All of the drivers of residential construction, except home affordability, remained weak in the last month with some worsening slightly. The only good news was the $0.40/gal. drop in gasoline prices which halted the steep slide in consumer confidence. If gasoline prices hold at this level or drop further, there will be a measurable boost to home sales and, eventually, home construction.
Data from RealtyTrak on the geographical distribution of foreclosed home list for sale emphasizes the huge regional differences in the economic environment for housing. Together, California and Florida have about 110,000 foreclosed homes for sales. Most are empty. Most are available at deep discounts, sometimes as high as 50%. This inventory surplus will force housing starts even lower in these states and delay a rebound in housing starts until many months after home sales resume rising. Four states have less than 100 foreclosed homes for sale. Vermont has only 3. A turnabout in home sales set off by improved confidence will cause an instant rebound in housing starts in states with very little surplus inventory of home for sale. Housing starts will be rising in a majority of states before the national housing starts total begins to rise.
Key Indicators of the U.S. Market Environment — Aug 2008
Residential Construction (New and Remodeling)
| Year Ago | Previous Month or Qtr. |
Latest | Level | Recent Trend | Impact on Const. | ||
| New Residential | |||||||
| Affordability − 30-Year mortgage index (NAR) | 104.6 | 124.9 | June | 118.4 | High | Falling |  |
| Affordability − 1-Year ARM mortgage index (NAR) | 107.1 | 131.5 | June | 125.6 | High | Falling | |
| Consumer income growth, % change y/y (U.S. Commerce Dept.) |
3.8 | 5.4 | June | 7.4 | High | Rising |  |
| Consumer real income growth, % change y/y (U.S. Commerce Dept.) | -0.8 | 7.1 | June | 11.2 | High | Rising | |
| Employment change, 000s (U.S. Labor Dept.) | 57 | -51 | July | -51 | Low | Falling | |
| Household net worth, % change y/y (FRB) | 6.1 | 7.4 | Q1 | 3.4 | Average | Falling | |
| 30-Year fixed mortgage rate, % level (Freddie Mac) |
6.57 | 6.26 | W/E Aug 18th | 6.52 | Low | Rising | |
| 1-Year ARM mortgage rate, % level (Freddie Mac) |
5.67 | 5.1 | W/E Aug 18th | 5.18 | Low | Steady |  |
| Consumer confidence index (The Conference Board) |
-0.8 | 7.1 | July | 11.2 | High | Rising | |
| Housing market index (NAHB) | 22 | 16 | Aug | 16 | Low | Steady | |
| Homes under construction, 000s (U.S. Census Bureau) |
1,144 | 971 | July | 955 | Low | Falling | |
| New home inventory, number-of-months supply (U.S. Census Bureau) | 8.3 | 10.4 | June | 10 | High | Rising | |
| Existing home inventory, number-of-months supply (NAR) | 9.1 | 10.8 | June | 11.1 | High | Rising | |
| Residential Remodeling | |||||||
| Existing home sales, 000s (NAR) | 5,750 | 4,990 | June | 4,860 | Low | Falling | |
| Building supply store sales, seasonally adj. $ millions (U.S. Census Bureau) |
28,421 | 27,923 | July | 28,008 | Low | Steady | |
| Wood product shipments, seasonally adj. $ millions (U.S. Census Bureau) |
8,114 | 8,066 | June | 8,216 | Low | Rising | |
| Remodeling contractor hours worked, % change y/y (U.S. Labor Dept.) |
0.4 | -5.5 | June | -3.9 | Low | Falling | |
| Mortgage refinancing applications, index (Mortgage Banking Association) |
1,806 | 1,392 | W/E Aug 15th | 1,034 | Low | Falling | |
Abbreviations: y/y = year over year; WE = week ending; 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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