Confidence in New 55+ Home Sales Posts Another Year-Over-Year Gain

February 7, 2013

Builder confidence in the 55+ housing market improved the fourth quarter of 2012 compared to the same period a year ago, according to NAHB’s  latest 55+ Housing Market Indices (55+ HMIs).

There are separate 55+ HMIs for two segments of the 55+ housing market: single-family homes and multifamily condominiums.  Each 55+ HMI is based on a survey that asks if market conditions are good, fair or poor. An index number below 50 indicates that more builders view conditions as poor than good.

Although both 55+ HMIs remain below 50, both have improved significantly from a year ago.  The single-family index increased 10 points to a level of 28, the fifth consecutive quarter of year over year improvements.  Although multifamily condos remain the weakest segment of the 55+ housing market, the 55+HMI for condos also showed a substantial year-over-year increase, of six points to 19.

55+HMI 12Q4Meanwhile, the 55+ multifamily rental indices, which had already recovered substantially in 2011, remained relatively stable in the fourth quarter, although there was a slight pullback due to uncertainty about the low-income housing tax credit—the financial driver behind a significant portion of apartments built for this segment of the market. Present production dropped three points to 31, expected future production dipped one point to 34, current demand for existing units dropped four points to 38 and expected future demand fell five points to 39.

Like the overall housing market, the 55+ segment of the market is undergoing a slow but steady recovery, but there are some obstacles to a continued and stronger recovery.  While problems with tight credit conditions for buyers and obtaining accurate appraisals are still lingering, new problems like spot shortages and rising costs for labor, materials and lots are beginning to emerge.

For more information about NAHB’s 55+ HMI survey see www.nahb.org/55HMI


Builder Confidence in the 55+ Market Improves in the Second Quarter

August 9, 2012

According to NAHB’s latest 55+ Housing Market Index (HMI) survey, builder confidence in the market for new 55+ single-family homes increased significantly in the second quarter of 2012.  Compared to the same period a year ago, the 55+HMI for new single-family homes more than doubled from 13 to 29.  (Because the survey results are not yet seasonally adjusted, numbers should only be compared year-over-year.)

The 55+ single-family HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic).   An index number below 50 indicates that more builders view conditions as poor than good.

The 55+ single-family HMI is a weighted averages of current sales, traffic and expected sales.   Although the index components remain below the break-even point of 50, all have increased considerably from a year ago.  Present sales more than doubled (from 12 to 30), while expected sales for the next six months increased 17 points to 35 and traffic of prospective buyers rose nine points to 22.

Meanwhile, the 55+ multifamily rental indices recovered substantially last year, and are now holding steady: present production climbed three points to 31, expected future production increased three points to 32, current demand for existing units dropped one point to 42 and expected future demand decreased two points to 42.

Buyers are likely returning to the 55+ housing market as home prices begin to improve, helping to unlock some of the pent-up demand from 55+ consumers who have been sitting on the sidelines until they are able to sell their current homes at a more favorable price.

For more information about NAHB’s 55+ HMI survey see www.nahb.org/55HMI


Declining Multifamily Vacancy Rates Point to Future Growth

December 12, 2011

Data from the Survey of Market Absorption (SOMA), produced by the Census Bureau and the Department of Housing and Urban Development, reveal limited weakness in the multifamily sector for the first half of 2011. However, declining multifamily vacancy rates are a hopeful sign for future multifamily market expansion, which is consistent with improving responses reported in NAHB multifamily surveys.

The SOMA tracks completions and market absorption (either units rented or units sold after construction of the property is complete) for multifamily rental and for-sale housing in 5+unit properties. Data released in December report absorptions for the third quarter of 2011 for properties completing construction in the second quarter of 2011.

 

For unfurnished apartments, the SOMA data reveal some softness in the rental market for the first half of 2011. Rental apartments exhibited a fairly stable absorption rate of around 63% for most of 2010, but this rate declined to 56% in the first quarter of 2011 and 50% in the second quarter.

However, this decline in the absorption rate of newly constructed rental apartments occurred during a period in which the rental vacancy rate was also, counterintuitively, falling. From the middle of 2010 until the middle of 2011, the rental vacancy rate fell from 10.6% to 9.2%. This fact suggests that the absorption rate for new apartments, as well as multifamily completions, will soon rise to meet increasing rental demand. As noted earlier, this is consistent with improving measures of multifamily market confidence, according to NAHB surveys.

With respect to for-sale condominium and cooperative multifamily units, the story is also mixed. Completions are at record-lows, with 2nd quarter completions of for-sale multifamily units down more than 90% from levels reported five years ago. Nonetheless, for those units being placed in service, the absorption rate of 61% is at its highest level since the third quarter of 2007.

The owner-occupied vacancy rate for units in 5+ properties is also falling. Reaching a twenty-year high of 10.4% in the final quarter of 2010, the vacancy rate for owner-occupied multifamily units has since declined to 8.6% for the second quarter of 2011.

These data, NAHB survey results, and significant amounts of pent-up housing demand that will emerge as rental demand first, suggest that construction of multifamily units will continue to grow in 2012.