Builder confidence in the 55+ housing market showed continued improvement in the third quarter of 2013 compared to the same period a year ago, according to latest NAHB 55+ Housing Market Index.
All segments of the market – single-family homes, condominiums and multifamily rentals – registered strong increases. The single-family index increased 14 points to a level of 50, which is the highest third-quarter number since the inception of the index in 2008 and the eighth consecutive quarter of year-over-year improvements.
These figures stand in contrast to other elements of the housing market that are experiencing some weakness due to softening economic conditions during the second half of 2013. These conditions were exacerbated by the economic impacts and uncertainty caused by the partial federal government shutdown.
Despite this, economic growth during the third quarter came in better than expected. According to the Bureau of Economic Analysis, real GDP grew at a seasonally adjusted annual rate of 2.8%, modestly higher than the 2.5% growth in the second quarter. Nonetheless, economists are expecting a weaker fourth quarter, which will include small negative effects from the shutdown.
The Bureau of Labor Statistics employment data for October held mixed news. The payroll report indicating growth of 204,000 jobs was better than expected (furloughed government employees were treated as employed in the data as they received pay). However, the separate household survey showed a tick up in the unemployment rate from 7.2% to 7.3%, and a more ominous result in that 720,000 people left the labor force. The report suggests that discouraged workers remain a real challenge for the labor market.
Job creation is a key driver for housing demand, and the lackluster performance of the employment market since the end of the Great Recession remains a notable unresolved economic challenge. This stands in contrast to other areas of the economy that have improved. For example, the Mortgage Bankers Association reported that for the third quarter of 2013, the past-due rate on outstanding mortgages fell 55 basis points to a seasonally adjusted rate of 6.5% – the lower rate since the second quarter of 2008.
Improving finance conditions are also reflected in the most recent Federal Reserve Senior Loan Officer Opinion Survey, which showed growing expectations for mortgage lending over the next 12 months. Consumer credit has also been expanding, as household balance sheets have recovered significantly in recent years.
Census data for the third quarter suggest that the national homeownership rate was relatively unchanged during the third quarter of 2013, coming in at 65.1%. This reading is below the 20-year historical average of 69.4% and 4.3 percentage points below the peak of 69.4% set during 2004. The analysis also found that the vacancy for rental properties (8.3%) and owner-occupied housing (1.9%) are both well below levels from two years ago. Nonetheless, the rental vacancy rate did tick up 10 basis points from the second quarter.
In analysis news, NAHB economists used survey data of builders to examine the use of sales incentives. The survey found that 36% of builders are not offering any special incentives as of October 2013. This compares to only 14% who were not using such incentive during December 2008 but is similar to the 42% who offered no incentives during September 2005.
Additional survey data shed light on the makeup of NAHB builder members for 2012. The data reveal that NAHB’s builder members work at companies with, on average, 11.5 employees and report that their company built, on average, 30 units in 2012.
On Veteran’s day, NAHB economists reviewed housing data related to those who served in our nation’s armed services. The 2012 American Community Survey indicates that 77.5% of veterans are homeowners. And these individual constitute a significant portion of the new home market. In the second quarter of 2013, loans for new homes sold backed by the U.S. Department of Veterans Affairs (VA loans) made up 7% of the entire market – a lower bound estimate of the veteran share of the new home market.