New Home Sales Falter

August 23, 2013

The annual rate of new home sales dropped 13.4% to an annual rate of 394,000 in July. All four census regions experienced a decline ranging from 5.7% in the Northeast to 16.1 % in the West. The July rate takes annual sales levels back to the late 2012 levels and below the 448,000 first half of 2013 average.
The decline is the result of the jump in mortgage interest rates that began in May and accelerated in late June. New homes sales are recorded when the home buyer signs a contract to purchase so the July signings will not close their purchase for several months. The rise in mortgage rates first caused some acceleration in contract signing as June sales as which were 3.6% above May even as mortgage rates rose about 50 basis points. Further increases caused buyers to pause in July to determine if those new heights were permanent.
The NAHB/Wells Fargo Housing Market Index continues to show improving builder sentiment suggesting the new home sales dip is temporary as consumers adjust to permanently higher interest rates. Affordability could have some impact as some buyers are no longer able to qualify at the higher rates but rising prices have not diminished demand up to this point. The rise in prices alone has increased monthly mortgage payment 8 % in one year about the same as a 70 basis point increase in rates.
NAHB’s forecast for new home sales remains at 470,000 for 2013 or 28% increase over 2012 levels. Pent up demand, an improving economy, continued advancement in home prices and low mortgage rates by historic standards will support this level.

New Home Sales and Mortgage Rates

Living at Home as an Investment

August 21, 2013

Even with improving economic conditions, a record number of Millennials live with their parents. According to a recent study published by the Pew Institute, the share of the U.S. population aged 18 to 31 living in their parent’s home increased to 36 percent or a record 21.6 million young adults in 2012. The share of the same age group living with parents prior to the start of the Great Recession was 32 percent and 34 percent at the end of the Great Recession in 2009.

This growth has largely been attributed to three factors; declining employment, increasing college enrollment, and declining marriage. And these changes are part of an overall increase in the establishment of multigenerational households.

For a generation coming of age during the worst economic crisis since the Great Depression, this may appear to be more bad news. However, a closer look shows the increase is partly due to more investment in human capital. Facing reduced employment opportunities and poor earning potential without a college degree, in 2012 a record 38.9 percent of individuals aged 18 to 24 enrolled in college.


College enrollment increases the number of those living with parents in two ways, one economic and one technical. The economic is choosing to live at home while pursuing a degree. The technical is through the fact that in the data college students are often counted as living at home.* Dormitory-living is not counted as a distinct independent household.

The increase in college enrollment has significant implications on the future economic well-being of Millennials. On the one hand, those with a college degree have a much higher earning potential than those without a college degree. On the other hand, the cost of attending college is increasing and according to the Chronicle of Higher Education nearly 60 percent of all students borrow annually to help cover costs. Additionally research from the Federal Reserve Bank of New York shows year-after-year increases in loan delinquency and average student debt per borrower.

The economic well-being of those 18 to 31 is of particular interest as these individuals represent future consumers of housing. At some point, many of the 21.6 million Millennials living at home will move out. Past trends suggest most of these new households will be renters first.

Nonetheless, the housing choices they make will be influenced by policy decision made today. Those policy decisions will need to take into account lessons from the housing market crisis and the economic realities of a generation coming of age during the Great Recession. Fundamentally, policies that make it more difficult to purchase a home with a mortgage – via housing finance or tax reform – will have distinct impacts on Millennials.

* Data footnote: An adult is considered to be “living at home” or “living with parents” on the basis of the adult’s relationship to the head of the household. The Census defines individuals who are temporarily absent as household members even though they are not present in the household during the survey week. College students compose the bulk of such absent household members.

55+ HMI Index Soars in 2nd Quarter

August 9, 2013

All components of NAHB’s 55+ Housing Market Index showed major growth in the 2nd Quarter of 2013. Compared to the 2nd Quarter of 2012, both the single-family and the multifamily indices jumped 24 points: the single-family from 29 to 54 points, and the multifamily from 19 to 43 points.  Both indices are comprised of several components and all of the components posted substantial gains.  For the 55+ single-family index, presents sales climbed 24 points to 54, expected sales climbed 25 points to 60, and traffic of prospective buyers climbed 26 points to 48.  On the multifamily side, present sales rose 26 points to 44, expected sales rose 26 points to 46, and traffic of prospective buyers rose 19 points to 38.  An index number above 50 indicates more builders view conditions as good than poor.


Welcome to Our New Economist Joshua Miller

August 7, 2013

This week Dr. Joshua Miller joined the staff of the Economics and Housing Policy Group here at NAHB. Among other research responsibilities, Josh will be working with NAHB’s local economic impact model, which estimates job creation and economic benefits that flow from home building.

You can read the biographies of Josh and the other economics staff who contribute to Eye on Housing at the following link:

NAHB/First American Improving Markets Index Up Again

June 6, 2013

The number of markets that continue to show improvement increased to 263 or 73 percent of all markets measured. The June NAHB/First American Improving Markets Index counts the number of metropolitan areas that have seen at least six months of improvement in single-family housing permits, house prices and employment. The index is up 5 from May which had dropped 15 markets from April, the first significant drop since the same time last year.
The net change of five was the result of 29 additions and 24 dropped. As the index and list of markets satisfying the criteria reaches three-quarters of all markets, the places that just made the list with small increases in one of the three indicators can relapse and cause the market to fall off the list just as similar small improvements add markets to the list. Of the 24 markets that fell off the list, 19 had a fall back in house prices. In the preceding month, those 19 averaged 3.8 percent price improvement while all the markets on the May list had an average 7 percent increase at that point.
Over the history of the index 335 metropolitan areas have been on the list, or 93 percent of all eligible. The list is likely to continue seeing nearly equal numbers added and dropped as the economic and housing revival has spread to most markets but some marginal improvements get reversed.

Cummulative IMI appearances

Remodelers Report Labor Shortages

May 28, 2013

A recent NAHB survey reveals that professional remodelers have begun to see some shortages of directly employed labor as well as of subcontractors.  The findings come from the Labor Availability Report EXTERNAL for the first quarter of 2013, which asked remodelers about shortages for 12 different trades:

  •   Rough Carpenters
  •   Finished Carpenters
  •   Electricians
  •   Excavators
  •   Framing crews
  •   Roofers
  •   Plumbers
  •   Bricklayers/masons
  •   Painters
  •   Weatherization workers
  •   HVAC
  •   Building maintenance managers

In terms of direct labor, results show that at least 35 percent of remodelers report shortages of finished carpenters, rough carpenters, and framing crews, while 27 percent report shortages of bricklayers/masons.  When it comes to subcontractors, over 35 percent also report problems finding finished carpenters, rough carpenters, and framing crew subs, while 20 percent to 30 percent report sub shortages of bricklayers, painters, and roofers.

A similar survey was sent to single-family builders in March 2013.  Comparing both sets of results shows that, in general, builders are more likely to be experiencing labor shortages than remodelers, particularly for framing crews (both directly employed and subs)[1] and electricians.  The only trade for which remodelers are more likely than builders to report shortages is finished carpenters.

Another way to compare results between remodelers and builders is by calculating the average share of each group reporting any shortage across all 12 trades.  This exercise shows that 23.2 percent of remodelers report shortages of directly employed labor, compared to 27.8 percent among builders.  Similarly, 24.5 percent of remodelers report a shortage of subcontractors, compared to 30.7 percent among builders.

Labor Availability

It’s important, however, not to overstate the results.  While some remodelers are seeing shortages of some types of labor, still more than half of them report no shortages for any of the types of labor listed.  Yet given the soft start of the current housing recovery, it is concerning to see any labor shortages this early in the game.

[1] Builders and remodelers do not always use the same type of labor, of course.  Remodelers not working on additions may not need framing crews, for example, which could account for the lower shortages among remodelers.

Existing Sales and Prices Increase

May 22, 2013

Existing home sales increased 0.6% in April from an upwardly revised level in March, and were up 9.7% from the same period a year ago. The National Association of Realtors (NAR) reported that April 2013 total existing home sales were at a seasonally adjusted rate of 4.97 million units combined for single-family homes, townhomes, condominiums and co-ops. That compares to 4.94 million units in March, and 4.53 million units during the same period a year ago. All regions were up from a year ago, ranging from 14.9% in the South to 4.3% in the West. For the current month, the only decrease was 3.4% in the Midwest.

Existing Home Sales April 2013The April 2013 level of single-family existing sales increased 1.2% from March to a seasonally adjusted 4.38 million sales, and was up 9.0 % from the same month a year ago. Seasonally adjusted condominium and co-op sales decreased 3.3% from March to a seasonally adjusted 590,000 units in April, but were up 15.7% from the same period a year ago.

The total housing inventory at the end of April increased 11.9% from the previous month to 2.16 million existing homes for sale. At the current sales rate, the April 2013 inventory represents a 5.2-month supply compared to a 4.7-month supply in March, and a 6.6-month supply of homes a year ago. The April inventory of condominiums/co-ops increased to a 4.9-month supply from a 4.8-month supply in March, but was down from a 7.5-month supply a year ago. NAR reported that listed inventory is 13.6% below the same period a year ago, and that listed inventory is most restricted in lower price ranges. NAR also reported that the April median time on market for all homes was 46 days, down from 62 days in March and 83 days during the same month a year ago.

Some 18% of April 2013 sales were distressed, defined as foreclosures and short sales sold at deep discounts. This level was down from 21% in March and 28% during the same month a year ago.

The median sales price for existing homes of all types in April 2013 was $192,800, up from $183,900 in March, and up 11.0% from $173,700 during the same period a year ago. NAR reported that April represented the fourteenth consecutive monthly year-over-year price increase. The median condominium/co-op price increased from $180,000 in March to $189,500 in April, and was up 11.3% from $170,200 a year ago.

In April 2013, all cash sales were 32% of transactions compared to 30% in March, and 29% in April 2012. Investors accounted for 19% of April 2013 home sales, unchanged from March and down slightly from 20 % in April 2013. First-time buyers accounted for 29% of April 2013 sales, down from 30% in March and down from 35% during the same period a year ago.

NAR reported that buyer traffic is up 31% from a year ago, but sales are only up about 10%, despite noting that April existing sales reached the highest level since November 2009 when the market was responding to the home buyer tax credit. Potential buyers continue to face higher prices. Those same increasing prices will induce more households to place their homes on the market, and will eventually dampen the enthusiasm of investors and cash buyers.

The modest increase in April existing home sales was consistent with the 1.5% increase in the March 2013 Pending Home Sales Index.


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