Welcome to Our New Economist Joshua Miller

August 7, 2013

This week Dr. Joshua Miller joined the staff of the Economics and Housing Policy Group here at NAHB. Among other research responsibilities, Josh will be working with NAHB’s local economic impact model, which estimates job creation and economic benefits that flow from home building.

You can read the biographies of Josh and the other economics staff who contribute to Eye on Housing at the following link:


NAHB/First American Improving Markets Index Up Again

June 6, 2013

The number of markets that continue to show improvement increased to 263 or 73 percent of all markets measured. The June NAHB/First American Improving Markets Index counts the number of metropolitan areas that have seen at least six months of improvement in single-family housing permits, house prices and employment. The index is up 5 from May which had dropped 15 markets from April, the first significant drop since the same time last year.
The net change of five was the result of 29 additions and 24 dropped. As the index and list of markets satisfying the criteria reaches three-quarters of all markets, the places that just made the list with small increases in one of the three indicators can relapse and cause the market to fall off the list just as similar small improvements add markets to the list. Of the 24 markets that fell off the list, 19 had a fall back in house prices. In the preceding month, those 19 averaged 3.8 percent price improvement while all the markets on the May list had an average 7 percent increase at that point.
Over the history of the index 335 metropolitan areas have been on the list, or 93 percent of all eligible. The list is likely to continue seeing nearly equal numbers added and dropped as the economic and housing revival has spread to most markets but some marginal improvements get reversed.

Cummulative IMI appearances

Remodelers Report Labor Shortages

May 28, 2013

A recent NAHB survey reveals that professional remodelers have begun to see some shortages of directly employed labor as well as of subcontractors.  The findings come from the Labor Availability Report EXTERNAL for the first quarter of 2013, which asked remodelers about shortages for 12 different trades:

  •   Rough Carpenters
  •   Finished Carpenters
  •   Electricians
  •   Excavators
  •   Framing crews
  •   Roofers
  •   Plumbers
  •   Bricklayers/masons
  •   Painters
  •   Weatherization workers
  •   HVAC
  •   Building maintenance managers

In terms of direct labor, results show that at least 35 percent of remodelers report shortages of finished carpenters, rough carpenters, and framing crews, while 27 percent report shortages of bricklayers/masons.  When it comes to subcontractors, over 35 percent also report problems finding finished carpenters, rough carpenters, and framing crew subs, while 20 percent to 30 percent report sub shortages of bricklayers, painters, and roofers.

A similar survey was sent to single-family builders in March 2013.  Comparing both sets of results shows that, in general, builders are more likely to be experiencing labor shortages than remodelers, particularly for framing crews (both directly employed and subs)[1] and electricians.  The only trade for which remodelers are more likely than builders to report shortages is finished carpenters.

Another way to compare results between remodelers and builders is by calculating the average share of each group reporting any shortage across all 12 trades.  This exercise shows that 23.2 percent of remodelers report shortages of directly employed labor, compared to 27.8 percent among builders.  Similarly, 24.5 percent of remodelers report a shortage of subcontractors, compared to 30.7 percent among builders.

Labor Availability

It’s important, however, not to overstate the results.  While some remodelers are seeing shortages of some types of labor, still more than half of them report no shortages for any of the types of labor listed.  Yet given the soft start of the current housing recovery, it is concerning to see any labor shortages this early in the game.

[1] Builders and remodelers do not always use the same type of labor, of course.  Remodelers not working on additions may not need framing crews, for example, which could account for the lower shortages among remodelers.

Existing Sales and Prices Increase

May 22, 2013

Existing home sales increased 0.6% in April from an upwardly revised level in March, and were up 9.7% from the same period a year ago. The National Association of Realtors (NAR) reported that April 2013 total existing home sales were at a seasonally adjusted rate of 4.97 million units combined for single-family homes, townhomes, condominiums and co-ops. That compares to 4.94 million units in March, and 4.53 million units during the same period a year ago. All regions were up from a year ago, ranging from 14.9% in the South to 4.3% in the West. For the current month, the only decrease was 3.4% in the Midwest.

Existing Home Sales April 2013The April 2013 level of single-family existing sales increased 1.2% from March to a seasonally adjusted 4.38 million sales, and was up 9.0 % from the same month a year ago. Seasonally adjusted condominium and co-op sales decreased 3.3% from March to a seasonally adjusted 590,000 units in April, but were up 15.7% from the same period a year ago.

The total housing inventory at the end of April increased 11.9% from the previous month to 2.16 million existing homes for sale. At the current sales rate, the April 2013 inventory represents a 5.2-month supply compared to a 4.7-month supply in March, and a 6.6-month supply of homes a year ago. The April inventory of condominiums/co-ops increased to a 4.9-month supply from a 4.8-month supply in March, but was down from a 7.5-month supply a year ago. NAR reported that listed inventory is 13.6% below the same period a year ago, and that listed inventory is most restricted in lower price ranges. NAR also reported that the April median time on market for all homes was 46 days, down from 62 days in March and 83 days during the same month a year ago.

Some 18% of April 2013 sales were distressed, defined as foreclosures and short sales sold at deep discounts. This level was down from 21% in March and 28% during the same month a year ago.

The median sales price for existing homes of all types in April 2013 was $192,800, up from $183,900 in March, and up 11.0% from $173,700 during the same period a year ago. NAR reported that April represented the fourteenth consecutive monthly year-over-year price increase. The median condominium/co-op price increased from $180,000 in March to $189,500 in April, and was up 11.3% from $170,200 a year ago.

In April 2013, all cash sales were 32% of transactions compared to 30% in March, and 29% in April 2012. Investors accounted for 19% of April 2013 home sales, unchanged from March and down slightly from 20 % in April 2013. First-time buyers accounted for 29% of April 2013 sales, down from 30% in March and down from 35% during the same period a year ago.

NAR reported that buyer traffic is up 31% from a year ago, but sales are only up about 10%, despite noting that April existing sales reached the highest level since November 2009 when the market was responding to the home buyer tax credit. Potential buyers continue to face higher prices. Those same increasing prices will induce more households to place their homes on the market, and will eventually dampen the enthusiasm of investors and cash buyers.

The modest increase in April existing home sales was consistent with the 1.5% increase in the March 2013 Pending Home Sales Index.

Government Issues New Definitions for Metropolitan Statistical Areas

April 22, 2013

The Office of Management and Budget (OMB) recently issued new delineations  for the nation’s Metropolitan Statistical Areas (MSAs) and Metropolitan Divisions, based on data from the 2010 Census.  Major changes to MSA definitions take place every 10 years, when population counts and commuting patterns are revised following the decennial census.  In 2013, 23 brand new areas were designated as MSAs: 10 in the South region, 5 in the Northeast, 5 in the West, and 3 in the Midwest.  Pennsylvania added 4 news MSAs, the most of any state (Figure 1).


Besides creating brand new metro areas, the OMB guidelines also changed the name of many MSAs (and a few Divisions).   The name of each MSA consists of up to three “principal cities” within the metro area, ordered according to population totals.  The new MSA names may be the result of merging MSAs, or principal cities or counties being added or removed from the previous delineation.  One such name change, for example, took place in Baltimore, MD, where the MSA name changed from Baltimore-Towson, MD to Baltimore-Columbia-Towson, MD.  This indicates that Columbia now has the necessary population and employment totals to be named a principal city of this metropolitan area.  An interesting name change took place in Hawaii, where the state’s largest MSA changed from Honolulu, HI to Urban Honolulu, HI.  Figure 2 shows additional examples of metro areas whose names changed in 2013.

Changing MSA

The new OMB guidelines also resulted in a few areas losing their MSA status (Figure 3).  In some cases, the counties affected were absorbed by another MSA; while in other cases, the counties are simply not metropolitan counties any longer.  Poughkeepsie-Newburgh-Middletown, NY is an example of the former.  Its two counties were absorbed into the divisions that make up the New York City MSA.  Danville, VA, meanwhile, is an example of the latter case – its two counties are no longer in any metropolitan statistical area.

No Longer MSAFor builders or property owners who make use of government housing programs, it’s important to note that the metropolitan-based system of income limits and Fair Market Rents will probably not be affected by these definition changes for at least one more year.

How Big a Home Do Home Buyers Want?

March 19, 2013

In the world of home buyer preferences, there is one question that pops up more often than any other:  how much space are home buyers looking for?  NAHB’s study What Home Buyers Really Want answers this important question, based on responses from more than 3,600 home buyers, sampled to represent all home buyers in the country[1].

Among all home buyers combined as one group, the median home size desired is 2,226 square feet.  However, a closer look at the data broken down by various buyer characteristics shows there are significant differences in how big a home different types of buyers really want.

Age, for example, plays an important role, with the amount of space desired dropping steadily as the age of the buyer increases.  Among those younger than 35, the size desired is 2,494 square feet, compared to 2,065 square feet among those 65 or older (Figure 1).


Race and ethnicity also affect home size preferences, as minority buyers tend to want more space than White, non-Hispanic buyers.  While the latter report wanting about 2,197 square feet, Asian buyers desire to have 2,280 square feet, Hispanic buyers want 2,347 square feet, and African-American buyers want 2,664 square feet (Figure 2).


Estimates from the U.S. Census Bureau indicate that the median size of all single-family homes started in 2012 was 2,309 square feet (the average was 2,521 square feet).  After peaking in 2006, the median home size fell in 2007, 2008, and 2009, but then reversed course and has now risen for three consecutive years.  The reason for this reversal, to a large extent, has to do with buyers’ ability to access credit.  In recent years, the less financially-solid buyers have been shut out of the new home market by overly stringent mortgage lending requirements.  As a result, homes built in the last few years reflect the preferences of those who are still able to obtain credit and have large down payments – typically wealthier buyers who can afford larger homes.

[1] Survey participants are representative of all home buyers in the country, across geographic, age, income, and race groups.

Housing Affordability Increases at Year-End 2012

February 22, 2013

Exceptionally low interest rates helped ensure a slight gain in nationwide housing affordability amid relatively stable house prices in the final quarter of 2012. The NAHB/Wells Fargo Housing Opportunity Index (HOI) rose to 74.9 percent, up from 74.1 percent in the third quarter.

The HOI is the share of new and existing homes sold in a quarter affordable to a family earning the median income.  An HOI of 74.9 means that 74.9 percent of all homes sold in the last three months of 2012 were affordable to families earning the national median income ($65,000).


Ogden-Clearfield, Utah held its position as the nation’s most affordable major housing market for a second consecutive quarter at the end of 2012. There, 93.7 percent of all new and existing homes sold were affordable to families earning the area’s median household income of $71,500.

Among smaller housing markets, Fairbanks, Alaska, remained at the top of the affordability chart with nearly all homes sold in the quarter — 99.6 percent – affordable to those earning the median income of $92,900.

After 18 consecutive quarters at the bottom of the affordability chart, New York-White Plains-Wayne, N.Y.-N.J. switched places with San Francisco-San Mateo-Redwood City, Calif., which had been the second-to-least affordable market. Just 28.4 percent of homes sold in San Francisco during the fourth quarter were affordable to families earning that area’s median income of $103,000.

The least affordable small housing market in the fourth quarter was Ocean City, N.J., where just 43.5 percent of homes sold were within reach of families earning the median income of $71,100.

Securitizations of Household Debt Accounted For Bond Market Growth

February 20, 2013

U.S. bonds outstanding have grown from $2.5 trillion in 1980 to $36.9 trillion in 2011. Over this period mortgage-related and asset-backed securities accounted for much of this increase. According to Chart 1, the amount of mortgage-related and asset-backed securities outstanding grew from $0.1 trillion in 1980 to $10.2 trillion by 2011. The growth in mortgage-related and asset-backed securities exceeded the increase in other U.S. bonds. As a result, their share of the total U.S. bond market expanded during this period. Chart 2 shows that mortgage-related and asset-backed securities represented 4.4% of U.S. bonds outstanding in 1980. By 2007, they accounted for 34.5% of outstanding U.S. bonds.  Since 2007, the share of the U.S. bond market that is attributable to mortgage-related and asset-backed securities has declined 6.9 percentage points to 27.6%. While the amount of mortgage-related and asset-backed securities outstanding continued to grow between 2007 and 2011, the amount of U.S. Treasury securities and corporate debt outstanding has risen even faster. However, despite a drop in its share between 2007 and 2011, the value of outstanding asset-backed and mortgage-related securities exceeds that of every other category.



Between 1980 and 2007, mortgage-related and asset-backed securities accounted for the majority of growth in the U.S. bond market. Mortgage-related securities include both mortgage-backed securities (MBS) and collateralized mortgage obligations (CMOs). Like MBS, CMOs pay investors from cash flow generated by its underlying collateral. Unlike MBS, one CMO can offer a menu of payment options for investors with different risk-return appetites. Chart 3 shows that the value of mortgage-related securities outstanding as a share of the total U.S. bond market grew from 4.4% in 1980 to 21.9% in 1993. By 2007, its share of outstanding U.S. bonds had increased to 25.3%. Since 2007, the share of outstanding U.S. bonds represented by mortgage-related securities has fallen 2.7 percentage points to 22.6%. Meanwhile, the share of asset-backed securities outstanding, which was 0.2% of total U.S. bonds outstanding in 1986, grew to 9.2% by 2007. However, since 2007, its share has decreased 4.2 percentage points to 4.9%.

Household debt products underlie the majority of outstanding mortgage-related and asset-backed securities. Residential mortgage-related securities include both agency MBS and CMOs as well as both private label Residential MBS (RMBS) and CMOs. It excludes private label Commercial MBS (CMBS). Consumer financial asset-backed securities are linked to credit cards, auto loans, home equity loans, and student loans. According to Chart 3, 17.4 of the 17.5 percentage point expansion in mortgage-related securities between 1980 and 1993 were attributable to residential mortgage-related securities. Although its share of mortgage-related securities fell slightly, it still accounted for 91.6% of mortgage-related securities outstanding in 2011. At the same time, the outstanding amount of asset-backed securities that were based on consumer financial products accounted for 5.5 percentage points of the 9.2 percentage point growth between 1987 and 2007. By 2011, asset-backed securities based on consumer financial products represented 56.8% of all asset-backed securities outstanding. Meanwhile, collateralized debt obligations (CDOs) accounted for 37.4% in 2011.


As Chart 4 illustrates, home equity linked debt and CDOs were the primary drivers behind the growth in asset-backed securitizations between 1985 and 2011. The Securities Industry and Financial Markets Association notes that the inclusion of home equity in asset-backed security totals instead of mortgage-related totals is based on the market’s classification. Similar to other asset-backed securities, CDOs pay investors from cash flow generated by its underlying collateral. Unlike other asset-backed securities, the underlying collateral of a CDO can be composed of various assets and even other derivatives. However, according to Figure 2 of research from the Federal Reserve Bank of Philadelphia, home equity accounted for nearly 70.0% of the CDO balance in 2007 and other, non-commercial mortgage backed securities accounted for roughly another 10.0%.

In 1985, asset-backed securities were solely linked to automobile loans and equipment loans. However, by 1999, home equity-backed securities accounted for the largest portion of outstanding asset-backed securities at 34.8%. CDOs meanwhile, accounted for 14.3%. By 2006, home equity-backed securities outstanding peaked at 39.8% and the combination of home equity-backed securities and CDOs represented 69.3% of the market. The combined share of home equity-backed securities and CDOs climbed to 69.9% in 2007 as the decline in home equity-backed securities was offset by continued growth in CDOs. Meanwhile, structured securities backed by automobile loans fell from 93.6% in 1986 to 6.1% in 2007 while those linked to credit card loans, which rose to 55.6% of outstanding asset-backed securities in 1990, represented 10.9% of this market by 2007. Since 2006, the share of outstanding asset-backed securities linked to home equity has declined by 12.3 percentage points to 27.5%. Over this six-year period, the outstanding amount of other asset-backed securities, especially CDOs also fell, but the outstanding amount linked to home equity declined more quickly. However, at its 2012 level, securitizations of home equity-backed securities and CDOs, the two largest categories of outstanding asset-backed securities, account for 63.3% of outstanding asset-backed securities while at 13.7%, student loans are a distant third.


New Home Sales Up in November

December 27, 2012

Sales of newly-built homes rose 4.4% to a seasonally-adjusted annual rate of 377,000, the highest monthly level since the end of the home buyer tax credit in April 2010. On a regional basis, the largest increase in absolute and percentage terms (21.1%) was the South with a 38,000 monthly increase from an unusually low October figure of 180,000. The Northeast region also saw an increase of 3,000 sales for a 12.5% increase. The Midwest declined 12.5% to 49,000 sales but the October figure was unusually high at 56,000. The West saw a 17.8% fall to 83,000, the lowest monthly figure since March 2012.
The inventory of unsold homes increased slightly to 149,000 but the higher sales pace helped reduce the months’ of supply to 4.7 months. The November level is tied with May, July, August and September of 2012 as the lowest levels since the 2005 boom. The number of completed homes for sale and ready to move in remains extremely low at 41,000 for the entire US.
The median sales price rose 14.9% and average prices rose 20% that are likely a combined effect of higher priced homes sold and a reflection in the cost of building materials and lot price increases. The share of homes sold for more than one-half million dollars doubled from 5% in October to 10% in November. Lumber and sheet products like plywood and OSB have also been rising steadily for most of 2012. As developed lots become scarce, the underlying cost of bringing more lots into the market has also increased and will continue to put upward pressure on new home prices.
The future of new home sales continues to look positive as mortgage rates remain very low, home prices stabilize and pent-up demand continues to emerge. NAHB expects new home sales to increase another 22% in 2013 to an annual rate of 456,000 assuming the Congress and Administration do agree on a tax and spending compromise. If not, housing will suffer in 2013.

Months’ Supply of New Homes

Builder Confidence Continues Rise in November

November 19, 2012

The NAHB/Wells Fargo Housing Market Index rose another five points to a 6-year high of 46 in November. The component measuring traffic remained unchanged at 35; the component measuring current sales rose 8 points to 49 while the component measuring future demand rose two points to 53. The expectation component has been above the tipping point of 50 for three consecutive months (above 50 being the point where more builders see a better market ahead than see a poorer market).
Regional three-month moving average index levels also rose two to four points, Northeast to 31, Midwest to 45, South to 43 and West to 47. The Northeast index is the only region that has hesitated in the last several months, remaining in a narrow band of 29 to 31 for six months. Single-family permits have behaved similarly, running between 40,000 and 45,000 since March 2012. The FHFA price index changes for the two divisions within the Northeast region have been among the lowest recently. The Northeast is the only region with a higher unemployment rate now than one year ago and in two months ago.
Builders report continued difficulties with buyers qualifying for mortgages and low appraisals below the contract price. But the source of the increasing optimism centers on improved buyers’ attitudes. Builders report buyers who are able to obtain a mortgage are ready to buy after postponing their purchase for years. Low inventory or the wrong inventory in the existing home market has also benefited home builders. Over the past year, new home sales have increased 27% while existing home sales have increase 11% as the available and appropriate inventory of existing homes dries up.
The new home inventory is also very low but builders are able to respond to orders, at least as the market begins to recover. Lot inventory is low and in some markets will soon become a limiting factor to continued expansion. Material prices, particularly lumber and wood products, have risen and in a few markets construction labor and subcontractor availability has begun to worry builders. A continued home building expansion will require attracting the resources, materials, labor and land, from their current usage and that will likely mean a rise in home prices.


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