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NAHB: Builder Confidence Dips on Hurricane Damage

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Home builders had less confidence in housing market conditions in September. In the aftermath of Hurricanes Harvey and Irma, builders worried that ongoing shortages of construction labor and materials would worsen.  NAHB Chairman Granger MacDonald said that concerns over labor and building materials were “intensified,” but said that builder confidence was expected to return to high readings once rebuilding is underway.

The National Association of Home Builders Housing Market Index dropped three points to an index reading of 64 with all three component readings lower than they were in August. Builder confidence in current market conditions for new single-family homes dipped for points to an index reading of 70. Builder confidence in housing market conditions over the next six months also dropped points to 74. September’s reading for buyer traffic in new housing developments was one point lower at 47.

Construction Labor and Materials Shortages Expected to Worsen

Home builders have cited shortages of labor and building materials in recent years, but these shortages are expected to grow in coming months due to massive amounts of construction workers needed for rebuilding after severe storm damage and flooding wiped out homes, businesses, and infrastructure. As with the high demand for homes caused by low inventories of homes for sale, labor and materials costs will likely rise as rebuilding begins

The NAHB Housing Market Index measures builder confidence on a scale of 0 to 100. Any reading over 50 indicates that more builders than fewer consider housing market conditions to be in positive territory. While September readings are well within positive territory, approaching winter weather and shortages may cause builder confidence in housing market conditions to decrease.

Regional Builder Confidence Readings Mixed

Three-month rolling average readings for four regions tracked by NAHB had missed results in September. The Northeast posted a one-point gain to 49; the Midwest posted a loss of three points for a reading of 63 and the Southern region posted a one-point loss for a reading of 66. The West posted a two-point gain for a reading of 77.

Future builder confidence readings depend on conditions as storm season continues and winter weather sets in.

New Home Construction Seen As A Possible Solution To Pent Up Demand For Homes

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New Home Construction Seen As A Possible Solution To Pent Up Demand For HomesBuilder confidence in markets for new homes fell three points in February to a reading of 58. January’s reading was revised upward to 61. Builders have repeatedly expressed concerns shortages of labor and lots for development, but continue to express confidence in future sales conditions.

David Crowe, National Association of Home Builder’s (NAHB) chief economist, said that builders are watching slowing economic trends, but also cited low mortgage rates, improving labor markets and pent-up demand for homes as factors for strong U.S. housing markets. The NAHB notes that any reading over 50 indicates that more builders were confident than those who were not.

HMI Components Readings

The three readings used to calculate the NAHB Housing Market Index (HMI) were also lower. The reading for current sales conditions fell by three points to 65; the reading for sales conditions over the next six months fell by one point to 65. Home builders were less confident in buyer traffic in new home developments; the February reading dropped by five points to 39. Although the buyer traffic gauge was its lowest in nine months, it hasn’t topped the benchmark of 50 since the peak of the housing bubble ten years ago.

Three month rolling averages for the four regions charted by NAHB also dropped. The Northeastern region was 2 points lower at 47; the Southern region also lost two points for a reading of 59. The Midwestern region lost one point for a reading of 57 and the Western region dropped three points for a reading of 72.

Building New Homes Seen as Solution to Pent Up Demand for Homes

Analysts responded to February’s HMI with mixed views. Some analysts said that buyer demand for homes would override concerns over building costs. This view makes sense in view of pent-up demand driving up home prices. At some point, affordability and buyers ability to qualify for mortgage loans are likely slow the rate of increasing home prices.

Less pent-up demand could also help first-time and moderate income buyers compete for homes as buyer demand eases. First-time and moderate income buyers are essential in driving home sales, as their purchases of pre-owned homes allow homeowners to buy larger homes or relocate.

Reports on Housing Starts and Building Permits scheduled this week will shed additional light on home builder activity.

A Guide to Selecting a Home and Property That Will Suit Your Growing Family

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A Guide to Selecting a Home and Property That Will Suit Your Growing FamilyBoth seasoned homeowners and first-time buyers know making the decision to purchase a new home is not one that is taken lightly. There are so many things to consider, from choosing a home with growth potential to finding a community to support a family’s interests and lifestyle.

While the decisions may seem endless, don’t be discouraged. Develop a strategic approach to buying a home with our definitive guide to selecting a home and property that will suit a growing family’s needs. Use this guide, along with advice from a trusted real estate professional in your area, to get started on the path to home ownership.

Look For Neighborhoods With Growth Potential

Choosing the right location is one of the most grappled with decisions when it comes to buying a home. While some home-buyers aspire to “keep up with the Joneses,” purchasing a home in the “trendy” neighborhood of the moment, savvy home-buyers know the best bargains can be found in “up-and-coming” locales.

Skip the higher property values and congestion and search for a home in an unincorporated area with growth potential. This might require driving a few extra blocks for that morning Starbucks coffee, but this will easily be overlooked once the community grows (and your home value with it).

Unfinished Basements Are Your Friend

Sure, most home-buyers cringe when they enter the sometimes scary, always dark and lonely, unfinished basement. But the savvy home-buyer knows unfinished basements are their friend.

A basic renovation can take the space from ghastly to awesome. Unfinished basements provide a number of options for growing families and are a great way to add bathrooms, bedrooms and common areas for kids and teens.

Choose A Home With Income Potential

While the average buyer is interested in a single-family home, don’t discount homes with basement apartments or mother-in-law suites. These types of home configurations can lead to significant income potential and can help to offset the cost of a monthly mortgage payment.

Income potential doesn’t just include garage apartments and mother-in-law suites; it encompasses open space as well. Build a duplex or a guesthouse on extra land for a significant return on investment. Or, take advantage of special land grants to grow crops or house bees on unused acreage.

Think Long-Term When Choosing Schools

When choosing schools, think macro not micro. Remember to evaluate school districts at all levels: elementary, middle and high schools. Don’t choose a community based on the elementary school, if the middle and high schools are not as impressive.

A young child might be an elementary school student upon purchasing the home, but will matriculate through the school district during the course of a 30-year mortgage. Be sure to select a home in a community with a school district that can support youngsters at every level.

For more information about finding a home for a growing family, contact a real estate agent in your area. 

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