NAHB Article on "Sentiment Surveys"

This posting from the NAHB online newsletter summarizes the latest reports on homebuilder sentiment and overall consumer sentiment. Jim Cramer, on CNBC's "Mad Money", has been predicting a July 2009 housing "bottom" for a long time...he may not be so "mad" after all.

Surveys of Consumers and Builders Signal Revival of Home Buyer Demand

The stunning improvements in major measures of housing affordability, along with temporary federal and state tax incentives for first-time buyers and new-home buyers, have served to stabilize housing demand and to encourage the beginnings of recovery. This revival has occurred despite the persistence of extremely weak economic conditions and serious tightening of lending standards in major components of the home mortgage market.

The University of Michigan’s survey of consumer sentiment showed that 79% of households had a favorable view of home buying conditions in the early part of May — up substantially from the cyclical low in early-2006 and the highest reading since early-2004. The revival primarily reflects the major price reductions that have accumulated since 2005, and historically low mortgage interest rates have also caught the fancy of consumers in recent months.

NAHB’s proprietary survey of large public and private single-family builders provides concrete evidence of recent stabilization and improvement in both gross home sales (new orders) and net sales (accounting for cancellations) — on a seasonally adjusted basis.

Gross sales hit bottom in February and registered significant improvement in both March and April. Net sales actually bottomed out late last year and have shown substantial improvement in recent months, particularly in April.

NAHB’s broad-based single-family Housing market Index (HMI) had been mired in a narrow record-low range from November of last year through March of this year. However, the HMI broke out of this range with a decisive move in April — from 9 to 14 — and registered further improvement when it rose to 16 in May.

While the HMI level still is quite low, the recent turnaround has been broad based, showing up in all major regions of the country and in all HMI components — present sales, expected sales and buyer traffic.

Mixed Signals on Housing

The market reacted to some lower than expected data on housing starts. While many were expecting a modest increase, few were expecting such a double-digit drop. I believe that this is good news for the future health of the housing market. Sales are the key...we need existing inventory to be absorbed BEFORE we start adding to inventory. Sales should be the leading indicator...not starts.

Tech Ticker tells the story of supply equilibrium in this link. April housing starts.

Here is the AP story on housing data and the impact on stocks.

I have also included some insight from CNBC this morning. This was taped shortly after the data was released.

Builder Sentiment Improves

Latest news from Reuters via Yahoo.com. Perhaps we are ready to call a "bottom".

U.S. home builder sentiment rises in May
On Monday May 18, 2009, 1:01 pm EDT

WASHINGTON (Reuters) - U.S. homebuilder sentiment jumped to its highest level in eight months in May, a private survey showed on Monday, supporting views that the three-year housing slump might be close to an end.

The National Association of Home Builders/Wells Fargo Housing Market Index rose to 16 from 14 in April, in line with market expectations.

The NAHB attributed the second consecutive monthly increase in the gauge -- which measures builder confidence in the market for newly built, single family homes -- to "the best home buying conditions of a lifetime."

"This continued increase indicates that home builders feel we're at or near the bottom of the market and that positive signs lie ahead for builders and potential home buyers, provided that builder access to production credit significantly improves," said NAHB chief economist David Crowe.

Other housing indicators have recently shown a sharp slowing in the pace of the market's decline, raising optimism a bottom was not too far away.

The collapse of domestic house prices and the subsequent global credit crisis were the main catalysts for the U.S. recession, now in its 17th month.

The report also showed two out of three subindexes of the Housing Market Index rising in May. The current sales conditions gauge climbed two points to 14, while the sales expectations measure for the next six months rose three points to 27. The traffic of prospective buyers index was unchanged at 13 in May.

A Step in the Right Direction

Here is a story from the NAHB that gives me some hope. As I first posted on June 26th and then expanded on with my December 3rd post, Housing can be one of the quickest means of improving our nation's energy efficiency. I also recommended an increase in the tax credit from $2000 to $5000...

Great minds think alike!

Senators Recommend Expanding Energy Tax Incentives


As part of the federal government’s efforts to stimulate the lagging U.S. economy, Sens. Olympia Snowe (R-Maine) and Dianne Feinstein (D-Calif.) recommended in a Jan. 6 letter to President-elect Barack Obama significant expansions in two important energy tax incentives that promote energy-efficient construction.

“It is paramount that stimulus funding be utilized for capital improvements,” the legislators wrote, “and our nation’s building stock offers one of the greatest opportunities to see an immediate and long-term return on this investment.”

Among other energy tax incentives, the present tax code provides a $2,000 credit to builders of qualified energy-efficient homes and a $1.80-per-square-foot deduction for installation of certain energy-efficient features in commercial buildings, including multifamily properties four or more stories above grade. The former — the Section 45L new energy-efficient home tax credit — expires at the end of 2009, while the latter — the Section 179D energy-efficient commercial building deduction — sunsets at the end of 2013.

The senators propose to increase the impact of these incentives by extending the tax credit for three years and increasing the credit amount to $5,000. They also propose increasing the deduction from $1.80 per square foot to $3 per square foot through the end of 2011.

“By investing in highly efficient homes, the U.S. can lower home owners’ monthly energy bills for the life of the home and allow them to invest in their own and their children’s future,” the lawmakers argue.

NAHB has supported extending and expanding these important incentives to improve the energy efficiency of the nation’s housing stock and applauds the senators’ recommendations and leadership on this issue.