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Slight Decline in Q2 Housing Opportunity Index08-31-15 | News

Slight Decline in Q2 Housing Opportunity Index
Consumers Turn Pessimistic in July Survey

The National Association of Homebuilders' second-quarter Housing Opportunity Index fell one point to 63.2, but it has been above 50 since at least mid-2010. Separately, Fannie Mae's National Housing Survey for the month of July sustained significant drops in consumer sentiment.

As housing median prices go up, fewer and fewer people have the financial wherewithal to buy single-family homes. To illustrate, the second-quarter Housing Opportunity Index, or HOI, has declined slightly, the National Association of Homebuilders reports.

The HOI's second-quarter reading is 63.2. What this this means is that 63.2 percent of new and existing homes sold between April 1 and June 30 were affordable to families earning the U.S. median income of $65,800. The first-quarter HOI came in at 66.5.

"Although affordability edged slightly lower in the second quarter, the HOI remains well above 50, where half the households (in the U.S.) can afford half the homes sold," David Crowe, chief economist for the NAHB, said. "Low mortgage rates, pent-up demand and continued job growth should contribute to a gradual, steady rise in housing throughout the year," Crowe added.

In 2014, the HOI stood at 65.5 in the first quarter. It dropped to 62.6 in the second quarter, declined again to 61.8 in the third quarter, and then rebounded a bit to 62.8 in the fourth.

The HOI was in the 60s for much of 2013, and it was in the 70s in all of 2011 and 2012, as well as the third and fourth quarters of 2010.

"Home price appreciation in many markets across the nation are a sign that the housing recovery continues to move forward," Tom Woods, NAHB chairman, said.

But that trend has driven the national median home price up from $210,000 in the first quarter to $230,000 in the second quarter.

Meanwhile, average mortgage rates moved slightly lower to 3.99 percent from 4.03 percent in the same period, another incentive for buying homes.

And Woods added another note of caution. "At the same time, the cost of building a home is rising due to higher costs for buildable lots and skilled labor," he said.

The website link: https://tinyurl.com/omxcpn7 Consumer sentiment about the current housing market fell slightly in the month of July, as reflected in Fannie Mae's latest National Housing Survey. As in all of its surveys, Fannie Mae directed its questions to 1,000 Americans.

Respondents were asked whether now is a good time to buy a home, and the number of affirmative answers dropped to 61 percent, an all-time low for the Fannie Mae Housing Survey.

Consumers were also asked whether now is a good time to sell a home, and this number plunged seven points to 45 percent. An economist for Fannie Mae said the pessimism among consumers could be due to their perceptions of wage growth, or rather the lack of it.

Most of the consumers surveyed said they expect home prices to rise an average of 3 percent in the next year. The number of respondents who said it would be easy to obtain a mortgage fell to 48 percent. At the same time, the number of consumers who said it would be difficult to qualify for a mortgage rose to 49 percent.

Also, the number of people who said they expect their personal finances to improve in the next year dropped to 44 percent. And the number of respondents who said their household income would drop in the next year increased to 15 percent.

The website link: https://tinyurl.com/nqfxafo