Builders Absorb Consumer Concerns

The October NAHB/Wells Fargo Housing Market Index fell two points to 55 from a one-point downwardly revised September level of 57. The decline was broad based with a two-point fall in all three components: current sales from 60 to 58, expected future sales from 64 to 62 and traffic from 46 to 44. The index has remained above the tipping point of 50 for five consecutive months.

The survey is taken in the first 10 days of the month when Washington remained mired in complete disagreement over the debt and budget deadlines. Consumer confidence indicators and builders’ comments in this survey suggest that the uncertainty has caused buyers and builders to pause until these deadlines are settled.

Builders continue to be slowed by higher costs of building materials, building lots and construction labor while confronting downward price pressures from low appraisals. Consumers continue to have difficulty obtaining a mortgage. In a recent survey, 57% of builders said they had lost a sale because the buyer could not qualify for a mortgage.

The Census Bureau and HUD remain closed so a housing starts estimate for September will not be delivered at 8:30 am on October 17 as scheduled. NAHB has produced a monthly estimate for September starts based on our knowledge of the industry, the results from the HMI and our daily contact with builders. NAHB’s estimate for September starts is between 875,000 and 900,000. Single-family starts showed some new life in August after a pause that began in April before interest rates spiked. Single-family starts should remain in the August range of 620,000 to 630,000. Multifamily starts bounced around in 2013 in a monthly seesaw effect typical of the more volatile series. NAHB expects multifamily to range at the lower end of this years’ span at between 255,000 and 270,000.