April Data Suggests Market At or Near Bottom
Below is another article from the NAHB suggesting that 2009 is going to be the year things start to rebound. Of course we never know the market is at the bottom until the it starts coming back up… but this article brings up some interesting points.
In Durango right now, we are seeing favorable conditions for buyers. Interest rates are at record lows, land prices have decreased and there is plenty of inventory to choose from. Building costs have stabilized with lumber costs at a 7 year low and trade contractors competing for business.
In the past year, we’ve also seen a number of trade contractors and home builders go out of business and exit our local market. So… when consumer confidence bounces back, as we have already started to see this first quarter of 2009, and buyers start taking advantage of the favorable conditions by starting their plans for building, what do you think will happen to building costs?
I just got back from a Builder 20 meeting, where I met with 20 top end builders from all over the nation. Every one of us has seen an increase in interest for new construction during this first quarter, and every one of us anticipates that with a shortage of trade contractors and builders available to do the work, construction pricing will be on the upward move again. Because Durango is a dream destination for many people, we have not been hit as hard as the rest of the nation during these economic times, so our demand will bounce back quickly. In a smaller market with a limited workforce such as ours, we anticipate pricing to climb as the demand for new homes increases and trade contractors become overloaded with work.
At Kogan Builders, we’ve been telling our clients who want to build in the next two years to start thinking about putting their project into motion now. By evaluating the site, and beginning the design now, our clients can be ready to break ground as soon as the timing is right for them, taking advantage of the lowest possible construction pricing. Because the site evaluation, design and engineering can take anywhere from 3-18 months, we encourage people to take care of these preliminary steps so they are ready to go when the market turns around.
If you find yourself in this situation, take us up on our Free Site Evaluation where we walk your property and give you ideas about design and building placement and estimate rough costs for infrastructure and construction. Kogan Builders is a full service design-build company, so we can ensure your design is ready when you are.
Ok… here’s the article I promised you!
HOME BUILDER CONFIDENCE POSTS BIGGEST GAIN IN FIVE YEARS
WASHINGTON, April 15 – Builder confidence in the market for newly built, single-family homes rose five points in April to the highest level since October 2008, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This gain was the largest one-month increase recorded since May of 2003, and brings the HMI out of single-digit territory for the first time in six months – to 14. Every component of the HMI reflected the boost, with the biggest gain recorded for sales expectations in the next six months.
”If you’re a potential buyer who’s been sitting on the fence waiting for a sign that now is the time to act, this is it,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “Some of the most favorable buying conditions in a lifetime are now in place, and they are drawing more consumers back to the market.”
”This is a very encouraging sign that we are at or near the bottom of the current housing depression,” said NAHB Chief Economist David Crowe.
“With the prime home buying season now underway, builders report that more buyers are responding to the pull of much-improved affordability measures, including low home prices, extremely favorable mortgage rates and the introduction of the $8,000 first-time home buyer tax credit.”
Crowe cautioned, however, that a key issue that still must be addressed is the ongoing lockdown on builder acquisition, development and construction (AD&C) financing. “Restoring health to our nation’s economy will require a substantial housing recovery, and that recovery is contingent on breaking the logjam in AD&C lending that presents an ever-increasing obstacle for home builders,” he said.
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations in the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Each of the HMI’s component indexes recorded substantial gains in April. The largest of these gains was a 10-point surge in the component gauging builder sales expectations for the next six months, which brought that index to 25. The component gauging current sales conditions and the component gauging traffic of prospective buyers each rose five points, to 13 and 14, respectively.
The HMI also rose in every region in April, with an eight-point gain to 16 in the Northeast, a six-point gain to 14 in the Midwest, a five-point gain to 17 in the South and a 4-point gain to 9 in the West.
Editor’s Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be accessed online at: www.nahb.org/hmi. More information on housing statistics is also available at: www.housingeconomics.com.
