Foot Traffic Up as Home Buying Real Estate Outlook: A Becomes More Affordable Turnaround May Be in Sight Thanks to record low mortgage rates and declining home prices, 55 million families — or half of all U.S. households — can afford today's $200,000 median-priced new home, according to figures released by NAHB. "That's an increase of 17 million households from conditions just two years ago and the best housing affordability number we have seen in years," said NAHB Chairman Joe Robson. "We are now seeing the first signs that buyers are returning to the marketplace." Based on data from the U.S. Census Bureau comparing home prices, mortgage rates and the minimum income needed to purchase a medianpriced home in February 2007 and February 2009, a typical family today can purchase a house with $20,000 less in household income and save nearly $500 per month on their principal, interest, taxes and insurance. About 55.4 million households can afford to purchase a home today, compared with 38.4 million two years ago, according to figures compiled by NAHB. "With affordability up dramatically, reports from our builders in the field indicate that foot traffic in new homes is on the rise and consumer interest is increasing with each passing day. These are encouraging signs that the housing market may be finally reaching a bottom," said Robson. Entering the crucial spring home buying season, there are other signs that buyers are starting to return to the market. Single-family permits were up 11% in February, new and existing home sales also posted gains and the huge inventory backlog is being slowly whittled down. In a survey for Century 21 Real Estate last month among prospective first-time home buyers who indicated they were likely to purchase a home in the next two years, a majority — 78% — said that now is a good time to buy a home. Of those responding to the online poll, 68% said that now is a better time to buy than six months ago. Another sign that consumers are considering jumping back into the housing market is the growing
interest in the $8,000 first-time home buyer tax credit included in the recently enacted economic stimulus package. During February and March, 1.5 million visitors logged on to NAHB's consumer Web site, www. federalhousingtaxcredit.com, to learn more about the tax credit. Further, a new survey commissioned by Move, Inc. found that nearly 20% of those who plan to purchase a home this year are doing so to take advantage of the tax credit, which expires at the end of November. "With home values in many markets at the lowest level since 2003, an $8,000 tax credit available to first-time home buyers, fixed-rate mortgages under 5% and an outstanding selection of homes to choose from, buyers are starting to recognize that this has the makings for a one-time opportunity to break into the market," said Robson. Housing is a critical component of the U.S. economy, accounting for about 15 cents of every dollar spent in this country, so any upturn in the housing market should be viewed as good news for the overall economy, said Robson. Construction of an additional 500,000 single-family homes — the difference between today's anemic construction rate and one that would move closer to meeting the underlying demand for housing — would generate 734,000 jobs and $35 billion in wages in the construction industry and another 790,000 jobs and $37.7 billion wages in manufacturing, trade and service sector jobs, he noted. Additionally, another half-million housing starts would bolster the tax base for government, generating $45 billion in federal, state and local tax revenues. And the benefits go well beyond the completion of each home. Within the first year after buying a home, those half million households will spend about $2.5 billion more on appliances, furnishings and property alterations. "Clearly, housing will be central to any economic recovery we experience in the months ahead," said Robson. The above article has been provided to you compliments of NAHB and Nation’s Builder News.
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Almost no one in the economic forecasting business wants to take the risk of announcing that it's now official. We're past the rock bottom of the down cycle for real estate and now we're moving into recovery mode. That's understandable, but the fact is that the signs are all there. Sales and pending sales of homes have turned up sharply in hard-hit markets. House prices are more affordable. Consumer confidence polls show slight but noteworthy improvements in the public's outlook. Check out developments for the week of April 6 alone: Mortgage applications for purchases of resale and new homes were up again — 8% for applications using conventional loans, and a remarkable 17% gain in applications to buy houses using low-downpayment FHA mortgages. Mortgage rates remain at near historic lows, though they may be bottoming out. Thirty-year fixed rates rose a tenth of a percent on average, according to the Mortgage Bankers Association, to 4.7%. Fifteen year rates stayed flat, around 4.5%. A group of new consumer-sentiment polls came out showing that Americans are feeling better about their economic prospects for the first time in months. A survey of 15,000 adults by Discover Financial Services recorded a significant jump in confidence between February and March. A New York Times/CBS poll of 1,000 consumers found the same. The Times even put the results at
the top its front page with the headline: "Poll Finds Brightening Outlook on U.S. Economy." Members of NAHB reported that shoppers' visits to look at new houses for sale are "on the rise and consumer interest is increasing.” The association also announced that more than half of all U.S. households — 55 million of them — can now afford to buy the median-priced $200,000 new home. That's up 45% in the past 24 months. Even Business Week, which has been particularly harsh on housing in recent years, ran a cover story about the turnaround getting underway — focusing on hard-hit areas of Florida, California and Las Vegas, where sales have been rising fast and unsold inventory taking a plunge. The report quoted Paula Hellenbrand, president of the Cape Coral Florida Association of Realtors®, who predicted an end to inventory problems on the near horizon. "At this rate (of current sales),” she told the magazine, "we're going to see a big shortage of inventory by summer, and that will trigger price increases.” That would be extraordinary, especially in view of still-rising unemployment and depressed levels of spending by consumers. But don't count it out. The above article has been provided to you compliments of NAHB and Nation’s Builder News.
Single-Family Home Starts Unchanged in March Characteristic volatility in the multifamily sector pushed nationwide housing starts down 10.8% in March while production of singlefamily homes remained unchanged, according to numbers released by the U.S. Commerce Department on April 16. Total starts fell to a seasonally adjusted annual rate of 510,000 units last month. The decline resulted from a 29% drop on the multifamily side, which largely offset a big gain in apartment and condo building in February. “While improving interest among potential home buyers has builders more optimistic these days, we don’t want to ramp up production until sales of new homes pick up,” noted NAHB Chairman Joe Robson. “A cautious attitude about new building is definitely what’s called for here, and that’s what most builders have wisely adopted for the time being.” “Today’s numbers are right on target with NAHB’s forecast, which anticipates that housing starts will bottom out in the second quarter,
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after new-home sales have stabilized,” said NAHB Chief Economist David Crowe. “Single-family starts remained virtually unchanged over the past three months, indicating that we are closing in on a bottom,” Crowe said. “Multifamily starts — which tend to bounce around from month to month — were responsible for the decline in total starts as they readjusted following a substantial gain in February.” Crowe noted that while builders have been seeing more sales office traffic and fielding more calls in recent weeks as consumers respond to historically affordable home buying conditions, many continue to grapple with a severe credit crunch for acquisition, development and construction financing (AD&C). “A substantial recovery in housing of the kind that’s required to help get the national economy back on its feet will not happen until the logjam in AD&C lending has been broken,” he cautioned. See HOME STARTS, Page 22 www.TheShowCaseUSA.com