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The Week Ahead: Confidence in the Housing Market Drops

Market Go Next BH [1]

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index [1] dropped down two points in October, reflective of builder confidence toward the housing market decreasing, according to NAHB [2].

“Even with this month’s drop, builder confidence stands at its second-highest level in 2016, a sign that the housing recovery continues to make solid progress,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Illinois. “However, builders in many markets continue to express concerns about shortages of lots and labor.”

NAHB reports that two HMI components fell comparatively to the previous month’s standings, specifically current sales conditions and buyer traffic. However, the index did indicate that sales expectations in the next six months rose from September.

“The October reading represents a mild pullback from a jump in September, and indicates that the housing market continues to make slow and steady gains,” said NAHB Chief Economist Robert Dietz. “Moreover, mortgage rates remain low and the HMI index measuring future sales expectations has been over 70 for the past two months. These factors will sustain continued growth in the single-family market in the months ahead.”

What will November’s housing market index set to release on Wednesday, November 16 hold?

HUD/Census Bureau Housing Starts for October 2016, Thursday, November 17

For months, the industry has been watching the housing starts numbers to see if new residential home construction would pick up as the inventory of existing homes has been extremely tight.

HUD and the Census Bureau will jointly release the next New Residential Construction Report for October 2016 on Thursday, November 17. In September’s report [3], housing starts declined over-the-year by 12 percent and over-the-month by 9 percent (down to a rate of 1.05 million), which was largely driven by a drop in multifamily starts; single family starts jumped by 8 percent over-the-month in September (to an annual rate of 783,000). Single-family building permits increased by 6.3 percent over-the-month up to 1.23 million in September.

The fact that overall permits (1.23 million) outpaced housing starts (1.05 million) in September indicates a significant turning point for the market, Realtor.com Chief Economist Jonathan Smoke said.

“True, housing starts dropped—but we have to take that with a grain of salt because it came from such thin data,” Smoke said. “On the other hand, the permitting data released today blew by analysts’ expectations. It also showed that this year’s most troubling trend in new construction has clearly reversed: Permits are outpacing starts, which indicates that developers and builders are finally planning for more growth ahead. That’s great news for both the economy and the consumer.”

This week’s schedule

Wednesday, November 16
NAHB Housing Market Index for November 2016, 10 a.m. EST
Housing and Insurance Subcommittee Hearing, “Modernizing Appraisals: A Regulatory Review and the Future of the Industry,” 10 a.m. EST

Thursday, November 17
HUD/Census Bureau Housing Starts for October 2016, 8:30 a.m. EST