The Census Bureau and the U.S. Department of Housing and Urban Development
have released October figures on building permits and housing starts
and the news is not good.
Housing permits were issued at an annual rate of 1,535,000 in October which
is 6.3 percent behind the pace in September and down 28.0 percent
from the October 2005 level. Permits for single family construction fared slightly
better short term, declining only 3.8 percent since last month but were off
31.7 percent since last year.
Housing starts dropped 14.6 percent from the September rate to 1,486,000 units
but this was a 27.4 percent below the rate one year ago. Single family starts
declined 15.9 percent since September and were off nearly 32 percent from the
estimate in October 2005.
The industry is suffering disproportionately in the western region
of the U.S. where single family starts were down 9.7 percent since last month
and 41.8 percent year-over-year.
But while builders appear to be pulling back in actual building activity, their
confidence seems to be rebounding. The National Association
of Home Builders/Wells Fargo Housing Market Index (HMI) gained two points from
the October survey and is now at 33.
The HMI is constructed from responses builders make to questions about their
perceptions of current single-family home sales, their expectations for sales
over the next six months and their perceptions of current buyer traffic. Responses
are then used to construct an index for each category and an overall index.
Any score over 50 is an indication that more builders view conditions as good
Perceptions of current sales moved one point higher to 33 while the component
gauging expectations for the next six months was up four points to 46 and perceptions
of buyer traffic improved to 26 from 23.
All three components began to recover last month after eight straight months
of declining builder confidence.
NAHB President David Pressly said, "More and more builders are seeing
light at the end of the tunnel. Our members are telling us that the market is
steadying after a significant downward correction. On the demand
side, we look for sales to stabilize and gradually move up in the coming months.
With builders continuing to offer significant sales incentives and affordability
on the rise, home shoppers have greater opportunities today than they have had
for several years, making this an opportune time to buy."
A second NAHB survey released this week indicates that Americans have not lost
confidence in housing as a worthy investment.
A survey conducted by RT Strategies between October 26 and October 29 showed
that 81 percent of homeowners believe that the homes will increase
in value over the next five years compared to 13 percent who thought values
would decline. 69 percent of those surveyed listed their home as their most
valuable investment. The runner-up was 401(k) and other retirement accounts,
far behind at 11 percent.
The survey was conducted with 2,000 households, including more than 1,750 registered
voters. The significance of the latter figure is unclear.
"The poll clearly debunks the more sensational media reports speculating
on the demise of the housing market," said NAHB President Pressly, "It
is interesting to note that other polls conducted by major news organizations
have come up with similar results, indicating that despite the current housing
market downturn Americans resoundingly believe that buying a home is the best
investment they can ever make."