NAHB’s Snapshot of Economy: October Home Sales and Consumer Confidence Stats…..

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Snapshot of the Economy from the National Association of Home Builders in Washington, DC
Contact any NAHB staffer in their Economics Dept for more detailled information…TB

National Association of Home Builders
December 1, 2014
David Crowe
NAHB Chief Economist
Eye on the Economy


Sales Flat But Confidence Rising

Sales of new single-family homes were up 0.7% over a downwardly revised pace for September, according to the Census and HUD October report. The seasonally adjusted annual sales rate came in at 458,000 for the month, only 1.8% higher than the October 2013 sales rate. Inventory of new single-family homes for sale rose to 212,000, but this remains only a 5.6 months’ supply at the current sales rate.
Inventories have been rising along with builder confidence. The November NAHB/Wells Fargo Housing Market Index of single-family builder sentiment rose four points to 58 due to promising long-run trends. The November reading marks the fifth consecutive month for the HMI to come in above the tipping point of 50. All three components of the index (current sales, expected sales and buyer traffic) posted gains in November.
Future sales should be supported by improving hiring in the economy and continued low mortgage interest rates. For instance, according to FHFA data, the average effective contract interest rate for mortgages associated with newly built homes was 4.23% in October. While the NAHB/Wells Fargo Housing Opportunity Index slipped to a level of 61.8, from 62.6 in the second quarter (meaning 61.8% of new and existing homes sold during the quarter were affordable to a family earning the U.S. median income), monetary policy will support favorable interest rates in the months ahead, as recently published minutes from the Federal Reserve’s Open Market Committee detail.
Construction of single-family homes also picked up speed in October, according to Census/HUD estimates. Starts for single-family homes were up 4.2%, which at a 696,000 seasonally adjusted annual rate marks the fastest pace since early 2008. Permits also increased for the month.
However, total housing starts were down 2.8% in October due to a 15.4% drop in the volatile multifamily apartment construction sector. Despite these monthly ups and downs, average multifamily starts remain in the healthy range of over 350,000 per year. And multifamily developer confidence remains strong. The NAHB Multifamily Production Index registered a level of 54 for the third quarter. This was an increase of 4 and was the 11th consecutive quarter of a reading at 50 or above. And rents continue to rise, with NAHB calculations of CPI data indicating an increase for inflation-adjusted residential rents of 1.5% from October 2013.
Third-quarter data of housing construction reveals a number of notable trends. For example, for two consecutive quarters the average size of newly built single-family homes has declined. Average home size has risen in the post-recession period due to an atypical market mix that is relatively stronger for wealthier home buyers. Median home size should fall as first-time buyers return to historical levels in the new home market.
Typical new multifamily unit size remains low due to historically high levels of for-rent development and persistent relative weakness for condo development. In contrast, the market for single-family built-for-rent units appears to be cooling off, after reaching historically elevated levels from 2008 through 2013.
Townhouse construction is regaining steam again, with the current market share (as measured on a one-year moving average) standing at 11% of single-family starts. The same trend appears to be in place for custom home building (owner/contractor built), with this sector’s market share reaching approximately 24% of single-family starts (on a one-year moving average basis) during the third quarter.
Turning to the resale market, the National Association of Realtors reported that pending existing home sales decreased 1.1% in October, although the Pending Home Sales Index was 2.2% higher than a year ago. Completed existing home sales were up slightly for the month, rising 1.5% over the September pace and 2.5% higher than October 2013. Inventories are low, decreasing 2.6% in October and representing only a 5.1 months’ supply at the current sales pace.
Recent FHFA and Case-Shiller housing data indicate that home price appreciation has cooled but continues to grow. The FHFA data shows 4.3% annual growth for September, while Case-Shiller reveals 4.8% appreciation. Improved housing prices and labor market performance continue to reduce mortgage delinquencies. According to data from the Mortgage Bankers Association, the share of mortgages more than 90 days past due fell to 2.3% for the third quarter, down from the market peak of 5.1% at the end of 2009.
Some easing of residential construction headwinds was recorded during the fall. Softwood lumber prices fell 3.1% and OSB prices were off 2.9%. However, gypsum prices rose 1.1% after declines in the prior two months and prices are expected to rise into 2015. And the count of unfilled construction sector jobs fell from 121,000 in August to 98,000 in September. Access to labor has been a key builder challenge in recent years.
Underlying macroeconomic trends should help support growth for housing going into 2015. Third-quarter GDP growth was revised up to 3.9% from an initial read of 3.5% due to improved reading for investment and personal consumption expenditures. And consumer sentiment indicators are at or near post-recession highs.
In analysis news, NAHB economists recently detailed industry survey data concerning the cost implications and concerns regarding building code changes. The data indicate that 35% of single-family builders are extremely concerned about code impacts.

Latest Posts


A Degree of Separation

Spurred by improved personal finances and a favorable outlook for employment, the Thomson Reuters/University of Michigan Consumer Sentiment Index increased for the fourth consecutive month in November and reached its highest level since July 2007. Posted Nov. 26.


October New Home Sales

New home sales posted a slight gain in October after downward revisions for prior months, according to data released by the Census Bureau and HUD. Posted Nov. 26.


Pending Sales Trend Down

Although pending home sales decreased 1.1% in October, the index was up from the previous year. Posted Nov. 26.


Annual House Price Growth Continues, But at a Slower Pace

Recently released data by the Federal Housing Finance Agency shows that its measure of house prices, House Price Index – Purchase Only, rose by 4.3% on a 12-month seasonally adjusted basis in September. Posted Nov. 25.


GDP Growth in the 3rd Quarter – Momentum? Revised Up To Probably

Growth in economic output was revised upward to a seasonally adjusted annual rate of 3.9% from 3.5% in the advance estimate. Posted Nov. 25.


Interest Rates Remain Stable on New Home Loans

The Federal Housing Finance Agency reported a 5-basis-point increase in mortgage interest rates for October newly built home sales. Posted Nov. 25.


Custom Home Building Market Expanding

The custom home building market has recorded two consecutive quarters of strong production. Posted Nov. 25.


Townhouse Market Growing

Total townhouse construction was up on a year-over-year basis during the third quarter. Posted Nov. 24.


Single-Family Built-for-Rent Market Share Closer to Historical Levels

Single-family starts built-for-rent held steady at 6,000 starts for the third quarter. While the market share of built-for-rent single-family homes remains somewhat elevated, the share and count of starts are off post-recession highs. Posted Nov. 21.


Multifamily Market Sentiment Off Recent Peak

NAHB’s Multifamily Production Index reached 54 in the third quarter, four points below the previous quarter’s reading. Posted Nov. 20.


Existing Momentum

Existing home sales increased in October for the second consecutive month, and exceeded year-over-year levels for the first time in a year, despite no improvement among first-time buyers. Posted Nov. 20.


Energy Prices Continue to Fall

Over the past 12 months, prices on expenditures made by urban consumers increased 1.7% before seasonal adjustments. Posted Nov. 20.


Multifamily Built-for-Rent Share Remains High

An elevated market share for rental multifamily homes is holding typical new apartment size below levels seen during the housing boom. Posted Nov. 20.


FOMC Minutes – A ‘Considerable Time’

FOMC minutes make clear the widespread agreement among participants that the asset purchase program has achieved its stated goal of substantial improvement in the outlook for the labor market and should be concluded. Posted Nov. 19.


Single-Family Home Size Leveling Off as Market Recovers

The average size of newly built single-family homes has declined for two consecutive quarters as the overall housing market recovers. Posted Nov. 19.


Housing Construction Continues Upward Trend

Single-family home construction increased 4.2% in October to top off at 696,000 on an annualized basis. This rate is the second highest since early 2008. Posted Nov. 19.


Inflation at the Producer Level in October: Wood Products Soften, Gypsum Rises

Inflation in prices received by producers (prior to sales to consumers) increased 0.2% in October after a 0.1% decline in September and no change in August. Posted Nov. 18.


Builders Continue Optimism

The November NAHB/Wells Fargo Housing Market Index rose four points to a level of 58 as builders continue to see promise in home selling. Posted Nov. 18.


Mortgage Delinquency Rates Fall

Recently released data from the Mortgage Bankers Association shows that the share of mortgages that are considered delinquent has fallen. Posted Nov. 17.


Evolving Building Codes: Many Builders Worry about Costs without Benefits

Many single-family builders are worried about the cost implications of the way building codes are evolving, especially codes associated with fire sprinklers and energy efficiency. Posted Nov. 14.


Job Openings Decline with a Rise in Hiring

The number of open, unfilled construction sector positions declined in September, after increases in hiring during the end of the summer. Posted Nov. 13.


Housing Affordability Slightly Lower in 3rd Quarter

Firming home prices in markets across the country contributed to a slight dip in nationwide housing affordability in the third quarter of 2014. Posted Nov. 13.

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