We have all been waiting to hear news that the housing market has rebounded, and we got a little indication that things were improving today as homebuilder sentiment rose this month to its highest level since September.According to the National Association of Home Builders its index of builder confidence jumped two points in July to 17. This is the first time the index has hit 17 since last September.
While it is good to see the index moving higher, we have to keep in mind that the housing market is still severely depressed. Any index reading under 50 indicates a negative sentiment towards the market, so we still have a long way to go before we hit that mark.
The last time that the builder confidence index was above 50 was all the way back in April 2006.
The good news is that buyers are starting to come back into the market. Encouraged by lower interest rates, lower home prices, and tax credits, perspective home buyers are starting to see some good buying opportunities out there.
Before today's announcement, analysts had been expecting to see the index show a reading of 16. Despite being as low as it is, we can take a bit of solace in the fact that it has more than doubled since hitting a record low of 8 this past January, and is higher than the 2008 average reading of 16.
While lower home prices are definitely creating some great buying opportunities there are still a couple of major problems facing the housing industry. Unemployment figures are rapidly approaching 10%, and should eclipse the 10% mark over the next few months. The more people hear about rising unemployment the more they will be afraid that their job may be on the line. This will keep a lot of potential home buyers on the sidelines until people start to feel more assured that their jobs are not in jeopardy.
Overall consumer confidence remains low, and until we see a shift in overall confidence home sales will continue to remain depressed as well.
So there is still a long way to go before the market is back on solid ground, but it does appear that interest is returning to the market.
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Reader Comments (Page 1 of 1)
7-16-2009 @ 10:14PM
Iridium said...
And a reading under 50 represents a negative sentiment.
BREAK OPEN THE CHAPAGNE, WE GOT 17!!!!!
A few hombuilders got a few government contracts to build welfare palaces. We got a long way to go but in liberalese a rise from 6-17 actually means sentiment improved by 11 points and therefore we should celebrate.
The only way the reading means anything positive is if the sentiment improves above 50. This whole notion that a corporation can lose billions, yet come out ahead in the market is insane.
The real story is still very bad but the people who control the game are trying to force a rosy picture down our throats.
7-16-2009 @ 11:29PM
gigi8877 said...
"If you're sick you get paid, if it's a holiday you get paid, if it's raining you get paid! We've got a really, really nice full time income, working just part time from home." → http://www.itochu.ws
7-17-2009 @ 1:15AM
sgentilejr said...
At least things are not still getting worse for the new home builders. But I have to wonder what happens when the federal and state tax incentives and rebates end?
7-17-2009 @ 1:20AM
sgentilejr said...
YOU are the reason why our nation's economy is going down the drain. It was YOU who bought all of those Imported products and gave away our nation's jobs and wealth to foreign countries like China and India. Keep buying all those imported products and we will ALL be out of work soon and this will become a Third World Nation. It is YOUR choice.
Ask yourself :What do I need more, a decent paying job or imported ham, cheese, wine, clothing, vehicles etc.
7-17-2009 @ 5:25AM
al coholic said...
In the early seventies the average sized home was about 1500 square feet. A couple of years ago that number was nearly 3000 square feet. Did American families grow so large they needed more space? No, there was another reason. In the post WWll era housing was just that....housing. People saw housing as an expense and bought only enough to serve their family needs.
But that all changed in the 70's when inflation started blowing housing prices upward. Since mortgage interest rates remained relatively low compared to the appreciation a good play was to buy houses as an investment and sell them at a profit in two years. Back then you had to keep a house for a couple of years to avoid taxes on the profits. Another rule was that your new house had to be more expensive than the last one.
Soon enough housing got so expensive that people had to build absurdly large houses to to keep avoiding the tax. Around 1986 or so the requirement for a larger house was dropped but people still kept buying bigger because in the late eighties and nineties housing was appreciating at a rapid pace and buying bigger meant a larger profit after the two year period.
Now people are looking ahead to the next ten years and I doubt they will be building bigger and more expensive housing. In fact I predict that the average size of houses in the next five years will shrink dramatically as houses begin to be built for plain old housing again.