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Market Indicators for the Home Building Industry in Northwestern Wisconsin

Builder confidence in the market for newly built, singlefamily homes dipped by a single point to 14 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for September, released today. The index has now held between 13 and 16 for six consecutive months. "Very little has changed in terms of housing market conditions so far this year," said NAHB Chairman Bob Nielsen, a home builder from Reno, Nevada. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes, and competing against foreclosed properties that they have seen for some time. Beyond this, both builder and consumer confidence took a hit in recent weeks with the market disruptions caused by the S&P downgrade and congressional gridlock on the budget deficit." "The fact that the HMI continues to hover within such a narrow, low range reflects builders' awareness that many consumers are simply unwilling or unable to move forward with a home purchase in today's uncertain economic climate," added NAHB Chief Economist David Crowe. "While some bright spots are beginning to emerge in about a dozen select metro areas, the broader picture remains fairly bleak due to the weak economy and job market."

October 1, 2011 Volume 1, Issue 1

Derived from a monthly survey that NAHB has been conducting for more than 20 years, 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." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from 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 three component indexes recorded declines in September. The component gauging current sales conditions slipped one point to 14, while the components gauging sales expectations in the next six months and traffic of prospective buyers each declined two points, to 17 and 11, respectively. The Midwest was the only region to post a gain in its HMI score for September, edging up one point to 11. Meanwhile, the Northeast and South each posted two-point declines to 15 and the West posted a three-point decline to 12.

NEW HOME SALES REMAIN DECLINE IN AUGUST Sales of newly built, single-family homes declined 2.3 percent to a seasonally adjusted annual rate of 295,000 units in August, according to newly released data from the U.S. Commerce Department. The decline is from an upwardly revised, 302,000-unit rate in the previous month. "The number of foreclosed homes on the market continues to pose major challenges, not just to builders who have to compete against that low-priced product, but also to buyers who need to sell an existing home before trading up to a new one," said Bob Nielsen, Chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "As the price data show, entry-level homes are generally driving the new-home market right now, and that's because first-time buyers don't have another home they have to sell." "As builders in our recent surveys have been telling us, the lull in new-home sales continued even as mortgage

rates held at extremely favorable levels in August. This is partly because continuing tight credit conditions are dissuading even well-qualified buyers, who are having trouble obtaining the good rates that are out there," said NAHB Chief Economist David Crowe. "However, on a positive note, today's numbers confirm that builders are wisely refraining from adding to the inventory of unsold new homes, which is currently at a 49-year low." The only region to register an increase in new-home sales in August was the Midwest, where sales rose 8.2 percent. Meanwhile, the Northeast, South and West posted declines of 13.6 percent, 2.4 percent and 6.3 percent, respectively. The inventory of new homes for sale fell to 162,000 units in August, a new record low. However, due to the slower sales pace, the months' supply of new homes rose slightly, to 6.6.

Northland Area Builders Association, 29148 Mail Road, Danbury, WI 54830 Tel: 715-259-3486 | Fax: 888-825-8073 Email: naba@centurytel.net | Online: www.northlandareabuilders.com


Housing Dashboard 2011

Wisconsin Unemployment Rate

Wisconsin Construction Employment

(seasonally adjusted)

(seasonally adjusted)

July

7.8% projected

June May April

7.6% 7.3% 7.4%

90,000 projected 90,300 88,000 87,300

March

7.4%

88,400

Wisconsin Privately Owned Housing Starts (# of units) 577 851 736 665 492

Source: US Bureau of Labor Statistics & US Census Bureau

1 & 2 Family Housing Permits

Ashland County

Bayfield County

Burnett County

Sawyer County

Washburn County

0 0 0 0 0

4 7 5 6 3

5 7 6 6 4

5 11 9 7 6

5 9 6 6 1

55

67

64

89

50

2011 July June May April March 2010 Year End Totals

Source: US Census Bureau/WBA

2010 2009

71% 70.4%

Source: US Census Bureau

Wisconsin Projected Households 2005 - 2030

2000

2005

2010

2015

2025

2025

2030

Ashland County

6718

6935

7160

7370

7545

7674

7735

Bayfield County

6207

6624

7045

7484

7857

8135

8289

Burnett County

6613

7162

7670

8179

8629

8943

9120

Sawyer County

6640

7233

7830

8442

8952

9343

9599

Washburn County

6604

7151

7676

8219

8707

9067

9335

National

2084556

2208571

2322062

2442354

2557504

2654905

2738477

Source: US Census Bureau


Framing Lumber Prices (per 1000 board feet)

Random Lengths Composite Price

CME Futures Price

Wisconsin Homeowner Vacancy Rates

2011

2010

Sept 2

$258

$244

First Quarter

1.8

1.2

Aug 5

$272

$224.5

Second Quarter

1.9

1.7

July 1

$264

$244.9

Third Quarter

1.9

June 3

$261

$231

Fourth Quarter

1.6

Source: NAHB

2011 Terms on Mortgages

Source: US Census Bureau

Fixed rate 30 year conventional

Effective Rate

Share of (contract interest rate total market plus fees and charges)

Fixed rate 15 year conventional

Effective Rate (contract interest rate plus fees and charges)

Share of total market

July

4.81

70.2

4.58

4.9

June

4.92

69.9

4.43

7.1

May

5.04

67.6

4.53

9

April

5.12

66.8

4.52

9.2

Source: Federal Housing Finance Agency

NAHB: REMODELING MARKETS POISED FOR RECOVERY The decline in remodeling activity may be reaching an end, according to the latest National Association of Home Builders' (NAHB) Remodeling Market Index (RMI). Current market conditions jumped to 47.0 from 36.4 in the fourth quarter of 2009. Future indicators of remodeling business leapt to 48.9 from 31.4 in the last quarter. A new unified measure incorporating both current and future conditions, called the RMI Index, rose to 47.9 from 33.9 in the previous quarter. The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number below 50 indicates that more remodelers say market conditions are getting worse than report improving conditions. The RMI has been running below 50 since the final quarter of 2005, but the first quarter 2010 is the best showing since the first quarter of 2006. "Remodelers are receiving more calls for work, but getting signed contracts is still challenging" said NAHB Remodelers Chairman Donna Shirey, CGR, CAPS, CGP, a remodeler from Issaquah, Wash. "We're working a little more, but not making more due to tighter margins, onerous federal regulations, and consumer anxiety about making large purchases."

Current conditions for the remodeling market improved in three regions: Northeast 45.8 (from 27.7 in fourth quarter 2009); Midwest 47.0 (from 37.5); and South 49.0 (from 40.0). However, remodeling conditions declined in the West to 36.6 (from 41.7). Major additions climbed to 53.8 (from 40.0), as did minor additions to 49.6 (from 40.7). Maintenance and repair grew to 36.6 (from 27.1). Summary indices for future market indicators swelled substantially with calls for bids jumping to 56.3 (from 37.5 in fourth quarter 2009)) and appointments for proposals soaring to 59.2 (from 34.4). The amount of work committed for the next three months expanded modestly to 33.0 (from 21.9). Backlog of remodeling jobs also strengthened to 47.2 (from 31.9). "Although the overall RMI and most of its components are still slightly below the break-even point of 50, the recent improvements suggest that the remodeling market may soon reach its bottom and begin to grow in the coming months," said NAHB Chief Economist David Crowe. "However, professional remodelers are still operating in a highly competitive marketplace and dealing with consumers who are uncertain about the future."


MORTGAGE BANKERS ASSOC: MORTGAGE APPLICATIONS INCREASE Mortgage applications increased 9.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 23, 2011. The Market Composite Index, a measure of mortgage loan application volume, increased 9.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 9.2 percent compared with the previous week. The Refinance Index increased 11.2 percent from the previous week. The seasonally adjusted Purchase Index increased 2.6 percent from one week earlier. The unadjusted Purchase Index increased 2.2 percent compared with the previous week and was 0.1 percent higher than the same week one year ago. The four week moving average for the seasonally adjusted Market Index is up 1.96 percent. The four week moving average is down 0.18 percent for the seasonally adjusted Purchase Index, while this average is up 2.60 percent for the Refinance Index. “Mortgage rates declined last week, at least partially in response to the Fed’s announcement that they would shift their portfolio towards longer-term Treasury securities, and that they would resume buying mortgage-backed securities,” said Mike

Fratantoni, MBA’s Vice President of Research and Economics. “With lower rates, refinance application volume increased to its highest level since August 19, 2011. Purchase application volume also increased. However, the increase was in conventional purchase applications, which were up by 4.9 percent. Purchase applications for government loans fell by 0.6 percent over the week, likely influenced by the pending decline in FHA loan limits.” The refinance share of mortgage activity increased to 79.7 percent of total applications from 78.3 percent the previous week. This is the highest refinance share of mortgage activity since the survey’s re-benchmark in January 2011. The adjustable-rate mortgage (ARM) share of activity decreased to 6.1 percent from 6.7 percent of total applications from the previous week. The average loan size of all loans for home purchase in the US was $212,700 in August 2011, up from $211,200 in July 2011. The average loan size for a refinance was $241,300, up from $209,200 in July. The largest purchase loans were made in the Pacific region at $304,800. The largest refinance loans were also made in the Pacific region at $344,500.

NAHB: 12 METRO AREAS SHOW SUSTAINED ECONOMIC RECOVERY The National Association of Home Builders (NAHB) released its first NAHB/First American Improving Markets Index (IMI), a new economic index revealing metropolitan areas that have shown improvement for at least six months in three key economic areas—housing permits, employment and housing prices.

“It’s not surprising that many of the states represented are energy rich areas,” Crowe continued. “Those are the regions still experiencing relatively strong employment, supporting housing demand.”

The list of metropolitan areas includes Alexandria, LA; Anchorage, AK; Bangor, ME; Bismark, ND; Casper, WY; Fairbanks, AK; Fayetteville, NC; Houma, LA; Midland, TX; New Orleans, LA; Pittsburgh, PA; and Waco, TX. “Despite the challenging conditions in the national economy and housing sector, there are areas throughout the country where we are seeing pockets of improvement” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “Housing conditions are local, and do not always reflect the national picture. We created this new index to shine a light on those housing markets across the country that have stabilized and have begun to show signs of recovery.” “By examining key indicators of home prices, employment and housing permits data, we are using a comprehensive, but conservative method in determining which markets are improving,” said NAHB Chief Economist David Crowe. “Last year at this time, there was not a single market that showed improvement using these criteria, and now we can point to 12 examples of growth.”

October 4 - NABA Networking Night, Spooner October 5 - WBA Leadership Training, Chula Vista October 6 - WBA Board Day, Chula Vista October 19 - NABA Board of Directors Meeting November 3 - NABA Contractor Education Day, Spooner (4 ceu) November 8 - NABA Networking Night, Hayward November 16 - NABA Board of Directors Meeting Dec 8-9 - NW Regional Professional Builder Education Worskhop (12 ceu) December 9 - NABA Holiday Mystery Dinner, Hayward


The Index - October 2011  

NABA's monthly publication to members containing market indicators and other industry information.

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