The majority of homebuilders haven’t felt their industry was in good shape in more than five years, and the latest read shows no improvement.
The National Association of Home Builders says its builder confidence fell this month to the lowest level since last fall, with ongoing concerns about weak consumer confidence, competition from foreclosure sales and now the rising costs of raw materials.
Its monthly Housing Market Index fell to 13 in June, from 16 in May. It had held steady for the three previous months. Any reading below 50 indicates the majority of builders asked consider conditions poor.
The last time the index had a reading above 50 was in April of 2006.
“Builders are being squeezed by the continuing weakness in existing-home prices — against which they must compete — as well as rising material costs,” said NAHB Chairman Bob Nielsen.
“In addition to the ongoing impacts of distressed property sales on home prices, appraisal values and consumer confidence, rising costs for materials such as roofing, copper, wallboard, vinyl siding and other components have made it extremely difficult to construct a new home and sell it at a price that covers the costs.”
This is not such good news for my new construction and home builder counterparts. This is, however, good news for homeowners in general and a sign that the home market may be stabilizing.
You might ask, how in the world do you draw that conclusion from this article? The answer is simple. Every time a new home is built and the new owners move in it creates a vacant home somewhere. Whether the buyer of this new home is from out of state or they moved from a home right here in Albuquerque, this is universally true. This requires that a first time home buyer enters the market to consume the increased inventory caused by each new home that sells.
Generally when new home construction levels out, the inventory of “resale” or “used” homes begins to balance itself out. With a supply of homes that is equal to the demand from home buyers comes a healthy Albuquerque real estate market, perhaps a little more significant appreciation in home values, and a more normal real estate environment, which is good for all.