Housing starts show a slight decline but builder confidence remains high. What are the latest real estate market trends?
Housing starts remained essentially flat in October following a 15 percent increase in September, according to data released today by the U.S. Department of Housing and Urban Development.
Despite the 0.3 percent dip in new home construction, the nation’s builders express growing optimism about the state of the market for newly built, single family homes. Builder confidence rose 3 points last month, according to a monthly index released yesterday by the National Association of Home Builders. The gain builds on a similar increase in October and returns the index to highs last seen in May of 2010.
The second consecutive gain in the Housing Market Index is encouraging, but should not obscure the fact that builder sentiment remains quite low, said Bob Nielsen, chair of the builders’ association. Persistent challenges to the construction industry include the high number of foreclosures, difficulties obtaining construction financing and accurate appraisals and restrictive mortgage lending. In a prepared statement Nielsen said, “These problems must be addressed so that housing can contribute to economic and job growth the way it has in the past.”
The gains in confidence reflect a move back into the market by well-qualified buyers who are tempted by favorable mortgage rates and real estate prices, said David Crowe, chief economist for the builders’ association.
Most affluent investors surveyed by Millionaire Corner in September see opportunities in the current real estate market. More than 55 percent of investors with a net worth of $500,000 to $1 million, excluding primary residence, agreed that “now is a good time to buy real estate. More than 62 percent of business owners, who typically invest a significant portion of their assets into real estate associated with their businesses, find real estate attractive now. Investors younger than 40 are also enthusiastic about investing in real estate, and 56 percent believe it would be strategic to buy property now.
A forward-looking indicator for the housing market – the number of building permits issued - rose in October. Permits were up 10.9 percent to a seasonally adjusted annual rate of 653,000 in October, compared to 589,000 in September. Permits for single family homes rose 5.1 percent, to an annual rate of 434,000. The number of completed homes fell by 5.7 percent in September and is 2.8 percent below the rate of completion in October 2010.
While builders are becoming more confident about market conditions in general, they express a more pessimistic view of the market for investors age 55 and older. According to Nielsen, “The current state of the economy continues to affect buyers in the 55+ housing market. The market remains weak given the many uncertainties people face in this economy.”