Builder Confidence at 6 Year High

Confidence among U.S. homebuilders rose this month to its highest level in six years and many expect the housing recovery will strengthen in the next six months.

The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday increased to 40 in September. That’s up from 37 in August and the highest reading since June 2006, just before the housing bubble burst.

Any reading below 50 indicates negative sentiment about the housing market. The index hasn’t reached that level since April 2006, the peak of the housing boom.

Still, a measure of builders’ outlook for sales in the next six months rose to 51. That’s up from 43 in August and also the highest level since June 2006.

Builders also reported seeing the best sales level since July 2006, while turnout by prospective buyers returned to levels not seen since May 2006.

The survey, which is based on responses from 445 builders, has been trending higher since October. After a dismal 2011, homebuilders have seen their fortunes begin to turn around this year as the housing market recovery has steadily gained momentum.

Sales of newly built homes are running ahead of last year, when they sank to the lowest level in a half-century. Sales of previously occupied homes also are up from a year ago. And home prices are increasing more consistently, in part because the supply of homes has shrunk and foreclosures have eased.

Mortgage rates remain near record lows, beckoning potential buyers with good credit.

The positive trends have helped bolster optimism that the U.S. housing market may finally be on track for a sustainable recovery.

Even so, the housing market isn’t expected to recover fully until job growth improves and the unemployment rate, now at 8.1 percent, declines further.

In addition, a weakening economy in Europe and the possibility that U.S. lawmakers may fail to reach a budget deal in coming weeks could damage the U.S. economy. And that could keep would-be homebuyers on the sidelines.

Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the NAHB’s data.

Plansource, Inc. is a design firm and a portal of information for homebuilders and the homebuilding industry.  www.plansonline.com

Reprinted from NAHB and AP

 

Townhouse Construction on Upward Trend

Construction of attached single-family housing (townhouses) is increasing both in terms of total units and market share.

Per second quarter 2012 Census data of Starts and Completions by Purpose and Design, total townhouse construction increased significantly in recent months, matching a post-Great Recession high set during the homebuyer tax credit period. However, market share remains lower than in past years.

Quarterly starts of townhouses rose from 11,000 starts in the second quarter of 2011 to 17,000 starts during the same period of 2012. Using a one-year moving average, the market share of townhouses now stands at 11% of all single-family starts, up from 10.4% for the first quarter of 2012.

 

The peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when it reached 14.6%. This peak was set after a fairly consistent increase in share since the early 1990s.

Despite the drop in market share during the Great Recession, I expect the share for townhouse construction to increase in coming years. The prospects for the townhouses are positive given larger numbers of homebuyers looking for medium density environments and urban villages that offer walkable environments and other amenities.

Plansource, Inc., a Tampa, FL based residential design firm,  www.plansonline.com, is a portal of information for homebuilders and the homebuilding industry.

Reprinted from Builder Magazine