November Eye on the Economy
Weak Housing Market Beginning to Lean in the Right Direction

A patchwork of good and not-so-good housing and economic data emerged over the past three weeks. Housing measures appeared to start moving in the right direction, but from record low levels.

The advance estimate of real third-quarter GDP growth of 2.5% was lowered to 2.0% by a sharp downward revision to business inventories. While this is subpar and insufficient to bolster employment growth, it is an improvement over the 0.4% and 1.3% growth recorded in the first and second quarters of 2011, respectively.

Declines in energy prices — particularly for gasoline at the pump — drove down both producer and consumer prices modestly in October. However, home builders saw a moderate increase in the costs of most of the materials they use in construction.

The Case-Shiller and Federal Housing Finance Agency home price indexes both showed modest growth in the third quarter, although they have been somewhat volatile from month to month, with the former declining a bit and the latter inching higher in September.

The single-family housing market has recently seen small signs of improvement:

  • Builder confidence tracked by the NAHB/Wells Fargo Housing Market Index climbed six points over the past two months to a reading of 20 in November, which is still well below the level of 50 indicating a balanced market.

  • New single-family home sales were up for two consecutive months, rising in October to a reading that was the12th lowest since comparable records began in 1963.

  • After declines for three months in a row, single-family starts rose by a solid 3.9% in October, but they were still not appreciably higher than they were in May of 2010.

Multifamily starts have performed better, rising almost 90% over the 12 months from October 2010 to 2011. Multifamily starts fell 8.6% in October — with an even larger 13% decline in starts of buildings with five or more units — but this was likely a correction to a more than 50% spike the month before.

Existing home sales improved modestly in October, recovering some lost ground from the previous month. The general trend in existing home sales has been down this year as the result of a high rate of contract cancellations and fewer investors.

NAHB’s latest biannual survey on the cost of construction finds that it has cost significantly less to build a new single-family home this year than in 2009 because of declining square footage. While there hasn’t been much change in the share of the sales price that goes to construction costs, builder profit dropped to an all-time low of just 6.8% of the final sales price in 2011.
Latest Postings
House Prices Continue to Grow, With Modest Gains in the Third Quarter

House prices continued to improve in the third quarter, with both major indexes achieving modest gains. Posted: Nov. 29

Third Quarter 2011 AD&C Lending Update

Lending for acquisition, development and construction (AD&C) continued to decline in the third quarter of 2011, but the rate of decline was slowing. Posted: Nov. 29

Slight Improvement in New Home Sales

New home sales increased 1.3% in October to a seasonally adjusted annual rate of 307,000; inventory remained at a record low of 162,000; and there was a record-low 60,000 completed homes ready to be occupied. Posted: Nov. 28

Third Quarter GDP Growth — Second Estimate: Inventory Size Matters

Third-quarter real GDP growth was revised down to 2.0% in the second estimate — from 2.5% — due primarily to a contraction in private inventory investment. Posted: Nov. 23

Improving Markets Index: Fort Collins, Colo.

A healthy mix of services and high-tech manufacturing, the presence of Colorado State University and a booming oil and gas industry in neighboring Weld County put Fort Collins, Colo., on the NAHB/First American Improving Markets Index. Posted: Nov. 23

Existing Home Sales Held Back By Increasing Contract Cancellations

Existing home sales continue to drift, held back by a high rate of contract failures. They were up 1.4% in October, rising to 4.97 million units. Posted: Nov 21

Improving Markets Index: Tyler, Texas

A well diversified economy based on higher education, healthcare and the oil and gas industry put Tyler, Texas, on the NAHB/First American Improving Markets Index. Posted: Nov. 18

Mortgage Bankers: Newly Delinquent Mortgage Loans Fall to Lowest Share in Almost Four Years
In the third quarter, delinquent loans declined 45 basis points to a 7.99% share of total mortgages outstanding. The share of loans in the foreclosure process remained unchanged at 4.43%, but the loans starting to go into actual foreclosure increased to a 1.08% share, up 12 basis points. Posted: Nov. 17
Housing Affordability Continues Near Record High

The NAHB/Wells Fargo Housing Opportunity Index (HOI) shows housing affordability in the third quarter hovering near its highest level in the 20 years of the index. Posted: Nov. 17

Multifamily Starts Down in October, But Still Better Than Last Year

Starts in buildings with five or more apartments came in at 183,000 in October, down 13% after a temporary spike in September. Posted: Nov. 17

Housing Construction Improves
Housing starts were effectively unchanged in October, with single-family starts up 3.9% and multifamily construction down 8.3% after a large jump in September. Posted: Nov. 17
Slower CPI Growth in October, But Real Rents Accelerate

The 16-month run of steady growth in the Consumer Price Index (CPI) paused in October with a 0.1% decrease — only the second month-over-month decline since June of 2010. Posted: Nov. 16

Video: Chief Economist Dave Crowe on the NAHB/Wells Fargo HMI Moving Three Points in November
NAHB Chief Economist David Crowe comments on the three-point increase in the NAHB/Wells Fargo Housing Market Index in November. Posted: Nov. 16
Builders Sentiment Up For Two Consecutive Months
The November NAHB/Wells Fargo Housing Market Index rose three points to 20 from a revised October level of 17. All three components of the index were up, including a two-point increase in expectations for the single-family market and a three-point increase in current sales. Posted: Nov. 16
PPI: Energy Prices Ease In October, But Most Residential Building Material Prices Shift Up
Easing energy prices were largely responsible for a 0.3% decline in October’s producer price index, with gasoline falling 2.4%. Posted: Nov. 15
Construction Hiring Surprisingly Strong in September JOLTS Data

The Job Openings and Labor Turnover Survey (JOLTS) shows job openings heading up in September despite the sluggish national economy. They totaled 3.4 million, the highest since August 2008. Posted: Nov. 14

Builder Confidence in 55+ Single-Family Market Still Low
Builder confidence in the 55+ new home market remains weak, with the third quarter 2011 NAHB 55+ Housing Market Index for single-family homes down three points year-over-year. Posted: Nov. 11
Improving Markets Index: Jonesboro, Ark.
A large, growing and diversified industrial base specializing in food production; its position as a regional healthcare center; and the presence of Arkansas State University put Jonesboro on the NAHB/First American Improving Markets Index. Posted: Nov. 10
Cost of Constructing a New Single-Family Home in 2011
The NAHB construction cost survey shows that the average price of a single-family home has dropped over the last two years, but the share of that price attributable to the costs of construction and the finished lot has not changed significantly. Posted: Nov. 10