Two reports that contribute to the picture of the housing industry
were released on Monday. After news from the subprime
mortgage market, the quarterly delinquency report, and the accompanying
reaction of the stock market the two most recent pieces of information were
pretty much non-events and the stock market reacted enthusiastically.
The National Association of Home Builders and Wells Fargo released their Housing
Market Index (HMI) which measures the state of builder confidence in
the construction market along several parameters; their perceptions of the current
state of the market in terms of sales; their measure of buyer traffic at present,
and their predictions for the market over the next six months. The HMI has been
hammered in recent months, dropping to 39 (anything less than 50 on the index
as a whole or any of its three component parts is considered negative) on revised
figures for February which was originally given a score of 40. This month the
overall index dropped another three points to 36. This is not terrific news,
but is still up from the low of 30 the HMI hit in September.
The three component indexes also declined in March after going up in February.
Current single-family home sales and sales expectations over the next three
months each declined three points to 37 and 50 compared to February's
revised numbers and the index measuring current buyer traffic was down one point
NAHB Chief Economist David Seiders said, "Builders are uncertain about the
consequences of tightening mortgage lending standards for their
home sales down the line, and some are already seeing effects of the subprime
shakeout on current sales activity. The fundamentals of today's housing market
still are relatively strong, including a favorable interest-rate structure,
solid growth in employment and household income, lower energy prices and improving
affordability in much of the single-family market - due in part to price cuts
and non-price sales incentives offered by builders. NAHB continues to forecast
modest improvements in home sales during the balance of 2007, although the problems
in the mortgage market increase the degree of uncertainty surrounding our baseline
(i.e., most probable) forecast."
The second report, the official one coming out of the U.S. Census Department
in conjunction with the Department of Housing and Urban Development, is the
February count of new home construction including permits issued and homes started.
The two were a mixed bag. Permits were issued in February for
privately-owned housing units at a rate that was 2.5 percent below the revised
rate for January; the annualized estimate is now 1,532,000 and 28.6 percent
lower than the number of permits estimated in February 2006. However, this number
is on a par with permits issued since September, 2006 after the figures for
the previous six months took a precipitous drive from 2,1470,000 to 1,727. In
other words, its not 2005 but it's not a disaster either.
Housing starts totaled 1,525,000 units, up 9 percent from
revised January figures but still 28.5 percent below figures for February 2006.
Single family housing starts fared even better, rising 10.3 percent above January
The figures from both studies indicate that the housing market is shaky but
not plummeting to the bottom. We will, hopefully, see nothing worse than a few
more months of data that goes up and down.