Home builder confidence in the market for newly built, single-family homes rose for the fourth consecutive month, reaching an eight-year high, the National Association of Home Builders reported recently.
The NAHB Housing Market Index rose by three points to 59 for August, the highest level since 2005; any number over 50 indicates that more builders view conditions as good than poor. The component gauging current sales conditions rose by three points to 62, while the component gauging sales expectations in the next six months rose by one point to 68 and the component gauging traffic of prospective buyers held unchanged at 45.
NAHB said all but one region saw a gain in its three-month moving average HMI score in August. The Midwest and West each posted six-point increases, to 60 and 57, respectively, while the South posted a four-point gain to 54 and the Northeast held unchanged at 39.
“Builders are seeing more motivated buyers walk through their doors than they have in quite some time,” says NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. “What’s more, firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market.”
The report came out ahead of this morning’s New Residential Construction report from HUD and the Census Bureau, which measures July new housing starts, completions and permits.
Also recently, DataQuick, San Diego, released its July Property Intelligence Report, showing home prices increasing at an average of more than 13 percent over the past year.
The report said 25 of the 42 markets measured experienced home price increases in excess of 10 percent, with reporting counties ranging from an under 1 percent increase in Suffolk County, N.Y., to a more than 30 percent price increase in Sacramento County, Calif.
DataQuick Vice President of Analytics Gordon Crawford said the strong home price growth was driven by a decrease in both foreclosures and overall property availability, as total monthly home sales tapered from the previous reporting period. However, Crawford noted sharp home price increases amidst low sales volumes could be a cause of concern to overall recovery.
“We are seeing a direct correlation between home price appreciation and sales growth, as markets with the largest decrease in overall sales are those experiencing the most rapid increase in home prices,” Crawford says. “While economic drivers including job growth and low interest rates are contributing to increases in demand nationwide, prices in markets with tight supplies of available properties are skyrocketing. The main concern in this situation is that it is unclear if strong home price increases would be happening in the presence of more normal sales volumes.”
The report said home price growth was positive in all 42 reported counties over the past month and year, and positive in 41 of the 42 reported counties over the past quarter. Sales increased in 29 counties over the past month; in 37 counties over the past quarter; and in 28 counties over the past year. Foreclosures decreased in 31 counties over the past month; in 26 counties over the past quarter; and in 28 counties over the past year.
Not all housing news yesterday was positive; Fannie Mae, Washington, D.C., cautioned yesterday in a commentary that projected slowdowns in labor force growth could weaken future housing activity.
Fannie Mae Director of Strategic Planning Patrick Simmons says while forecasts suggest a “healthy rebound” in new housing production later this decade as housing markets return to normal, an anticipated slowdown in workforce expansion suggests more modest prospects for new housing demand and construction than witnessed historically.
“We project that labor force growth will slow substantially in coming years,” Simmons says. He noted even using optimistic assumptions about future labor force participation rates (the proportion of the population in a given age and sex group that is either employed or actively looking for work), Fannie Mae expects workforce growth between 2012 and 2025 will be well below the historical average
“The implications for housing are substantial,” Simmons says. “Given the positive correlation between housing production and labor force growth, the anticipated marked slowdown in workforce expansion implies weaker housing demand and homebuilding activity than observed in the past.”
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