Just Published - The Market Barometer Aug/Sept Edition

While mainstream media just loves to whine, the mixed signals are counter productive. Here's the real story, as it pertains to our industry.

While NAHB’s 55+ single-family Housing Market Index (HMI) saw increases in its Present Sales and Expected Sales components, the Prospective Buyer Traffic component dropped. The multi-family HMI also dropped and the indices tracking production of and demand for rentals have remained relatively flat. Nevertheless,

The government reports that the economy bounced back in Q214 after shrinking 2.1% in Q1, expanding at a seasonally adjusted annual rate of 4%. 

Six consecutive months of significant job gains has resulted in average annual growth of 229,000 a month, faster than last year’s pace of 194,000 and far ahead of the 2010 pace of just 88,000 per month.

Other economic boosts include increased consumer spending (+2.5%), a surge in business investments (+7%), a resurgence in exports (+9.5%), and last but certainly not least, growth in housing construction, which jumped 7.5%,( presumably due to improving weather conditions) after a decline of 5.3% in Q1.

Despite all of the positive indicators, the economy grew at a paltry average annual rate of about 1% in the first half of the year. Janet Yellen, our new FedHead, continues to hold interest rates due to the economic waffling and housing industry malaise, with most investors counting on a continuation of the policy through the end of 2015.

Fitch Ratings Optimistic – In comparison, Fitch Ratings anticipates a decidedly accelerated upturn in housing for the foreseeable future. Their Summer 2014 The Chalk Line report calls for continual housing growth through 2015 spurred by stabilizing housing values and slow and steady easing of credit standards.

Fitch prognosticates single-family home starts to improve 9.5%, reaching 677,000 this year, and new home sales to advance 8% to 465,000. Existing home sales volume is projected to decline 5% to 4.835 million, largely due to fewer distressed home sales. The National Association of Realtors (NAR) takes exception with the existing home sales estimate, calling for an annual rate in the 5.0 million-plus range. 

For 2015, Fitch estimates housing starts to escalate another 16%, balanced by a 21% increase in single-family starts, and a 6.7% increase in multi-family volume. Fitch also predicts new home sales “should improve more than 20%” and the increased momentum will theoretically boost GDP 5%.

Investor Indifference? - The slower pace of existing home sales appears to be influenced by less frenetic investor activity, which is resulting in fewer cash sales . . . 

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