Builders: market growing but challenges remain

Upward trends in recent months among a number of housing indicators point to a slow and steady growth in the nation’s housing market in 2013, but several challenges remain, according to the latest economic and housing forecast by David Crowe, chief economist for the National Association of Home Builders (NAHB).

“Consistent, positive reports on housing starts, permits, prices, new-home sales and builder confidence in recent months provide further confirmation that a gradual but steady housing recovery is underway across much of the nation,” said Crowe. “However, stubbornly tight lending standards for home buyers and builders, inaccurate appraisals and proposals by policymakers to tamper with the mortgage interest deduction could dampen future housing demand.”

Stating there is no consistent national trend, Crowe noted the housing recovery is local but spreading.

“We are transitioning from a very low demand level, where most people hold themselves out of the marketplace, to a case where supply will start being the problem,” he said. “As we begin to build more homes to address that supply, the new home stock will be a much more important element of the recovery.”

Setting the 2000-2002 period as a baseline benchmark for normal housing activity, Crowe said that owner-occupied remodeling has returned to previously normal levels.

“Multifamily production is also well on its way, back to 69 percent of normal,” he said. “It’s the single-family market that has the farthest to go, standing at only 40 percent of what is considered a typical market.”

Meanwhile, the number of improving housing markets across the nation continues to show considerable advancement. When the NAHB/First American Improving Markets Index (IMI) was launched in September of 2011, only 12 metropolitan areas out of 360 were on the list. As of December 2012, the list stands at more than 200 metro areas. The index is based on a six-month upswing in housing permits, employment and house prices.

“One reason we have seen such a significant jump in the IMI is because house prices are beginning to recover,” said Crowe. “House prices bottomed out early in 2011 and since early 2012 we’ve seen a 6 percent increase on a national basis.”

Another factor spurring the recovery is that household formations are on the rise. In the early part of the decade, the nation was generating 1.4 million new households each year. This collapsed to 500,000 annually during the housing downturn and currently new households are being formed at close to a 900,000 clip per annum.

“We’re not up to normal, but this is adding to demand for housing,” Crowe said.

As new households form at a growing rate, so too does builder confidence. The NAHB/Wells Fargo Housing Market Index, which measures builder confidence in the single-family housing market, has posted gains for eight consecutive months and now stands at a level of 47. This is very close to the critical midpoint of 50, where equal numbers of builders view the market as good or bad. The HMI has not been above 50 since April of 2006.

Single-family home starts are projected to climb to 534,000 units this year, up 23 percent from 2011. NAHB is forecasting that single-family new-home production will post a healthy 21 percent gain in 2013 to 647,000 units. Starts will continue their upward climb in 2014, posting a further 29 percent rise to 837,000 units.

Multifamily production is expected to rise 31 percent in 2012, reaching the 233,000 level, and posting a solid 16 percent gain in 2013 to 270,000 units. Multifamily starts are anticipated to rise an additional 9 percent in 2014 to 294,000 units.

Meanwhile, new single-family home sales are expected to rise from 307,000 last year to 367,000 this year, a 20 percent rise. Sales are anticipated to climb to 447,000 next year, up 22 percent from 2012 and jump to 607,000 in 2014, a 36 percent increase over 2013 levels.

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USGBC gets Google grant to promote health

The U.S. Green Building Council (USGBC) has received a $3 million grant from Google that it hopes will will catalyze the transformation of the building materials industry and accelerate the creation of healthier indoor environments.

“Healthy, non-toxic building materials are a critical component in green building,” said Rick Fedrizzi, president, CEO and founding chair of the USGBC. “Fostering awareness of the materials we put into our buildings is of paramount importance, since many materials can link to a host of environmental and health issues. Working with Google enables us to broaden our efforts in the materials industry as we prepare for the next version of the LEED green building program, LEED v4. This updated rating system will paint a more complete picture of materials and products, enabling project teams to make more informed decisions.”

“The idea for this project emerged from our own work at Google, where we’re committed to creating the healthiest work environments possible that help employees perform at their best,” said Anthony Ravitz, Google’s Green Team Lead. “USGBC has a deep background in spearheading research, developing a rating system spanning the globe and engaging with the many stakeholders in the building industry, making them the perfect partner to help spur real change on the healthy materials front.”

The grant will focus on three areas that will spur the creation of healthier indoor environments and encourage market transformation in the building materials industry: supporting research on building materials and health, developing new transparency tools and engaging stakeholders from across the industry.

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Improving housing markets list grows

The number of U.S. housing markets showing consistent improvement in three key measures of strength expanded by 22 in November to a total of 125, according to the National Association of Home Builders/First American Improving Markets Index (IMI), released today.  This marks a third consecutive monthly gain for the index, which now includes representatives from across 38 states as well as the District of Columbia.

The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Markets added to the list in November include such geographically diverse locations as San Diego, Calif.; Gainesville, Fla.; Omaha, Neb.; Louisville, Ky.; and Charlotte, N.C.

“Not only did 22 additional markets qualify for the improving list in November, but the geographic distribution of included metros expanded from 33 states to 38 (plus the District of Columbia), while 97 out of 103 markets retained their spots on the list from the previous month,” observed Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “This shows that a housing recovery is firmly taking root and helping generate needed jobs and economic growth across much of the country — though we know that this expansion could be even stronger were it not for ongoing challenges including overly tight lending conditions and difficult appraisals.”

“The solid increase in the number of improving housing markets this month illustrates the degree to which the housing recovery has gained momentum since we initiated the IMI last year,” noted NAHB Chief Economist David Crowe. “Compared to the 30 markets that made the list as of November 2011, we now have 125, which is about one-third of all the markets surveyed for this index.”

“This new high point for the Improving Markets Index provides the latest evidence that housing has turned a corner due to rising demand from consumers who are increasingly confident about the direction of local home values,” said Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, housing price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three measures for at least six consecutive months following those measures’ respective troughs before being included on the improving markets list.

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Builders accept entries for Green Awards

The National Association of Home Builders (NAHB) is accepting submissions for its 2013 NAHBGreen Awards. Each year, NAHB recognizes individuals, companies and organizations for excellence in residential green design and construction practices and for green building program and advocacy efforts.

This year, the award winners will be revealed to an even wider audience than in past years, with the awards being announced on Jan. 23 in conjunction with the 2013 International Builders’ Show in Las Vegas.

“The NAHBGreen Awards showcase the best and most innovative work in green,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “This is an excellent opportunity for industry professionals to be recognized for their hard work.”

The awards are open to both NAHB members and non-NAHB members. To be eligible for the Green Project of the Year categories, projects must have been started no earlier than January 2010 and substantially completed by December 2012.

Categories include: Project of the Year–Single Family, Project of the Year–Multifamily, Project of the Year–Remodel, Project of the Year–Site Development, and Advocate of the Year.

All homes and developments must be scored to the ICC-700 National Green Building Standard, to ensure fair comparisons for judging purposes. This can be done by using the online Green Scoring Tool.

All entries must be received by Oct. 18, 2012. Application fees are $250 for Project of the Year categories and $150 for the Advocate of the Year award.

For more information, or to apply, please visit the builders’ website.

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KBIS calls for speakers

The National Kitchen & Bath Association wants to hear from experts as potential presenters in the first-ever Voices from the Industry Conference Session Series, set to launch at KBIS 2013 in New Orleans.

The series will consist of 70 conference speakers that represent all industry segments and every level of professional. The NKBA is looking for industry-relevant topics to be presented by those experts to address the topics that are relevant to today’s kitchen and bath professional.

All applications are due no later than November 2, 2012. Selected applicants will be notified by the end of December 2012, and should be prepared to speak at the 2013 Kitchen and Bath Industry Show, April 19 -21 in New Orleans.

For complete details, such as conference policies, selection criteria, and content requirements, click here.

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Realtors: relax lending standards to boost economy

New survey findings, combined with an analysis of historic credit scores and loan performance, show home sales could be notably higher by returning to reasonably safe and sound lending standards, which also would create new jobs, according to the National Association of Realtors®.

Lawrence Yun, NAR chief economist, said there would be enormous benefits to the U.S. economy if mortgage lending conditions return to normal. “Sensible lending standards would permit 500,000 to 700,000 additional home sales in the coming year,” he said. “The economic activity created through these additional home sales would add 250,000 to 350,000 jobs in related trades and services almost immediately, and without a cost impact.”

A monthly survey of Realtors® shows widespread concern over unreasonably tight credit conditions for residential mortgages. Respondents indicate that tight conditions are continuing, lenders are taking too long in approving applications, and that the information lenders require from borrowers is excessive. Some respondents expressed frustration that lenders appear to be focusing only on loans to individuals with the highest credit scores.
Even though profits in the financial industry have climbed back strongly to pre-recession levels, lending standards still remain unreasonably tight.

Yun said all it takes is a willingness to recognize that market conditions have turned in the wake of an over-correction in home prices, with all of the price measures now showing sustained gains. “There is an unnecessarily high level of risk aversion among mortgage lenders and regulators, although many are sitting on large volumes of cash which could go a long way toward speeding our economic recovery. A loosening of the overly restrictive lending standards is very much in order,” he said.

Respondents to the NAR survey report that 53 percent of loans in August went to borrowers with credit scores above 740. In comparison, only 41 percent of loans backed by Fannie Mae had FICO scores above 740 during the 2001 to 2004 time period, while 43 percent of Freddie Mac-backed loans were above 740.

In 2011, about 75 percent of total loans purchased by Fannie Mae and Freddie Mac, which are now a smaller market share, had credit scores of 740 or above.

There is a similar pattern for FHA loans. The Office of the Comptroller of the Currency has defined a prime loan as having a FICO score of 660 and above. However, the average FICO score for denied applications on FHA loans was 669 in May of this year, well above the 656 average for loans actually originated in 2001.

Loan performance over the past decade shows the 12-month default rate averaged just under 0.4 percent of mortgages in 2002 and 2003, which is considered normal. Twelve-month default rates peaked in 2007 at 3.0 percent for Fannie Mae loans and 2.5 percent for Freddie Mac loans, clearly showing the devastating impact of risky mortgages.
Yun said home buyers in recent years have been highly successful. Since 2009, the 12-month default rates have been abnormally low. Fannie Mae default rates have averaged 0.2 percent while Freddie Mac’s averaged 0.1 percent, which are notable given higher unemployment in the time frame.

Under normal conditions, existing-home sales should be in the range of 5.0 to 5.5 million. “Sales this year are projected to rise 8 to 10 percent. Although welcoming, this still represents a sub-par performance of about 4.6 million sales,” Yun said. “These findings show we need to return to the sound underwriting standards that existed before the aberrations of the housing boom and bust cycle, and thoroughly re-examine current and impending regulatory rules that may cause excessively tight standards.”

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Housing builds momentum

Two numbers released this morning show the housing market heading in a better direction.

New housing construction rose 2.3% to a 750,000 annual pace from a revised 733,000 annual rate in July, the Commerce Department reported via Bloomberg. Construction of single-family houses rose 5.5% to 535,000, the fastest rise since April 2010. Single-family-home permits were up 0.2% to an annualized 512,000, the highest since March 2010. Part of that growth is due to historically low mortgage rates—the average 30-year fixed has leveled at 3.55%.

There’s more good news for owners of existing homes and the agents who trade them. Sales of previously owned houses jumped 7.8% to a 4.82 million annual rate, the most since May 2010, according to the National Association of Realtors. The median price of an existing home climbed 9.5 percent to $187,400 from $171,200 in August 2011, according to Bloomberg.

The trend has reached bellwether Southwest Florida, according to data in today’s Sarasota Herald-Tribune. For the first seven months of the year, Sarasota County issued permits for 620 new homes valued at $201 million, a jump of 55% over the same period last year.

All of that comes on the heels of yesterday’s news from the National Association of Home Builders that confidence among builders rose from 37 in August to 40 in September, as measured by the NAHB/Wells Fargo builder sentiment index. That’s the highest reading since June 2006.

“The pace of overall housing production has been edging gradually upward all year as consumers become more confident in their local housing markets, and the latest data are further evidence that the housing recovery is here to stay,” said NAHB Chief Economist David Crowe.

Aerial view of a housing subdivision in Arizona

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Builder confidence gains momentum in September

Builder confidence in the market for newly built, single-family homes rose for a fifth consecutive month in September to a level of 40 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This latest three-point gain brings the index to its highest reading since June of 2006.

“This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Florida.

“Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years,” noted NAHB Chief Economist David Crowe. “However, against the improving demand for new homes, concerns are now rising about the lack of building lots in certain markets and the rising cost of building materials. Given the fragile nature of the housing and economic recovery, these are significant red flags.”

Derived from a monthly survey that NAHB has been conducting for the past 25 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

All three HMI components posted gains in September. While the component gauging current sales conditions increased four points to 42, the component gauging sales prospects in the next six months rose eight points to 51 and the component measuring traffic of prospective buyers edged up one point to 31.

Builder confidence also rose across every region of the country in September. Looking at the three-month moving average for each region, the Midwest and West each registered five-point gains, to 40 and 43, respectively, while the South posted a four-point gain to 36 and the Northeast posted a two-point gain to 30.

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Improving housing markets list improves

The number of improving housing markets across the country rose to 99 in September, according to the National Association of Home Builders/First American Improving Markets Index (IMI), released today. This is up from 80 metros that were listed as improving in August and includes representatives from 33 states as well as the District of Columbia.

The index identifies metropolitan areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months. Markets added to the list in September include such geographically diverse locations as Tucson, Ariz.; Jacksonville, Fla.; Springfield, Ill.; Greenville, N.C.; and Bend, Ore.

“The number of improving housing markets grew by 19 in September as 68 metros retained their spots, 31 new metros were added and just 12 dropped off the list,” noted Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “This solid growth is an encouraging sign that housing continues on a slow but steady recovery path that is gradually advancing from one local market to the next.”

“More metros across the country are experiencing a sustained uptick in house prices, employment and new building activity as rising consumer confidence in local market conditions pushes more people to consider a new-home purchase,” observed NAHB Chief Economist David Crowe. “That said, overly tight lending conditions for builders and buyers continue to slow this process considerably.”

“Combined with recent positive reports on builder confidence, housing starts and new-home sales, the September IMI adds to the growing consensus that housing is finally moving in the right direction, which in turn is spurring more potential buyers to get off the fence,” added Kurt Pfotenhauer, vice chairman at First American Title Insurance Company.

The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, house price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see improvement in all three measures for at least six months following those measures’ respective troughs before being included on the improving markets list.

A complete list of all 99 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in September, is available at the home builders’ site.

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NAHB opens registration for 2013 International Builders Show

The National Association of Home Builders (NAHB) has opened online registration for the 2013 International Builders’ Show (IBS), billed as the largest annual light construction trade show in the world. To be held Jan. 22-24 in Las Vegas, the show features an enhanced education program and deals for members and non-members who register before the end of September, NAHB said in a release.

Among the discounts and incentives offered during September:

  • Free spouse registration for NAHB members and non-members. Beginning Oct. 1, the rate will go to $20.
  • A free Expo Pass for all NAHB members.
  • A $50 Expo Pass for non-members ($100 from Oct. 1 through Dec. 3) or $100 off the early full registration fee of $450.

More than 800 exhibitors representing all facets of the building industry are expected at the show, which offers networking and educational opportunities on a variety of topics such as the housing and economic outlook, consumer preferences and trends, green building, sales strategies and universal design.

For 2013, NAHB says it has enhanced its education program based on attendee feedback. New features include more advanced level courses, new daily master sessions that were designed as in-depth, full-day intensive programs to dig deeper into specific industry topics, such as technology touch points in the consumer life cycle, and daily keynote speaker sessions. The overall number of courses has been streamlined to 100 sessions.

Among the many draws of IBS is The New American Home 2013, a one-of-a-kind green show home that is being built in a nearby neighborhood and will be open for attendees to tour throughout the show. The home incorporates builders’ best practices in energy efficiency, indoor-air quality, safety, convenience and aesthetics, NAHB said.

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