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Is the housing market stabilizing?

0 112 Market Intelligence

The housing market remained depressed over the last month but appears to have stabilized at the bottom of the cycle. Housing starts and sales have both increased slightly since December, inventories of homes for sales have declined significantly and homebuilders have slowed work on homes under construction. Home prices are now falling quickly, a necessary condition to bring buyers back into the market.

The housing market remained depressed over the last month but appears to have stabilized at the bottom of the cycle. Housing starts and sales have both increased slightly since December, inventories of homes for sales have declined significantly and homebuilders have slowed work on homes under construction. Home prices are now falling quickly, a necessary condition to bring buyers back into the market.

The turnabout from collapse to recovery is likely to take several months before it is fully established. Materials, equipment and service suppliers to housing will not realize measurable and sustainable sales increases until the end of spring at the earliest.

Home affordability has jumped to a level consistent with housing starts 75% higher than currently but this positive impact is on hold until consumer confidence rises from the current recession level reading. How quickly housing starts recover depends on how long and deep the economic recession is. Our outlook is for the recession to end in June or July which will provide the boost in consumer confidence needed to spur home sales.

Note that the outlook is for the direction of change to be positive by midyear but also for the level of activity in housing to remain depressed well below average beyond 2009.

The mortgage market problems that set off the housing collapse are now well enough on the mend that credit access and cost trends are contribution to a stronger rather than a weaker housing market. Nonetheless the aftermath of the mortgage mess will keep housing activity at a depressed level for several years even though activity at the job site begins to expand soon.

This restraint takes two forms. First, most of the anticipated foreclosures have yet to occur. As they occur they will add to the surplus of homes for sale. Second, more than 10% of homeowners are unable to move to a new house because the plunge in home prices has pushed owner equity below the market value of the home.

Housing Market Monitor — March 2008

Consumer buying power Latest Month Previous Month/Qtr. Year Ago 12 Month Average
Affordability  - 30-Y Mortgage NAR Index Feb 134.6 131.0 114.0 116.0
Affordability - 1-Y ARM Mortgage NAR Index Feb 142 134.1 115.6 119.0
Consumer income growth
(3 mo. annualized % change)
US Commerce Dept. Feb 4.3 4.1 8.8 5.5
Consumer real income growth
(3 mo. annualized % change)
US Commerce Dept. Feb 0.6 -0.6 5.3 1.8
Employment (000/'s jobs per month) US Labor Dept. Mar -80 -76 177 45
30-Y fixed mortgage rate (Freddie Mac) Freddie Mac Mar 5.92 5.76 6.16 6.26
1-Y ARM (Freddie Mac) Freddie Mac Mar 5.03 5.23 5.44 5.48
Consumer Confidence Index  Conference Board Mar 64.5 76.4 108.2 94.9
Household net worth growth
(annual % change)
Federal Reserve Board 3rd Q 7.30 8.10 8.60 7.10
 
New home construction
Permits (000/'s, annualized) US Census Bureau Feb 978 1,061 1,541 1282
Sales (000/'s, annualized) US Census Bureau Feb 590 601 840 729
Starts (000/'s, annualized) US Census Bureau Feb 1,065 1,071 1,487 1281
Homes under construction
(000/'s, annualized)
US Census Bureau Feb 1,028 1,039 1,208 1115
Homes completed (000/'s, annualized) US Census Bureau Feb 1,208 1,324 1,628 1439
New home inventory US Census Bureau Feb 471,000 481,000 540,000 519,500
Total new home inventory
(month supply)
US Census Bureau Feb 9.8 9.8 8.1 8.8
Home sale price (median) US Census Bureau Feb $244,100 $225,600 $250,800 $240,642
Residential materials cost  US Labor Dept. Feb 2.7 1.6 0.8 2.5
Residential contractor hourly wage  US Labor Dept. Feb 1.8 3.0 4.0 3.7
Housing market index NAHB Mar 20 20 36 23
 
Existing home competition
Pending home sales index
(2001 = 100)
NAHB Jan 85.9 85.9 108.5 84.9
Home inventory (months supply) NAR Feb 9.6 10.2 6.9 9.5
Homes sold (000/'s annualized) NAR Feb 5,030 4,890 6,600 5,417
Median existing home sales price NAR Feb $195,900 $199,700 $213,500 214,217
Median home price index (ex. Subprime +mortgages over $417,000) OFHEO 4th Q 276.4 283.2 278.9 281.4
Median home sales price index
(20 large cities only)
MacroMarkets Jan 180.67 184.666 202.32 195.12
 
Remodeling
Remodeling contractor hours worked (not sea. adj.) US Labor Dept. Jan 42,156 43,249 43,854 47,421
Mortgage refinancing applications index MBA Feb 2756.4 3365.8 2030.2 2318.7
NAHB remodeling index NAHB 4th Q 40.9 46.2 48.2 44.5
Leading Index of Remodeling Activity Harvard Joint Center 4th Q -1.2 -0.4 6.8 -0.2

Abbreviations: NAR = National Association of Realtors; NAHB = National Association of Home Builders;
OFHEO = Office of Federal Housing Enterprise Oversight.
Table: Reed Construction Data and Reed Construction Data - CanaData.

by Jim Haughey last update:Apr 28, 2008

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