Homebuilder Blues Here to Stay

Yesterday, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing a decline to the overall index as well as at best a flattening to most component indices.

It’s important to recognize that although the series are seasonally adjusted, each series has generally shown notable strength or noticeable flattening during the first quarter of each of the last 4 years.

Now that the early season optimism has likely run its course, look for these indices to turn southward again as builders more clearly contemplate the horrendous condition of their market.

The new home market will likely not resume any significant form of healthy function until the considerable overhang of inventory is cleared and with unemployment on the rise and the level of completion still unusually high, it appears that the overhang is here to stay.

Each component of the NAHB housing market index remains WELL BELOW the worst levels ever seen in over 20 years and continues to remain firmly in uncharted territory. (click on charts to enlarge)

Comments

[dfloydr:]

I am a Realtor in Phoenix.

Talking today to Pulte and Lennar in one of their projects I learned that sales are cooking. From Nov08 to Mar09 they closed about 2 homes per month each. April, May and now June are running 14 closings a month each and they are busily breaking ground on more spec homes to meet this surge of demand.

Valley wide our MLS inventory reached 58,000 at the end of Nov08. That is now down to 33,000 and declining at the rate of 800 a week inspite of any new foreclosures and short sales, and in many of the moderately priced areas inventories represent less than a one month supply.

95% of all closing this year have been under $400,000. Presently there are over 9,000 homes in escrow around the Valley. Some will take a while to close given the chaos at the buyers' lenders, many of which can't get their loan documents out fast enough to meet the closing dates required by the sellers' lenders who have agreed to short sales. Its crazy out there.

The glut remains in high end homes. The various plans coming out of DC have aggressively helped the bottom and middle of the market. DC and the banks have done little to nothing about the high end of the market. We are starting to see price adjustments in the $1 million plus inventory. Some are huge.

Jun 17 12:26 AM