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Outlook Continues to Improve; Can the Industry Keep Up?

Posted on 22 June 2016 by cradmin

spcs-1Several key indicators show that the construction and remodeling industries will continue to improve for the duration of 2016 and likely beyond. However, with the growing economy, unfilled construction jobs are also on the rise, showing that the nation may not have a large enough labor force to keep up with demand.

Home Prices on the Rise

Early this month, Qualified Remodeler reported that the S&P/Case-Shiller Home Price Indices rose by 5.2 percent year-over-year at the end of March as an average of all nine U.S. Census divisions. In addition, even though 10 major cities reported price increases over the year-end in February, the 10-City and 20-City Composites remain unchanged at 4.7 percent and 5.4 percent, respectively. The National Index also showed a month-over-month increase in March of 0.7 percent.

“Home prices are continuing to rise at a 5 percent annual rate,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates.”

Blitzer also noted that one of the factors responsible for rising home prices is the short supply of homes on the market. At less than 2 percent of the number of U.S. households, this is the lowest percentage since the mid-1980s.

“The Pacific Northwest and the West continue to be the strongest regions. Seattle, Oregon and Denver had the largest year-over-year price increases,” Blitzer continued. “The Northeast and upper Midwest were at the other end of the ranking. The cities with the smallest year-over-year prices gains were Washington, D.C.; Chicago; New York City; and Cleveland.”

Interest Rates Remain Unchanged

Just last Wednesday, June 15, the Federal Reserve announced that interest rates would remain unchanged while signalling that rates could still be raised twice before the end of the year. However, six of the 17 policymakers on the board believe that rates will only increase once during 2016.

May saw a sharp slowdown in hiring in the U.S., which has fueled doubts about how strongly the labor market will recover, and Janet Yellen, chair of the Federal Reserve, said the board needs to ensure the market has sufficient momentum to adjust to any rate hikes.

The Federal Reserve forecasts economic growth of 2 percent in 2016 and 2017, which is 0.1 percent lower than the previous forecast.

Single-Family Construction, Builder Confidence Up

Total housing starts were hindered in May by a decrease in multifamily buildings and fell by 0.3 percent, but permits for new construction rose by 0.7 percent. In total, multifamily construction fell by 1.2 percent, and single-family homes increased by 0.3 percent. However, this is an improvement over what had been forecast. April saw a strong surge in starts before the stagnation in May, and single-family construction is now predicted to outpace multifamily.

“Another month of gains in building permits coupled with near record-low mortgage rates provides opportunity for a bounce back,” noted Bill Banfield, vice president of Quicken Loans.

This news came just one day after the National Association of Home Builders/Wells Fargo Housing Market Index rose by two points to 60 on a scale of zero to 100. This index is considered the most reliable indicator of builder confidence available today, and the latest figure marks the first increase in the index since January.

All three elements that comprise the index experienced an increase this month:

  • Sales expectations rose by 1 point.
  • Sales expectations for the next six months increased by 5 points.
  • Buyer traffic rose by 3 points.

“Builders in many markets across the nation are reporting higher traffic and more committed buyers at their job sites,” said Ed Brady, chairman of the NAHB. “However, our members are also relating ongoing concerns regarding the shortage of buildable lots and labor and noting pockets of softness in scattered markets.”

“Rising home sales, an improving economy and the fact that the HMI gauge measuring future sales expectations is running at an eight-month high are all positive factors indicating that the housing market should continue to move forward in the second half of 2016,” said Robert Dietz, chief economist for the NAHB.

Construction Job Openings Remain High

One of the biggest problems the construction and remodeling industries currently face is a high number of unfilled jobs. According to the U.S. Bureau of Labor Statistics and an NAHB analysis, the number of monthly job openings in April is estimated at 200,000, which is a decrease from 215,000 in March. The March estimate is the highest number of job openings experienced by the industry since March 2007.

The overall trend for open construction jobs since the end of the Great Recession has been a steady increase, and hiring by home builders and remodelers remains weak with a decline of 4,400 positions in May and 5,200 in April. However, more than 128,000 jobs have been added collectively by home builders and remodelers over the past 12 months.

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2015 Housing Outlook Remains Positive – A Good Sign for the Countertop Industry

Posted on 15 June 2015 by cradmin

Despite a recent report stating that commercial building is still struggling, the outlook for the countertop industry remains bright as the second quarter of the year nears its end. According to the National Association of Home Builders (NAHB), new home sales rose by 6.8 percent this April at a seasonally adjusted rate of 517,000 units, and confidence in the multifamily market remains steady.

Home Sales on the Rise

New data from the Department of Housing and Urban Development (HUD) shows that home sales increased, but results in the nation vary widely in different markets. In the Midwest, home sales increased by 36.8 percent, but the Northeast experienced a decline of 5.6 percent while the South witnessed a decline of 2.3 percent.

Tom Woods, chair of the NAHB said, “Sales are moving forward, and our builder members are telling us they are starting to see more activity as more buyers get off the fence and enter the marketplace.”

Chief economist of the NAHB, David Crowe, concurred, stating, “Following an unusually low sales report in March, today’s numbers are consistent with other data we’ve seen recently and indicate a continuing, gradual improvement in the housing market.”

Housing Starts Increase

In addition to an increase in sales, housing starts jumped by 20.2 percent in April for an adjusted annual rate of 1.135 million homes, according to the U.S. Department of Commerce. This is the highest increase we’ve seen in the U.S. since the recession first began to hit in November 2007.

Breaking down the numbers, we see that single-family housing starts rose by 16.7 percent while multifamily starts increased by 27.2 percent. “Our builders tell us that consumers are slowly returning to the market,” said Woods. “This month’s report shows release of pent-up demand and evidence of a sustainable housing recovery.”

Crowe also applauded the numbers but pointed out that single-family housing is still only about half it what is should be in a fully recovered market. “With low interest rates and affordable home prices, we expect more upward momentum in the months ahead,” said Crowe.

Even though sales have dropped in the Northeast, this region accounts for an 85.9 percent increase in starts while residential building starts fell by 1.8 percent in the South. In the Midwest, starts rose by 27.8 percent, and the West saw a gain of 39.0 percent.

Multifamily Production Index Holds Steady

Another article from the NAHB reports that the national multifamily market has held steady through the first quarter of 2015 as measured by the Multifamily Production Index (MPI), which was at 54 at the beginning of April. This marks 13 consecutive months the MPI has had a score of 50 or higher.

The MPI was designed to measure the confidence of builders and developers in the current market, and the scale runs from zero to 100. Any score that is higher than 50 reflects that a greater number of reports show that conditions are improving rather than declining.

“Multifamily developers remain positive about the market,” said Dean Henry Stanton, chair of the NAHB Multifamily Leadership Board. “We’ll continue to see increased demand as new households form and the job market improves.”

June Is National Homeownership Month

As National Homeownership Month comes to a close, it has become evident that the increase in sales and starts may be because of the increased affordability of homes across the country. According to the NAHB/Wells Fargo Housing Opportunity Index, 66.5 percent of homes sold in the first quarter of 2015 were affordable to families with median annual incomes as low as $65,800.

At the end of March, the median home price in the U.S. was $210,000, down from $215,000 at the end of 2014.

First-time home buyers are also taking advantage of special programs, including those that offer low down payments, which is helping to push up sales. In some instances, Fannie Mae and Freddie Mac are underwriting loans for first-time home buyers with as little as 3 percent down. In addition, the average interest rate on mortgages fell from 4.29 percent to 4.03 percent.

The NAHB has been pushing Congress to ease restrictions on credit conditions for some time, and in April, Chairman Tom Woods testified before the Senate Banking Committee at a hearing on obstacles to obtaining new mortgages.

Woods is a strong advocate of the Portfolio Lending and Mortgage Access Act, which he said“is intended to ease the ability to repay requirements for community lenders who may fear originating non-qualified mortgage loans.”

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