Talking about good news from the National Association of Home Builders…
We got some good news for the economy and real estate recently when the National Association of Home Builders reported that its Housing Market Index rose three points to a reading of 59 for August. This is the highest level in almost 8 years!
I would say we can thank the improved housing markets and resulting higher demand for this increase in confidence among builders. Plus builders have to feel good since there is an inventory shortage of homes for sale in many areas.
How Do Buyers Feel?
It is great that the builders are feeling more confident but that means nothing if buyers don’t have the confidence to actually buy a home. And we have to be concerned about the possibility of changes to the Fed’s QE program. Some are worried that the high builders’ confidence level could trigger the Fed to announce the tapering of its $85 billion monthly purchase of Treasury securities and mortgage-backed securities.
Home builders are just like you and me because they are also worried about rising mortgage rates. Higher mortgage rates will mean that fewer buyers may be able to qualify for mortgages. Or that the buyers will have to lower their price range.
Plus we keep hearing rumblings in Washington about dismantling the GSEs which will make getting a mortgage harder and cost buyers even more money.
Multi-Family Driving Housing
Last week, the US Department of Commerce reported 896,000 housing starts on a seasonally adjusted annual basis. This was below expectations but was above the June 2013 level of housing starts.
Despite the lack of single-family home inventory in some areas, it is still multi-family that is making the biggest improvements. While housing starts rose in July, this was mainly due to the apartment sector rather than single- family homes. Demand for rentals and a shortage of available single family homes was seen by economists as contributing to increasing multi-family housing construction.
Starts for residential buildings with five or more units rose by 20.9% year-over-year while construction of one-to-four family residential buildings fell by 2.2%.
The low number of new single-family homes being built is not good news for the inventory problem. Unless you are selling a home in an area where the lack of homes gives you an advantage.
The Take Away:
All this sounds negative so it is hard to understand exactly why the home builders are feeling more confident. Unless it was the good news that the number of building permits issued in July increased. The number of building permits issued increased 2.70% in July 2013.
If home builders are feeling more confident, it makes me wonder why we are not seeing even more improvements in other areas of the economy. Sometimes it is hard to really figure out what is going on with all the spin in the mainstream media. Sadly this is also true in real estate since some sources will always try to put a positive spin on everything.
But as you can tell by the very name of this website, I try to be more realistic and honest. The fact is mortgage rates and home prices do make buying a home very attractive today. I suggest you consider whether or not buying a home makes sense for you while market conditions are still favorable.