Home sales improved, the price decline slowed, consumer confidence increased for the second month and 30-Year mortgage rates fell substantially in the last month. However, both housing starts and residential construction spending lag and both declined further in July. The environmental indicators suggest starts and possibly spending may be stable or very slightly up in the next few months.
Mortgage rates dropped about 50 basis points instantly when the seizure of Fannie Mae and Freddie Mac by the Treasury Department made explicit the implicit federal guarantee of their bonds. The large and rising risk premium investor had demanded to buy their bonds disappeared overnight. The mortgage crisis is not yet over. Washington has to establish a new mortgage finance system. Operating Fannie and Freddie as public companies is only a short term solution.
The recession level of consumer confidence has been the major restrain on home buying for many months. The Conference Board Consumer Confidence Index increased 6 points in august in line with falling gasoline prices. Since that survey was taken, gasoline prices have fallen $0.20/gal.further. Already, the Michigan/Reuters preliminary confidence index for early September jumped very sharply. Improved consumer confidence will be a boost to home buying very quickly.
Key Indicators of the U.S. Market Environment — Sept 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) | 103.1 | 118.5 | July | 117.7 | High | Steady |  |
| Affordability — 1-Year ARM mortgage index (NAR) | 107.2 | 125.6 | July | 125.2 | High | Steady | |
| Consumer income growth, % change y/y (U.S. Commerce Dept.) | 3.4 | 7.3 | July | 7.8 | High | Rising |  |
| Consumer real income growth, % change y/y (U.S. Commerce Dept.) | -0.3 | 11.4 | July | 12.2 | High | Rising | |
| Employment change, 000s (U.S. Labor Dept.) |
74 | -60 | Aug | -84 | 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) | 6.40 | 6.52 | W/E Sep 11th | 5.93 | Low | Falling | |
| 1-Year ARM mortgage rate, % level (Freddie Mac) |
5.66 | 5.18 | W/E Sep 11th | 5.21 | Low | Steady | |
| Consumer confidence index (The Conference Board) |
105.6 | 51.9 | Aug | 56.9 | Low | 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 | 10.7 | July | 10.1 | High | Rising | |
| Existing home inventory, number-of-months supply (NAR) | 9.5 | 11.1 | July | 11.2 | High | Rising | |
| Residential Remodeling | |||||||
| Existing home sales, 000s (NAR) | 5,760 | 4,850 | Jul | 5,000 | Low | Rising | |
| Building supply store sales, seasonally adj. $ millions (U.S. Census Bureau) | 28,421 | 27,840 | Jul | 27,929 | Low | Steady | |
| Wood product shipments, seasonally adj. $ millions (U.S. Census Bureau) | 8,713 | 8,299 | Jul | 8,252 | Low | Falling | |
| Remodeling contractor hours worked, % change y/y (U.S. Labor Dept.) | -2.7 | -4.9 | Jul | -3.3 | Low | Falling | |
| Mortgage refinancing applications, index (Mortgage Banking Association) | 1,770 | 1,330 | W/E Aug 29th | 1,052 | 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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