Builders Continue Optimism

The NAHB/Wells Fargo Housing Market Index rose 6 points to 57, the highest since November 2005 and up 16 points in three months, the largest 3 month positive move since the recovery of 1991. All three subcomponents rose to highs not seen since 2005 or early 2006. Expectations for the next 6 months rose 7 points to 67; current sales rose 5 points to 60 and traffic rose 5 points to 45.

Similarly, all four regions’ three-month moving average increased; Northeast up 4 points to 40, Midwest up 8 points to 54, South up 5 points to 50 and West up 3 points to 51. The broad improvement in all components and regions is further evidence of the breadth of the recovery. The NAHB/First American Improving Markets index has contained over 70% of all markets for 5 consecutive months.

Builders have experienced a continued rise in customer interest and willingness to buy. The low inventory of existing homes has also helped to boost demand for new homes and competition from foreclosures has diminished. Some softening in the severe rise in material costs early this year has helped builders compete. Some slight improvement in access to credit and the extremely conservative appraisals have also improved builders ability to build and sell.

Head winds remain, especially finding lots to build on and construction labor to meet the rising demand. NAHB expects housing construction to continue to rise at a modest pace for the remainder of 2013 with some pick up in the rate of building in 2014 as the economy and labor markets move toward trend.

Starts and Housing Market Index

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0 replies

  1. Yes, 2013 looks good for builders. The housing demand and steady increase in housing prices are definitely a good sign. However, you have to take into consideration that the recent increase in mortgage rates will slow down the demand and it will unlikely be as big as it was in the beginning of the year.

  2. I’d have to agree that optimism is high these days, although overall we’re still being very cautious and keeping our eyes open. The economy is in a strange place and looking pretty robust, but one is closing their eyes if they trust it too much. I mean, look at the few cities that are starting to declare bankruptcy; that won’t be good for anyone. Still, it’s nice seeing many areas of the country where housing looked like it had crashed and burn returning to a semblance of normalcy.


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