ReportWire

Tag: robdietz

  • Home builders turn bullish for the first time in nearly a year amid strong housing demand

    Home builders turn bullish for the first time in nearly a year amid strong housing demand

    [ad_1]

    The numbers: For the first time in nearly a year, home builders are upbeat about the housing market outlook.

    The shortage of previously-owned sales is helping to buoy builders’ confidence. 

    With mortgage rates above 6%, many homeowners find little incentive to sell—nearly 92% have an outstanding mortgage with a rate below 6%, according to a recent survey conducted by Redfin
    RDFN,
    -0.37%    ,
    a brokerage and real estate listings company. And 23.5% of homeowners have a mortgage rate of less than 3%. Consequently, the number of new home listings has dropped by 22%, as compared with the same period a year ago, according to a Realtor.com housing trends report.

    In turn, home builders are feeling good about their business. The National Association of Home Builders’ (NAHB) monthly confidence index rose 5 points to 55 in June, the trade group said Monday.

    This is the sixth month in a row that sentiment has improved among builders. It is also the first time in 11 months that builder confidence has moved into positive territory of above 50.

    The June reading of 55 was the strongest since July 2022. A year ago, the index stood at 67.

    Key details: Builders were starting to pull back on sales incentives. The share of builders cutting prices to boost sales has dropped to 25% in June, from a peak of 36% in November 2022.

    The typical builder was cutting prices by 7% in June, the NAHB said.

    The three gauges that underpin the overall builder-confidence index were up.

    • A reading on current sales conditions rose by 5 points. 

    • A measure on future sales gained 6 points.

    • A gauge of traffic of prospective buyers rose by 4 points. 

    Big picture: Due to pandemic-era monetary policies that depressed mortgage rates, the home buyers, real-estate agents, mortgage brokers and the rest of the industry are stuck trying to find solutions to a major supply crunch of homes.

    Builders seem to be one of the few participants who have benefited from the supply crunch, given the nature of their business of new construction. The homebuilder ETF,
    XHB,
    -0.38%    ,
    is up 25% year-to-date. 

    What the NAHB said: “A bottom is forming for single-family home building as builder sentiment continues to gradually rise from the beginning of the year,” Robert Dietz, chief economist at the NAHB, wrote.

    And with the “Federal Reserve nearing the end of its tightening cycle,” the statement read, it’s “good news for future market conditions in terms of mortgage rates and the cost of financing for builder and developer loans.”

    Markets were closed on Monday in observance of the Juneteenth holiday.

    Realtor.com is operated by News Corp subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.

    [ad_2]

    Source link

  • Builder sentiment fell every single month in 2022. Builders say there’s a silver lining.

    Builder sentiment fell every single month in 2022. Builders say there’s a silver lining.

    [ad_1]

    The numbers:  The National Association of Home Builders’ monthly confidence index fell two points to 31 in December, the trade group said on Monday.

    It’s the 12th month in a row that the index has fallen.

    Outside of the pandemic, the December reading of 31 is the lowest level since mid-2012.

    A year ago, the NAHB index stood at 84. The index’s 12-month drop is a new record. 

    But it’s not the biggest drop, the NAHB said. The drop in builder confidence between the end of 2004 and the start of 2009 was sharper; the index fell from 71 to 8 in that span.

    Key details: The three gauges that underpin the overall confidence index were mixed:

    • The gauge that marks current sales conditions fell by 3 points. 

    • The component that assesses sales expectations for the next six months rose by 4 points.

    • And the gauge that measures traffic of prospective buyers was unchanged from last month.

    All four NAHB regions posted a drop in builder confidence, led by the South and the Northeast. 

    Big picture: While builders continue to struggle to find buyers with the current rate environment, they’re also seeing a light at the end of the tunnel.

    Buyers are slowly coming back to the table as mortgage rates are no longer above 7%, and home price growth is moderating.

    And with 62% of builders offering incentives like mortgage rate buy-downs, paying points for buyers, and even price reductions, that luring some buyers, per the NAHB.

    About 35% of builders were dropping home prices in December, the NAHB said, with the average price reduction being 8%.

    What the NAHB said: “The silver lining in this HMI report is that it is the smallest drop in the index in the past six months, indicating that we are possibly nearing the bottom of the cycle for builder sentiment,” Robert Dietz, chief economist at the NAHB, said in a statement.

    “Mortgage rates are down from above 7% in recent weeks to about 6.3% today, and for the first time since April, builders registered an increase in future sales expectations,” he added.

    But the NAHB is expecting “weaker housing conditions” to persist in 2023, and only forecasts a full recovery in 2024, Dietz said. There is still a gap of 1.5 million housing units, they estimated nationwide.

    Nonetheless, the path to recovery is hard, the builders stressed.

    “In this high inflation, high mortgage rate environment, builders are struggling to keep housing affordable for home buyers,” Jerry Konter, chairman of the NAHB and a home builder and developer from Savannah, Ga., said in a statement.

    “With construction costs up more than 30% since inflation began to take off at the beginning of the year, there is little room for builders to cut prices,” Konter added.

    What are they saying? “We think home sales will find a floor by the end of the first quarter, helped by the near-75 [basis point] decline in mortgage rates since late October,” Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics, wrote in a note.

    “But a meaningful recovery is still a long way off, and home prices have much further to fall,” he added.

    Market reaction: The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.597%
    rose to 3.57% on Monday morning.

    While the SPDR S&P Homebuilders ETF
    XHB,
    -1.67%
    traded slightly lower during the morning session, as well as big home builder stocks like D.R. Horton Inc
    DHI,
    -1.44%    ,
    Toll Brothers
    TOL,
    -0.87%    ,
    and Lennar
    LEN,
    -2.28%    .

    [ad_2]

    Source link