Wednesday, August 15, 2012

Homebuilder Confidence Highest Since Feb. 2007, Homebuilder Stock Index Highest Since April 2008

1. From today's report on builder confidence from the NAHB: 

"Builder confidence in the market for newly built, single-family homes improved for a fourth consecutive month in August with a two-point gain to 37 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This gain builds on a six-point increase in July and brings the index to its highest level since February of 2007 (see chart above)."

“From the builder’s perspective, current sales conditions, sales prospects for the next six months and traffic of prospective buyers are all better than they have been in more than five years,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “While there is still much room for improvement, we have come a long way from the depths of the recession and the outlook appears to be brightening.”

2. The bottom chart above compares the performance of the S&P Homebuilders Index (based on stocks that reflect homebuilding activity including Pulte Group, Toll Brothers, Home Depot, Lumber Liquidators, Masco, Owens Corning, etc.) over the last year to the S&P 500 Index.  Since August of last year, the S&P Homebuilders Index has increased by 71%, almost three times the 25% increase in the S&P 500 Index over that period. The S&P Homebuilders Index has reached levels this week that have not been seen since April 2008, more than four years ago.

From DataQuick:

3. "Southern California home sales rose above the year-ago level for the seventh consecutive month in July despite continued declines in low-end distress sales.  Increased activity in move-up and high-end submarkets also contributed to a significant rise in the region’s median sale price, which neared a four-year high. The median price paid for a home in the six-county Southland rose to $306,000 last month, up 2.0 percent from $300,000 in June and up 8.1 percent from $283,000 in July 2011. 

July’s median was the highest since the median was $308,500 in September 2008. The median has risen month-to-month for six consecutive months and has increased year-over-year for the past four. July’s 8.1 percent annual gain was the highest for any month since July 2010, when the median rose 10.1 percent. 

Greater demand, partially triggered by historically low mortgage rates, and a thinner inventory of homes for sale help explain recent gains in the median price. But the increases also stem from a sharp drop in foreclosure resales, which often sell at a steep discount and are concentrated in lower-cost areas, as well as a substantial increase in the portion of sales in mid- to high-end neighborhoods." 

4.  "Home sales in the Bay Area rose on a year-over-year basis for the 13th month in a row in July, the result of increased mid- and up-market buying activity. The median price paid for a home was the highest in almost four years.

A total of 8,461 new and resale homes were sold in the nine-county Bay Area last month. That was down 1.4 percent from 8,577 the month before, and up 22.9 percent from 6,887 for July 2011. The median price paid for all new and resale houses and condos sold in the Bay Area last month was $421,000. That was up 1.0 percent from $417,000 in June, and up 12.6 percent from $374,000 in July 2011. Last month’s median was the highest since it was $447,000 in August 2008." 

MP: Evidence continues to accumulate that we've moved past the bottom of the real estate market this year, and have entered a new period of recovery characterized by ongoing increases in both home sales and median prices, rising builder confidence, and strong gains in the S&P Homebuilder Index.    


At 8/15/2012 2:03 PM, Blogger bart said...

NAHB values before 50 are negative.

At 8/15/2012 2:20 PM, Blogger Buddy R Pacifico said...

"NAHB values before 50 are negative."

From the NAHB:

"...the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”

Values below 50 indicate a "poor" outlook. At 50, the outlook seems to indicate "fair" and above it is "good" -- the next six months.

At 8/15/2012 2:21 PM, Blogger Jon Murphy said...

NAHB values before 50 are negative.

Which is what makes the chart so confusing.

The NAHB is a diffusion index, much like the PMI. It basically asks "are things better than last month or worse?" Like you said, Bart, a reading under 50 is a contraction. What is odd, though, is although the NAHB is tracking upwards, the actual number indicates a contraction in the housing sector. The number of housing starts has been improving steadily. I don't understand, then, why the NAHB can be negative when the actual statistics are improving. It doesn't make any sense.

At 8/15/2012 2:23 PM, Blogger Jon Murphy said...

The only thing I can think of is that homebuilders are still in a pre-recession mindset. Even though housing is improving, they think since it is below the pre-recession peak, that things are not improving. Thoughts on that?

At 8/15/2012 2:36 PM, Blogger bart said...

Jon Murphy said...
The only thing I can think of is that homebuilders are still in a pre-recession mindset. Even though housing is improving, they think since it is below the pre-recession peak, that things are not improving. Thoughts on that?

Every year since 2008-9, the bulls have been calling for a bottom, especially in 2011 and we had a brand new all time low in Case Shiller for example in March 2012 - just 5 months ago.

Builders have been severely burned and at worst are being too conservative, and at best are just reflecting the low level of certainty given things like all time historical lows in mortgage rates and the very high cash and foreign buys.

We also just plain haven't hit the lows when looking at a first time home prucahse, 20% down, 30 year.

Rent vs. house payment, one view

At 8/15/2012 3:25 PM, Blogger Jon Murphy said...

That makes sense, Bart

At 8/15/2012 3:54 PM, Blogger bart said...

Damn, I screwed up and was too clear again... -g-


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