What Shutdown? U.S. Homebuilders Remain Optimistic On Low Mortgage Rates And Affordable Homes
U.S. homebuilders remain in excellent spirits, sloughing off the effects of this month's government shutdown.
According to the National Association of Homebuilders, the October 2013 Housing Market Index (HMI) posted in "positive" territory for the fifth consecutive month. The HMI is a measure of homebuilder confidence nationwide.
With buyer foot traffic near 8-year highs and sales expectations strong, builder confidence remains "good". The best "deals" in new construction may be the ones you get today.
Homebuilder Confidence : Strong Through Shutdown
Each month, the National Association of Homebuilders (NAHB) publishes its Housing Market Index, metric meant to measure homebuilder sentiment for the single-family, new construction housing market. With just 3 questions requiring but one-word answers, the NAHB survey is simple and effective.
The survey asks builders to rate the following on a scale of "Good", "Fair" or "Poor"; or, "High", "Average", "Low" :
- How are market conditions for the sale of newly-built homes today?
- How are market conditions for the sale of newly-built homes six months from today?
- How is your prospective new home buyer foot traffic?
The NAHB collects its survey responses, weights the answers based on a formula, then publishes a final "confidence figure" which is scored to a scale of 1-100. Readings over 50 suggest favorable market conditions for builders; readings under 50 suggest unfavorable conditions.
For October 2013, the Housing Market Index reads 55 -- a 2-point drop from the month prior. Despite the drop, this month marks the first time since 2006 that the Housing Market Index was north of 50 for five consecutive months.
The HMI has tripled through the last 24 months.
New Construction Homes In High-Demand
The NAHB's homebuilder confidence survey continues to be buoyed by strong demand from U.S. home buyers.
October's Housing Market Index showed buyer foot traffic near multi-year highs. Strong demand for new construction has pushed new home sales higher, and builders expect that the next six months will be similarly elevated.
In response to the NAHB question regarding future home sales, the nation's builders said New Home Sales should reach -- then maintain -- levels not seen nationwide since 2005.
This could be bad news for buyers, unfortunately, because, unlike last decade, U.S. builders aren't outbuilding demand. The supply of homes for sales remain low which creates upward home price pressure.
At the current sales paces, the nation's stock of "new homes for sale" would be sold out in just 5.0 months. Supplies of less than six months indicate a "seller's market".
There is upward pressure on new home prices and it's as true in urban centers such as Houston, Texas; and Orange County, California where new construction is booming, as it is in smaller housing markets including Dayton, Ohio; and DuPage County, Illinois.
Not surprisingly, low mortgage rates are spurring demand, too.
Since the summer, the average 30-year fixed rate mortgage is down by more than 0.30 percentage points, changing the mathematics of "Rent vs Buy" for many first-time buyers.
Plus, the FHA Back to Work program has reduced the waiting period after a foreclosure, bankruptcy or short sale to just one year. This, too, has put more buyers in the national buyer pool.
With mortgage rates low and mortgage guidelines loose, 2014 is expected to be strong for housing.
Get Mortgage Rates For New Construction
According to the U.S. Census Bureau, there are just 176,000 new homes for sale nationwide -- a little bit more than 3,500 per state. Competition for new homes is fierce and the current speed of sales, the complete U.S. inventory will sell out soon.
Today's buyers of new construction may benefit from buying in 2013 versus 2014. Not only are mortgage rates expected to rise next year, but so are home prices.
See what a new home's mortgage payment will be. Get today's live mortgage rates online for free, quickly, with no obligation whatsoever.