Home affordability is at the housing boom level but permits, starts and sales continue to decline because prospective homebuyers either lack access to credit or the confidence to buy. The recent drop in 30-Year fixed mortgage rates to near 5% will cushion the decline in housing but is not enough to stop it. That will take an end to declining home prices and much improved confidence about income security. Neither is likely until summer 2009 at the earliest but it this will occur much later in the Southeast and Southwest.

President Obama has aggressively boosted aid to financially troubled homeowners and thrown out the earlier ineffective mortgage assistance plans. This $275 billion plan, together with the $8,000 first time homebuyer refundable tax credit and, possibly, mortgage “cramdown” legislation still pending, will cushion the housing recession and advance the turnabout by several months.

The only good news in the hard market data is that absolute size of the surplus of homes for sale continues to shrink so that the eventual turn to expansion in the market could be very abrupt and rapid. This happened because many homebuilders and some suppliers ran out the resources needed to hold on and ceased operating.

Key Indicators of the U.S. Market Environment — March 2009
Residential Construction (New and Remodeling)

	Year Ago	Previous Month or Qtr.	Latest		Level	Recent Trend	Impact on Const.
New Residential
Home Affordability Index  (NAR)	133.5	153.2	Jan	166.8	High	Rising
Consumer income growth, % change y/y (U.S. Commerce Dept.)	4.5	-0.8	Jan	-1.7	High	Falling
Consumer real income growth, % change y/y (U.S. Commerce Dept.)	-0.5	3.4	Jan	7.8	High	Rising
Employment change, 000s (U.S. Labor Dept.)	-144	-655	Feb	-651	Low	Falling
Household net worth, % change y/y (FRB)	0.0	0.0	Q3	0.0	Average	Falling
30-Year fixed mortgage rate, % level (Freddie Mac)	5.97	5.25	W/E Mar 5th	5.15	Low	Falling
1-Year ARM mortgage rate, % level (Freddie Mac)	5.12	4.92	W/E Mar 5th	4.86	Low	Falling
Consumer confidence index (The Conference Board)	76.4	37.4	Feb	25.0	Low	Falling
Housing market index (NAHB)	20	8	Feb	9	Low	Steady
Homes under construction, 000s (U.S. Census Bureau)	1,034	810	Jan	787	Low	Falling
New home inventory, number-of-months supply (U.S. Census Bureau)	9.8	12.2	Jan	13.3	High	Rising
Existing home inventory, number-of-months supply (NAR)	10.2	9.4	Jan	9.6	High	Rising
Residential Remodeling
Existing home sales, 000s (NAR)	4,890	4,740	Jan	4,490	Low	Falling
Building supply store sales, seasonally adj. $ millions (U.S. Census Bureau)	26,994	25,657	Jan	24,260	Low	Falling
Wood product shipments, seasonally adj. $ millions (U.S. Census Bureau)	8,142	7,533	Jan	7,469	Low	Falling
Remodeling contractor hours worked, % change y/y (U.S. Labor Dept.)	-4.9	-11.6	Jan	-7.2	Low	Falling
Mortgage refinancing applications, index (Mortgage Banking Association)	3,365	3,906	W/E Feb27th	3,063	Average	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.