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November Eye on the Economy |
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| 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. |
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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 |
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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 |
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NAHB Chief Economist David Crowe comments on the three-point increase in the NAHB/Wells Fargo Housing Market Index in November. Posted: Nov. 16 |
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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 |
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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 |
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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 |
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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 |
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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 |
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