Doctors: Builder Confidence Holds Steady, Labor Shortages Persist

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For the week of

July 22, 2019


MARKET RECAP

Doctors: Builder Confidence Holds Steady, Labor Shortages Persist

Builder confidence rose slightly in July. The National Association of Home Builders (NAHB) said its Housing Market Index (HMI), which it sponsors with Wells Fargo, gained one point, rising to 65. This marks the sixth consecutive month that sentiment levels have held at a steady range in the low- to mid-60s.

NAHB Chair Greg Ugalde said, “Builders report solid demand for single-family homes. However, they continue to grapple with labor shortages, a dearth of buildable lots and rising construction costs that are making it increasingly challenging to build homes at affordable price points relative to buyer incomes,”

The HMI derives from a survey that NAHB has conducted among its new home builder members for over 30 years. In that survey builders are asked to give their 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 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.

All three of the component indices improved in July. The measures of both current and future sales conditions rose 1 point to 71 and 72 respectively. The index measuring buyer traffic remains stuck below the 50 benchmark, up 1 point to 48.

“Even as builders try to rein in costs, home prices continue to outpace incomes,” said NAHB Chief Economist Robert Dietz. “The current low mortgage interest rate environment should be getting more buyers off the sidelines, but they remain hesitant due to affordability concerns. Still, attractive rates should help spur new home purchases in large metro suburban markets, where approximately one-third of new construction takes place.”

Regional scores are expressed as three-month moving averages. The South moved one point higher to 68 and the West was also up one point to 72. The Northeast remained unchanged at 60 while the Midwest fell a single point to 56.

Source: Mortgage News Daily | Jann Swanson

Looking Ahead: Upcoming Key Market Dates

Tuesday, July 23, 2019 Existing Home sales
Wednesday, July 24, 2019 Markit Manufacturing & Services PMI (Flash)
Wednesday, July 24, 2019 New Home sales
Thursday, July 25, 2019 Housing Vacancies

Fannie Mae lowers mortgage rate forecast and says home-price growth will accelerate

Cheaper mortgage rates will cause a heat-up in home prices, according to the forecast. Last month, Fannie Mae said it expected home prices to grow in 2019. In the new forecast, it called for a 5.4% increase.

“With lower mortgage rates taking effect, the deceleration in house price growth that was so prominent over the past year may be pausing,” Fannie said in commentary that accompanied the new forecast.

That comes with a bonus: As people pay more for their homes, mortgage originations will be higher, Fannie Mae said.

“This continued decline in mortgage rates and our upwardly revised view on house price growth have led us to increase our forecast for single-family mortgage originations for the remainder of the year,” Fannie Mae said. “We now expect total originations to rise 7% from 2018 to $1.75 trillion, and we expect refinances to account for 32% of total mortgage originations in 2019, up from 29% in 2018.”

That would make this year the highest since the $1.8 trillion originated in 2017, according to Fannie Mae data.

In addition to its housing forecast, Fannie issued a slate of economic forecasts. It kept its prediction for U.S. GDP growth at 2.1% this year, down from 3% in 2018. It raised its forecast for core Consumer Price Index growth – meaning the CPI minus food and energy, the Federal Reserve’s preferred inflation gauge. Fannie now is expecting the U.S. will see a 2.1% increase in core CPI in 2019, up from the 1.8% it predicted a month ago.

The unemployment rate probably will average 3.7% in 2019, Fannie said. That’s down from the 3.8% it was calling for a month ago. For 2020, the unemployment rate probably will be 4%, Fannie said in its latest forecast, down from the 4.2% it predicted a month ago.

Source: HousingWire | Kathleen Howley