Weak Housing Market Begins to Rebound

Builder confidence tracked by the NAHB/Wells Fargo Housing Market Index climbed six points over the past two months to a reading of 20 in November. This is still well below the level of 50, indicating a balanced market.

 

A patchwork of good and not-so-good housing and economic data emerged. Housing measures appeared to start moving in the right direction, but from record low levels.

Declines in energy prices - particularly for gasoline at the pump - drove down both producer and consumer prices modestly in October. However, home builders saw a moderate increase in the costs of most of the materials they use in construction.

The Case-Shiller and Federal Housing Finance Agency home price indexes both showed modest growth in the third quarter, although they have been somewhat volatile from month to month. The former declined a bit and the latter inched higher in September.

The single-family housing market has recently seen small signs of improvement.

After declines for three months in a row, single-family starts rose by a solid 3.9 percent in October, but they were still not appreciably higher than they were in May of 2010.

NAHB's latest biannual survey on the cost of construction finds that it has cost significantly less to build a new single-family home this year than in 2009 because of declining square footage.

While there hasn't been much change in the share of the sales price that goes to construction costs, builder profit dropped to an all-time low of just 6.8 percent of the final sales price in 2011.

- Courtesy of NAHB