Builder confidence in the market spikes in July

In another sign pointing to housing beginning its slow road to recovery, builder confidence improves for the third consecutive month.

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, builder confidence in the market for newly built, single-family homes rose six points to 57, marking the index’s third consecutive monthly gain and its strongest reading since January of 2006.

“Today’s report is particularly encouraging in that it shows improvement in builder confidence across every region as well as solid gains in current sales conditions, traffic of prospective buyers and sales expectations for the next six months,” said NAHB Chairman Rick Judson. He cautioned that “This positive momentum could be disrupted by threats on the policy side, particularly with regard to the mortgage interest deduction and federal support for the housing finance system.”

“Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten,” noted NAHB Chief Economist David Crowe. “Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften.”


All HMI components posted gains

The NAHB reports that all three HMI components posted gains in July. The component gauging current sales conditions rose five points to 60, its highest level since early 2006. Meanwhile, the component gauging sales expectations in the next six months gained seven points to 67 and the component gauging traffic of prospective buyers rose five points to 45 – marking the strongest readings for each since late 2005.

All four regions also posted gains in their HMI scores’ three-month moving averages. The Northeast showed a four-point gain to 40 while the Midwest reported an eight-point gain to 54, the South posted a five-point gain to 50 and the West measured a three-point gain to 51.

Some analysts indicate that housing has recovered or is nearly recovered, but we will continue to assert that the long road to recovery has begun, like an auto accident victim who has been taken off of life support and is now starting rehab. Most indicators are improving, but there are endless ways a recovery can be hindered, so we exercise caution in calling this a recovery quite yet, as we have a long way to go until we are at pre-recession levels for most housing indicators.

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Construction spending hits four year high, led by housing

According to the U.S. Census Bureau and U.S. Department of Commerce, after a 0.1 percent dip in April, residential construction spending rose 1.2 percent in May, reaching its highest level since October 2008. In a positive sign for the overall economy, public and private construction spending combined hit a four year high, highly fueled by public construction projects. The housing andeconomic recovery are underway, but remain below pre-recession levels, indicating a long road ahead.

The Commerce Department reports that construction spending improved 0.5 percent overall to $874.9 billion after a revised 0.1 percent gain in April. The weak spot remains commercial real estate, as growth in spending on non-housing structures actually declined in the first quarter which has not happened in nearly two years. Spending on private non-residential buildings dipped 1.4 percent in May, following three months of gains.

Spending on public construction projects jumped 1.8 percent, the largest increase in almost a year, a much needed increase in light of spending on these types of projects falling in April and March.

The report indicates that outlays on federal government projects improved 0.6 percent, and while not a substantial change, it is the second consecutive month of improvement, after a shaky first quarter. State and local projects improved 1.9 percent, representing a six month high.

New home construction sector in trouble? Nope.

Because the housing bubble was missed by most, the nation remains in the grips of The-Sky-Is-Falling-itis, flinching at any economic index that could threaten a hearty recovery. In that vein, many are already pointing to rising interest rates as a potential threat to the housing recovery, but just last week, as interest rates increased, so did applications for new mortgages.

Combined with the continued tight inventory levels and Realtors in many parts of the nation begging homeowners to sell to give their buyers something to buy, interest rates are not what will cause the sky to fall, and construction spending and builder optimism, like most housing indices, will continue to slowly improve, even amidst hiccups.

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Original Article:

Home construction levels soar to four year high

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framing Home construction levels soar to four year high

According to the U.S. Commerce Department, spending on construction rose 1.2 percent overall in February compared to January, after a 2.1 percent drop from December. Private residential construction rose 2.2 percent in the month, and while the gain in February does not make up for the dip in January, the silver lining in the Department’s news is that home construction rose to levels not seen in over four years.

Construction spending has been a bouncing ball in recent months, but February’s numbers represent a 7.9 percent increase in spending compared to February 2012. Private construction of non-residential units rose 0.4 percent for the month and public construction grew 0.9 percent despite persistent government budget problems.

The way forward for housing

Economists universally project increases in construction spending and housing starts in 2013 as the housing crisis finally ends and most of the nation’s healing process begins. Although this month’s news is primarily positive, analysts note that spending is still far below healthy levels and has a long way to go before returning to it’s pre-recession normal.

Meanwhile, home values in March experienced their second largest gain since 2006, according to Zillow.

“Rising home values will free many more homeowners from negative equity, allowing some of them to list their homes for sale which, in turn, will ease supply constraints,” said Zillow’s Chief Economist, Dr. Stan Humphries. “Burgeoning new construction will also help bring more supply into the marketplace. As more supply comes on line, home value appreciation rates will moderate and stabilize, marking the final transition from a recovering market to a healthy and sustainable market.”

Regardless of buyer and seller behavior, however, politics plays a key role in exactly how quickly housing recovers. Right now, there is a heated battle on The Hill with the Federal Housing Finance Agency again being called to resign for his refusal to forgive debts, so his position as the literal head of the housing market, even above Obama, will dictate which path the housing recovery will take.

Home buyer preferences show affinity for newer homes

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two story house Home buyer preferences show affinity for newer homes

NAR Profile of home buyers’ preferences

According to the National Association of Realtors® (NAR) 2013 Profile of Buyers’ Home Feature Preferences, geography and demographics had the strongest impact on home buyer preferences between 2010 and 2012. During that period, the average home purchased was 1,860 square feet and built in 1996 and typically featured three bedrooms and two bathrooms, and just over half of the homes purchased were on a single level.

“Deciding where to live comes with a lot of options, but buyers quickly realize that some features are more important than others when it comes to choosing the right house for them,” said NAR President Gary Thomas. “Buyers need to have a clear idea of what features are important to them and know where they are willing to compromise; in this respect, Realtors® can bring buyers home. Realtors visit hundreds of homes with buyers each year, and have a unique understanding of what buyers value in their local markets.”

What rooms were most important

When it came to rooms that buyers want in a home, 55 percent of buyers thought it was very important to have a living room, although NAR reports that buyers in the Northeast placed more importance on a home with a dining room. Buyers aged 55+ prioritized a bedroom on the main level of the house while home buyers aged 35 to 54 placed more importance on a laundry room, while those with children placed more importance on a family room.

Of the 63 percent of buyers who did not purchase a home with a laundry room, they tell NAR they’d be willing to pay an average of $1,590 more for a home with this room, while the 44 percent of buyers who did not purchase a home with a den/study/home office/library would be willing to pay $1,920 more for a home with this room.

Home buyers willing to pay more for favored features

NAR asked respondents to rank 33 home features, and central air conditioning was the most important to the most buyers, followed by a walk-in closet in the master bedroom, being cable/Internet ready, and an en-suite master bathroom. As to what they actually purchased, of those who considered central A/C and cable/Internet readiness very or somewhat important, 94 percent purchased a home with these features.

Of those who did not purchase a home with central A/C, they would be willing to pay $2,520 more for a home with it, and 69 percent of buyers who didn’t get new kitchen appliances would be willing to pay $1,840 more for a home with them.

A walk-in closet in the master bedroom was the third most common feature on which buyers would spend more. Sixty percent of buyers who did not purchase a home with a walk-in closet would be willing to pay $1,350 more for a home with this feature.

Garages, trees, wood floors, new kitchens

NAR reports that Southern buyers prioritized central air conditioning, and likely because of the available inventory, tended to buy newer homes (less than five years old) and larger homes, averaging at 2,000 square feet with more emphasis on wooded lots with trees than other regions. Northeastern residents purchased larger homes as well, averaging 1,850 square feet, and that region values hardwood floors more than any other region.

Even though 78 percent of buyers purchased a home with a agarage, this feature was more popular with new-home buyers, Midwesterners, and suburbanites. Single men wanted finished basements, a feature most popular in the Midwest and Northeast. Both single men and married couples placed higher importance on new kitchen appliances.

Where the big bucks come in

Fully 32 percent of home buyers said they would be willing to pay a median of $5,420 more for a home on the waterfront, while 40 percent would be willilng to pay $5,020 more for a home under five years old.

One in three would be willing to pay a median of $3,200 more for a home with a basement, while one in five would be willing to pay $2,920 more for a home with an in-law suite.

Can’t get no satisfaction

NAR Vice President of Research Paul Bishop. “Most satisfied homeowners still said they would like more or larger closets and storage space. In addition, nearly half of recent buyers would prefer a larger kitchen, and two out of five would prefer a larger home overall.”

Homeowners felt strongly enough about changing their home that within three months of a home purchase, 53 percent of buyers undertook a home improvement project, spending an average of $4,550. Kitchen remodeling was the most common, followed by the kitchen, then bathrooms. The most common improvements were lighting and appliance replacement.

Housing jobs boosting national economic recovery

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construction worker Housing jobs boosting national economic recovery

Housing jobs contributing to the economy

It was long said that 2013 would be the year that construction jobs would actually add to the American economy and help kickstart it back up, but according to Trulia, it’s not just construction employment that is contributing, but a plethora of housing jobs, despite a 2.1 percent drop in construction spending in January .

The real estate media company said that “During the housing recovery, residential construction employment is up 125,000 (trough to current), while employment in related industries – like building-materials manufacturing, home-improvement stores, and mortgage brokers – is up an additional 184,000 jobs.”

Additionally, they cite that residential construction jobs rose 3.1 percent year-over-year, including general contractors, specialty contractors, and spec builders. This number is more than double the national employment growth rate, which is 1.5 percent.

Total jobs in construction plus related industries in manufacturing, trade, finance, and real estate grew by 2.7 percent year-over-year, yet Trulia’s Chief Economist, Dr. Kolko says housing-related employment is far below its peak. Residential construction jobs are still 39 percent below their peak during the bubble, and overall housing-related jobs are down 28 percent from their peak.

Housing jobs are more than just construction

“The housing recovery is also creating jobs outside of the construction sector,” said Dr. Kolko, “including the manufacturing firms that make lumber and concrete; stores that sell building materials and construction supplies; mortgage and other housing-related financial firms; and real estate agents, brokers, and other real-estate-related businesses. In all of these housing-related industries, employment is growing faster than for the U.S. economy overall.”

The challenge for the housing sector remains tight housing inventory levels, and trade groups continue to assert that builders are still struggling with obtaining financing under overly-tight lending conditions. Economists state that these two could ease this year, which means that it is foreseeable that housing jobs could continue to outpace the national employment growth rate and contribute to the national GDP.

Market Update: Home Sales Are Up, but Inventory Is Still an Issue

Housing Analysis, real estate, house prices, home value, realtor, agents, buyers, brokers

Housing Analysis

Sales of previously owned homes rose in nearly every region of the country in January according to an industry report released Thursday. Meanwhile, the supply of homes for sale continued to drop, pushing up property values for the 11th consecutive month of year-over-year gains.

Total existing-home sales—completed purchases that include single-family homes, condos, townhomes, and co-ops—increased 0.4 percent in January to an annualized rate of 4.92 million, according to the National Association of Realtors. That’s more than 9 percent ahead of the sales pace recorded in January 2012, and the second highest rate of sales since November 2009, when a federal homebuyer tax credit was set to expire.

Experts credit heightened buyer interest and a tightening supply of homes for sale for the burgeoning seller’s market materializing across the country, with the most acute conditions happening the West.

Total housing inventory at the end of January 2013 fell almost 5 percent to 1.74 million—a 4.2-month supply at the current sales pace—the lowest supply of homes since December 1999 when there were 1.71 million homes on the market.

Many would-be sellers continue to hold off from putting their homes on the market because they have underwater mortgages, experts say. While almost 2 million Americans were freed from negative equity in 2012, according to a recent report from real estate website Zillow, nearly 14 million still remain in trouble on their mortgages.

“Negative equity is still very high, and millions of homeowners have a very long way to go to get back above water, even with current robust levels of home value appreciation in most areas,” Zillow Chief Economist Stan Humphries said in a release. “As a result, negative equity will remain a major factor in the market for the foreseeable future.”

Foreclosures, the glut of which was once a source of great anxiety in the housing market, have consistently made up a smaller portion of sales in recent months, further constraining a once-plentiful source of home supply for the crucial first-time homebuyer set.

But even with inventory the tightest it’s been in years, experts aren’t expecting any relief anytime soon. “We expect a seasonal rise of inventory this spring, but it may be insufficient to avoid more frequent incidences of multiple bidding and faster-than-normal price growth,” NAR Chief Economist Lawrence Yun said in a statement, adding that increased buyer traffic has effectively transformed much of the country into a seller’s market.

“Buyer traffic is continuing to pick up, while seller traffic is holding steady,” he said. “Buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory to improve sales more strongly.”

90 Percent of U.S. Cities Post Home Price Gains

A dwindling supply of lower-priced homes and foreclosures continued to fuel the upward trend in home prices, an industry report showed Monday, with property values posting the strongest year-over-year increase in seven years.

Home prices rose in nearly 90 percent of the nation’s largest metropolitan areas in the fourth quarter of 2012 according to the National Association of Realtors. The national median existing single-family home price rose 10 percent to $178,900, the strongest year-over-year price increase since the fourth quarter of 2005 when the median price jumped 13.6 percent.

Economists credited an improving job market and rock-bottom low interest rates for the home price increases as heightened demand put more pressure on a seemingly ever-tightening supply of homes.

“Home sales are being fueled by a pent-up demand and job creation, along with still favorable affordability conditions and rents rising at faster rates,” NAR Chief Economist Lawrence Yun said in a statement. “Our population has been growing faster than overall housing stock, so supply and demand dynamics are very much at play.”

While “favorable affordability conditions” still exist according to NAR, a shrinking supply of lower-priced homes and foreclosures continued to account for some of the upward price pressure. Distressed homes—foreclosures and short sales—generally sell at deep discounts and depress overall home prices. Those types of sales only accounted for 23 percent of fourth quarter sales, down from 30 percent a year ago.

The best-performing metro area was Phoenix, where property values increased 34 percent from a year earlier. Close behind were Detroit and San Francisco, where prices rose 31 percent and 28 percent respectively. On the flipside, Kingston, N.Y., saw the biggest price declines, with the median selling price falling almost 8 percent. Kankakee, Ill., and Erie, Penn., followed, posting 7 percent and 6.1 percent drops respectively


Rick Roque

Rick Roque

Any questions or feedback on this article, email Rick Roque, Managing Editor of The NicheReport Real Estate Edition, at  or call him at 408.914.5895. 

New home construction surged 37% in 2012

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new home construction New home construction surged 37% in 2012

New home construction surges

According to the U.S. Census Bureau, housing starts in December rose 12.1 percent compared to November, and an astounding 37 percent compared to December 2011, marking improvements in one of the hardest hit sectors in the American economy, led by single-family housing units which rose 8.1 percent for the month. New home construction picked up in December as the Eastern seaboard began picking up the pieces and rebuilding after Superstorm Sandy destroyed homes in a historic natural disaster, seeing a 19 percent increase in housing starts for the month.

Housing starts did much better in December than most economists had forecast, which is the reason that in recent months, builder confidence levels have not slid backwards, as more builders feel optimistic about sales conditions.

Housing completions rose 1.6 percent in December compared to November, and ended the year at 13.2 percent higher than December 2011. Single-family housing completions were a full 3.7 percent higher in December than November.

New home construction permits up 29 percent in one year

Another hopeful sign for the sector is an increase of 0.3 percent in building permit authorizations in December when compared to November, and a healthy 29 percent increase compared to December 2011. Building permit volume is a forward looking indicator closely watched as a predictor of upcoming starts and completions, and with these numbers, a positive spring is in store for the new home construction industry.

At AGBeat, we have long asserted that the housing recovery will be a slow march, not an overnight spike, and while this news is all positive, it must be stated that getting back to pre-recession levels will most certainly not happen overnight, particularly when economic uncertainty persists in light of the political theater in D.C.

The National Association of Home Builders’ Chief Economist, Dr. David Crowe noted in a recent statement that the sector is not out of the woods yet. “Persistently tight mortgage credit conditions, difficulties in obtaining accurate appraisals and the ongoing stalemate in Washington over critical economic concerns continue to impede the housing recovery.”