Tag Archives: Home Builder Confidence

Builder Confidence Report

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Housing Market Index Shows Builders Continue To Have A Positive Outlook

For Immediate Release

Atlanta, GA

As you may have heard, SunTrust will layoff 800 people in their mortgage division as they adjust to the ebbs and flows of the industry.  This may obviously impact service levels and will certainly impact morale. But I’m still here competing with them and here for you.

However one piece of good news remains. The National Association of Homebuilders/Housing Market Index dropped two points to 55 from September’s revised reading of 57. Builder concerns over labor costs and availability and economic uncertainty related to the federal government shutdown were noted as factors contributing to the lower reading for October.

Key Points Noted In Octobers HMI included:

  • Builder confidence remains above 50, which indicates that more builders have a positive outlook on housing market conditions than those with negative sentiment.
  • The October HMI cites pent-up buyer demand in markets throughout the US as a positive influence on October’s reading.
  • A spike in mortgage rates lowered builder confidence, but the Federal Reserve’s decision not to change its quantitative easing program eased fears about rapidly rising mortgage rates.
  • The federal government shutdown, along with builder and consumer concerns about the national debt ceiling also contributed to a dip in homebuilder confidence.
  • National HMI results are comprised of homebuilder ratings of three factors. Homebuilders rated current market conditions at 58, which was two points lower than September’s reading.
  • Builder outlook for market conditions over the next six months fell by two points to October’s reading of 62. The lowest reading came in at 44 for buyer foot traffic. This reading was also two points lower than the September reading.

Regional HMI Results Mixed

Readings for regional homebuilder confidence varied for October:

Northeast: The reading for October fell three points to 38. Concerns over the government shutdown were felt here.

Midwest: Up by one point for October at 64, the Midwestern region posted the only gain for October.

South: The October reading for the Southern region was unchanged at 56.

West: The West lost one point on its HMI for October. Lack of available homes and developed land for building likely contributed to this reading.

NAHB Projects Single And MultiFamily Housing Starts

The NAHB estimated that starts for single and multi-family housing units for September will fall between 875,000 and 900,000 on a seasonally-adjusted annual basis. Single-family housing starts are expected to range between 620,000 and 630,000 for September.

NAHB produced this estimate in lieu of the US Department of Commerce report on housing starts that was delayed due to the federal government shutdown. NAHB also reported continued volatility in multi-family housing construction.   What this all mean is the builders are not looking to slow down in putting more inventory into the system.

A continuation of the government shutdown would have almost certainly create ongoing consequences for housing and mortgage lending.  Now that its over, its time to get back to business.

– Joel Miller

Home Builder Confidence Has Far Outpaced Actual Home Construction

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Home Builder Confidence Has Far Outpaced Actual Home ConstructionHome builder confidence was unchanged for September according to the National Association of Home Builders/Wells Fargo Housing Market Index HMI released Tuesday. After four months of rising confidence, September’s HMI reading came in at 58, which was not far from expectations of a reading of 59.

August’s reading of 58 was revised from 59. Readings over 50 indicate that more builders view housing market conditions as being positive than negative.

Housing Market Index Readings Rise

Components of September’s HMI include readings for home builder views of current market conditions, which maintained August’s reading of 62. The September reading for buyer foot-traffic rose to 47 from 46 in August.

Builder expectations for housing market conditions within the next six months slipped from a reading of 48 in August to 45 for September. Lower expectations for market conditions within the next six months likely take into consideration the coming winter months when weather conditions slow construction and home sales.

Home builder confidence has far outpaced actual home construction on a year-over-year basis; the HMI increased by 45 percent since September 2012. Investors expect a seasonally-adjusted reading of 921,000 housing starts for August on Wednesday. This figure represents a year-over-year increase of 23 percent for housing starts.

Rising mortgage rates affected September’s reading. In addition, David Crowe, chief economist for NAHB also cited consumer credit restrictions, a low inventory of lots available for development and rising labor costs as factors contributing to a plateau in builder confidence.

Fed Decision On Quantitative Easing Tapering Expected

Wednesday’s highly anticipated statement from the Federal Reserve’s Federal Open Market Committee (FOMC) has created a “wait-and-see” mood among home buyers, home builders and investors. The Fed is expected to announce whether or not it will begin tapering its $85 billion monthly purchases of securities.

This program, which is called quantitative easing, was designed to keep long-term interest rates low. Speculation on the Fed’s upcoming decision about reducing its securities purchases has caused mortgage rates to rise since May.

Economists are expecting the Fed to announce moderate tapering of QE to $75 billion in monthly purchases. Reducing or not reducing the fed’s securities purchases has become an elephant in the room to those concerned with mortgage rates; in recent months, the Fed has hinted at its intention to taper QE purchases before year-end.

If the Fed reduces its securities purchases, the demand for securities (bonds) is expected to fall, along with bond prices. When bond prices fall, mortgage rates typically rise. The good news is that once the Fed announces a decision on QE, the guesswork will be done for a while.