Tuesday, October 23, 2012

Realty Times - Real Estate Outlook: Builder Confidence Rises

Builder confidence can be a prime litmus test for the health of future housing. Are builders pulling permits? Are they confident in future new home sales?

According to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence is at the strongest levels since June of 2006. What does this mean for the market?

"The slight gain in builder confidence this month is an indication that, while still moving forward, the speed at which the housing recovery is proceeding is being moderated by the various constraints such as tight credit, difficult appraisals and more recently, the limited inventory of buildable lots in certain markets," explained NAHB Chief Economist David Crowe. "These are the complicating factors that make it difficult for builder confidence to reach and surpass the 50-point mark, at which an equal number of builders view sales conditions as good versus poor."

Limited access to credit is still hampering a full housing recovery. "Many builders are reporting increases in the number of serious buyers visiting their sales offices, and the overall confidence measure is much higher than it was at this time last year," noted NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla.

"The concern is that, even though demand for new homes is rising, overly tight credit conditions are still constraining new building and new purchases at a time when that kind of economic activity and the job growth it generates are greatly needed."

The HMI has tracked builder confidence for the last 25 years. This index tracks builder perceptions on current home sales and sales expectations for the next six months. This month's survey showed a considerable gain over last month.

Builder confidence continued to improve in three out of four regions in October. Looking at three-month moving averages, the HMI gained two points in the Midwest and West to 42 and 44 on a scale of good being above 50. There was a three point gain in the South to 39 points. A three-month moving average for the Northeast's HMI held unchanged at 29.

According to Realty Trac, foreclosure filings were down another 8 percent in September and down 16 percent from September 2011. The national decrease in September and the third quarter was driven mostly by sizable decreases in the non-judicial foreclosure states such as California, Georgia, Texas, Arizona and Michigan.

The news wasn't all positive however, as some backed up foreclosures may soon be hitting the market.

"We've been waiting for the other foreclosure shoe to drop since late 2010, when questionable foreclosure practices slowed activity to a crawl in many areas, but that other shoe is instead being carefully lowered to the floor and therefore making little noise in the housing market -- at least at a national level," said Daren Blomquist, vice president at RealtyTrac. "Make no mistake, however, the other shoe is dropping quite loudly in certain states, primarily those where foreclosure activity was held back the most last year."

The report shows one in every 248 U.S. housing units with a foreclosure filing during the quarter.

Blomquist added that "a backlog of delayed foreclosures will likely build up in those states as lenders adjust to the new rules, with many of those delayed foreclosures eventually hitting down the road."

Published: October 22, 2012

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Source: http://realtytimes.com/rtpages/20121022_realestateoutlook.htm

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