mortgages on new homes illustrated ongoing affordability challenges faced by first-time and moderate income home buyers.

High demand for available homes puts mortgage-dependent home buyers at a disadvantage when cash offers are in play. Rapid escalation of home prices creates difficulty for first-time and moderate income buyers as down payment and mortgage qualification requirements sideline buyers.

Increasing home builder sentiment has not corresponded to the number of new homes being built, which industry analysts consider the main solution to high demand for homes driven by short inventories of homes. First-time buyers are important to housing markets as they enable “move-up” buyers to sell their homes and buy new or larger homes.

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NAHB: Home Builder Confidence Highest in 12 Years

Posted in Home Building Tips by Michigan Real Estate Expert on March 16th, 2017

According to the National Association of Home Builders Housing Market Index for March, builder confidence in market conditions reached its highest level in 12 years and was six points higher than February’s index reading of 65.

Housing market index readings are based on three components. Builder confidence in current market conditions for new single family homes rose seven points to 78; builder confidence in market conditions for the next six months increased five points to an index reading of 78. Most surprising was the reading for buyer traffic in new housing developments, which eight points to 54 in March. Buyer traffic readings typically don’t exceed the benchmark reading of 50, which indicates neutral builder sentiment. Builder confidence in buyer traffic for March surpassed 50 only twice since the housing bubble era.

Housing Market Index Readings Expected to Moderate in Coming Months

Robert Dietz, Chief Economist for NAHB, said that Housing Market Index readings will probably be more moderate in coming months as builders continue to face obstacles. Builders cited rising costs for materials and ongoing shortages of labor and lots. On the upside, builders surveyed said that a less regulatory environment contributed to higher confidence readings.

While home builder confidence is higher, the connection between confidence and building more homes isn’t matched by housing starts. Builders also said that rising mortgage rates are a barrier to buying new homes. The Federal Reserve’s Federal Open Market Committee raised the target federal funds rate to 0.75 to 1.00 percent on Wednesday; federal rate hikes typically influence private lenders to raise consumer rates including mortgage rates.

In a post-meeting statement, Fed officials said that the federal funds rate remains accommodative and will continue to sustain economic growth and the Fed’s goal for a long-run inflation rate of 2.00 percent. The Fed cited its dual mandate of achieving maximum employment and price stabilization as supporting its decision to raise rates, but stated that actual decisions to raise the federal funds rate are based on close readings and information about global and domestic economic developments; future decisions could be impacted by emerging economic factors.

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New Home Construction Seen As A Possible Solution To Pent Up Demand For Homes

Posted in Housing Analysis by Michigan Real Estate Expert on February 17th, 2016

New Home Construction Seen As A Possible Solution To Pent Up Demand For HomesBuilder confidence in markets for new homes fell three points in February to a reading of 58. January’s reading was revised upward to 61. Builders have repeatedly expressed concerns shortages of labor and lots for development, but continue to express confidence in future sales conditions.

David Crowe, National Association of Home Builder’s (NAHB) chief economist, said that builders are watching slowing economic trends, but also cited low mortgage rates, improving labor markets and pent-up demand for homes as factors for strong U.S. housing markets. The NAHB notes that any reading over 50 indicates that more builders were confident than those who were not.

HMI Components Readings

The three readings used to calculate the NAHB Housing Market Index (HMI) were also lower. The reading for current sales conditions fell by three points to 65; the reading for sales conditions over the next six months fell by one point to 65. Home builders were less confident in buyer traffic in new home developments; the February reading dropped by five points to 39. Although the buyer traffic gauge was its lowest in nine months, it hasn’t topped the benchmark of 50 since the peak of the housing bubble ten years ago.

Three month rolling averages for the four regions charted by NAHB also dropped. The Northeastern region was 2 points lower at 47; the Southern region also lost two points for a reading of 59. The Midwestern region lost one point for a reading of 57 and the Western region dropped three points for a reading of 72.

Building New Homes Seen as Solution to Pent Up Demand for Homes

Analysts responded to February’s HMI with mixed views. Some analysts said that buyer demand for homes would override concerns over building costs. This view makes sense in view of pent-up demand driving up home prices. At some point, affordability and buyers ability to qualify for mortgage loans are likely slow the rate of increasing home prices.

Less pent-up demand could also help first-time and moderate income buyers compete for homes as buyer demand eases. First-time and moderate income buyers are essential in driving home sales, as their purchases of pre-owned homes allow homeowners to buy larger homes or relocate.

Reports on Housing Starts and Building Permits scheduled this week will shed additional light on home builder activity.

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