16Jan2014
Dan Green
Author
Dan Green
Filed Under
Real Estate Sales

U.S. Homebuilders Expect To Control The 2014 Housing Market; A Plan For Today’s Buyers

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Housing Market Index : Homebuilders expect 2014 Housing Market to be "good"

U.S. homebuilders expect for another great year for housing in 2014.

According to the National Association of Homebuilders, the January Housing Market Index (HMI) posted in "positive" territory for the eighth consecutive month this month. The HMI is a measure of homebuilder confidence nationwide.

Buyer foot traffic remains near an 8-year high, and a high volume of homes is going under contract each month. With builder confidence strong, buyers may find it harder to locate "great deals" on homes as 2014 progresses.

Searching for new construction housing? Consider moving up your time frame.

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Homebuilder Confidence : Strong Into 2014 Season

Each month, the National Association of Homebuilders (NAHB) publishes its Housing Market Index, a metric meant to measure homebuilder sentiment for the single-family, new construction housing market.

The NAHB survey poses 3 questions, and asks for just one-word answers.

The survey is simple and effective. It 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 January 2014, the Housing Market Index reads 56.

The reading is a one-point drop from the month prior, but marks the 8th straight month that the index read north of 50. The last time this happened was in the eight-month period ending April 2006.

The Housing Market Index is more than 2x its value from January 2012.

Click here to prequalify for new construction.

New Construction Homes In High-Demand

The NAHB's homebuilder confidence survey continues to be buoyed by rising demand from today's U.S. buyers.

January's Housing Market Index showed buyer foot traffic near multi-year highs, which has resulted in an increasing number of monthly sales at increasingly higher sale prices.

It's no wonder builders are optimistic for 2014. Plus, sales volume is expected to be similarly elevated over the next six months.

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 since 2005.

Unfortunately, this could spell bad news for buyers because, unlike during last decade, today's U.S. builders know better than to outbuild demand. Nationwide, the supply of new homes for sale is expected to remain low, which creates upward home price pressure.  

At the current sales pace, the nation's stock of "new homes for sale" would be sold out in just 4.3 months. Contrast that with five years ago when home supply ran 12.1 months.

Housing market analysts believe supply of less than six months indicates a "seller's market".

The tight supply of homes is placing upward pressure on 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 markets which including Dayton, Ohio; and DuPage County, Illinois.

Low mortgage rates will likely spur demand this year, too.

Over the past one month, the average 30-year fixed rate mortgage has dropped as rents have climbed, on average. It's changed the mathematics of "Rent vs Buy" for many first-time buyers.

Furthermore, the FHA Back to Work program has reduced the waiting period after a foreclosure, bankruptcy or short sale to just one year, adding even more buyers to 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 167,000 new homes for sale nationwide -- a little bit more than 3,300 per state. Competition for new homes is fierce and, and the current speed of sales, the current U.S. inventory will soon be sold.

Buyers of new construction may benefit from buying early in 2014. Not only are mortgage rates projected to rise throughout the calendar year, but home prices are, too.

See what kind of home you can afford today. Get live mortgage rates at no cost and with no obligation. If you need a pre-approval, that's available, too.

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About the Author

Dan Green is a mortgage market expert, providing over 10 years of direct-to-consumer advice. NMLS #1019791. You can also connect with Dan on Twitter and on Google+.

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