Construction Forecasts

News & Analysis

Housing Recovery Still On Hold

08/03/2011 by Jim Haughey, RCD Chief Economist

Housing market drivers worsened over the last quarter in line with the slowdown in economic growth. The only positive driver is now the rise in household net worth. However, this is a long term leading indicator. Affordability, while still very high, is declining; confidence is steady at a depressed level; existing home inventories have recently turned up as the legal barriers to foreclosure begin to be resolved. In the remodeling market, both contractor work hours and building supply store sales have inched up which suggests a modest improvement underway.

Single family homebuilders have record lean inventories so they are ready to raise starts quickly as soon as the early 2011 economic slump ends. Multi family developers boosted production earlier this year and then backed off during the spring. They are also ready to respond quickly to a resumption of job expansion at a pace of 100,000 or more per month.

The existing home market is not ready for a quick recovery except in a small number of small and medium cities with near normal inventories and rising employment.

Key Indicators of the U.S. Market Environment — July 2011
Residential Construction (New and Remodeling)

  Year Ago Previous
or Qtr.
Latest Level Recent
on Const.
New Residential
Home Affordability Index (NAR) 168.7 187.1 May 182.7 High Falling
Consumer income, % change y/y
(U.S. Commerce Dept.)
4.8 6.7 May 5.5 Average Falling
Consumer real income, % change y/y
(U.S. Commerce Dept.)
3.8 0.2 May -0.1 Average Falling
Employment change, 000s
(U.S. Labor Dept.)
-192 25 Jun 18 Low Falling
Household net worth, % change y/y (FRB) 13.4 6.4 Q1 5.0 Low Rising
30-Year fixed mortgage rate,
% level (Freddie Mac)
4.56 4.5 Jul 21st 2011 4.52 Low Steady
1-Year ARM mortgage rate,
% level (Freddie Mac)
3.73 2.99 Jul 21st 2011 2.97 Low Steady
Consumer confidence index
(The Conference Board)
51.0 58.5 Jul 59.5 Low Steady
Housing market index (NAHB/ Well Fargo) 14 13 Jul 0 Low Steady
Homes under construction, 000s
(U.S. Census Bureau)
477 418 Jun 415 Low Steady
New home inventory, number-of-months
supply (U.S. Census Bureau)
8.2 6.4 Jun 6.3 High Steady
Existing home inventory,
number-of-months supply (NAR)
8.9 9.1 Jun 9.5 High Rising
Residential Remodeling
Existing home sales, 000s (NAR) 5,230 4,810 Jun 4,770 Low Steady
Building supply store sales, seasonally adj.
$ millions (U.S. Census Bureau)
23,414 24,806 May 25,140 Low Rising
Wood product shipments, seasonally adj.
$ millions (U.S. Census Bureau)
5,351 5,351 May 5,351 Low Steady
Remodeling contractor hours worked,
% change y/y (U.S. Labor Dept.)
-6.9 0.8 May 6.2 Low Rising
Mortgage refinancing applications, index
(Mortgage Banking Association)
4,162 2,675 Jul 15th 2011 2,729 Low Steady

Abbreviations: y/y = year over year; ARM = adjustable-rate mortgage; NAR = National Association of Realtors;
FRB = Federal Reserve Board; NAHB = National Association of Home Builders
Table: Reed Construction Data and Reed Construction Data - CanaData


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