Homebuilder Confidence Shaken by Fear of Too Much Demand

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Homebuilder confidence: new house under constructionBy Alex Veiga

Confidence among U.S. homebuilders fell this month because of concerns that increased demand for new homes is exceeding supplies of ready-to-build land, building materials and workers. In the short term, those constraints could slow sales. But builders' outlook for sales over the next six months has reached its strongest point in more than six years.

The National Association of Home Builders/Wells Fargo builder sentiment index released Monday fell to 44 from 46 in February. It was the second decline since January, which was preceded by eight straight monthly gains. A measure of current sales conditions declined from February's reading. Readings below 50 suggest negative sentiment about the housing market. The last time the index was at 50 or higher was in April 2006.

The index began trending higher in October 2011, when it was 17. That increase coincided with the start of a housing recovery. An improving job market, persistently low mortgage rates and rising home values have helped fuel U.S. homes over the past year. New-home sales jumped 16 percent in January to the highest level since July 2008.

The combination of heightened demand and a tight supply of previously occupied homes for sale have motivated builders to ramp up construction. Builders started work on the most homes last year since 2008. Despite the positive sales trends, many builders are facing higher costs for building materials and competition for land cleared for development. Some also are having trouble obtaining financing to buy land and cover construction costs.

At privately held Sivage Homes, which builds in New Mexico and Texas, customer traffic is up this spring and points to a better sales season than last year. But the builder's difficulty obtaining loans to acquire and develop land means the sales gains will likely be only marginally better than a year ago, says CEO Michael Sivage. "That's not a demand issue but a supply issue," he says.

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Homebuilder Confidence Shaken by Fear of Too Much Demand

Annualized expected growth from 2012-2017: 7.9 percent

Home prices in Norwich and New London have tumbled 23.4 percent since their Q2 2006 peak. It has a population of 273,502, an unemployment rate of 8.6 percent, and a median family income of $80,500, above the national median of $63,800. It also has a median home price of $225,000.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from 2012-2017: 7.2 percent

Tucson's home prices have plunged 40.4 percent since their Q1 2006 peak. The metro has a median home price of $165,000. It has a population of 989,569, a median family income of $57,800, and an unemployment rate of 6.9 percent.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 7.2 percent

Home prices in the Visalia and Porterville metro area have plunged 52.9 percent since they peaked in Q1 2006, and the city has a median home price of $145,000. It has a population of 449,253, an unemployment rate of 14.9 percent, and a median family income of $48,200 below the national median.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 7.2 percent

Home prices in Ocala are down 48.1 percent from their Q3 2006 peak. The metro has a population of 332,529, an unemployment rate of 9.0 percent, a median family income of $45,300, and a median home price of $107,000.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 7.3 percent

Home prices in Yakima are down 9 percent since their Q1 2009 peak. It has a median home price of $157,000. Yakima has a population of 247,141, an unemployment rate of 9.3 percent, and a median family income of $48,800.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 7.4 percent

Home prices in the Gulfport and Biloxi metro areas have slipped 21.4 percent since their Q4 2007 peak, and the metro has a median home price of $108,000. It has a population of 253,511, an unemployment rate of 7.9 percent and a median household income of $53,100.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 7.5 percent

The Vallejo and Fairfield metro area's home prices have fallen 59.2 percent since their Q1 2006 peak. It has a population of 416,471 and an unemployment rate of 9.5 percent. It also has a median family income of $76,800, and a median home price of $230,000.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from 2012-2017: 7.7 percent

Home prices in Yuma have fallen 37.7 percent since their Q4 2006 peak. It has a population of 200,870, an unemployment rate of 30.1 percent, nearly four times the national average. It has a median family income of $45,700.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 8.1 percent

The Reno and Sparks metro area has a population of 429,606, a median family income of $63,100, and an unemployment rate of 10.0 percent, higher than the national unemployment rate of 7.8 percent. Home prices are down 52.6 percent from their Q1 2006 peak, and the metro has a median home price of $177,000.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 8.4 percent

The Santa Barbara-Santa Maria-Goleta metro area has a population of 426,878, a median family income of $70,300, and an unemployment rate of 7.2 percent. Home prices are down 50.4 percent from their Q3 2005 peak, and the metro has a median home price of $285,000.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 8.5 percent

Carson City home prices have fallen 51.0 percent since their Q2 2006 peak. The Carson City metro area has a population of 55,439, an unemployment rate of 10.2 percent, and a median family income of $66,300.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 8.9 percent

Sebastian and Vero Beach home prices have fallen 50.5 percent since their Q4 2005 peak. The metro has an unemployment rate of 9.9 percent, a median family income of $59,200, median home price of $139,000.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 9.1 percent

Home prices in the Panama City-Lynn Haven-Panama City Beach metro area have fallen 41.9 percent since their Q1 2006 peak. It now has a median home price of $143,000. The metro has a population of 169,856, an unemployment rate of 7.6 percent, and a median family income of $56,400.

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Data provided by Fiserv Case-Shiller Indexes.

Photo: Flickr/Ray Devlin

Annualized expected growth from Q3 2012-Q3 2017: 9.1 percent

Santa Fe's home prices have fallen 21.1 percent from their Q4 2007 peak. The Sante Fe metro area has a population of 145,648, an unemployment rate of 5.0 percent below the national average, and a median household income of $60,100, below the national median of $63,800.

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Data provided by Fiserv Case-Shiller Indexes.

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Annualized expected growth from Q3 2012-Q3 2017: 9.7 percent

Medford's home prices have fallen 39.2 percent since their peak in Q2 2006. The metro has a population of 204,822 and median family income of $50,100. At 10.0 percent Medford's unemployment rate is higher than the national average.

Find homes for sale in Medford, Ore., or search listings in your area.

Data provided by Fiserv Case-Shiller Indexes.

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Banks were badly burned when land values crashed after the housing boom. Many have been slow to provide financing to smaller builders, many of which are short on land. Adding to the problem: As demand for land has grown, so have sales prices, which now often exceed the appraised value of the land. In that scenario, lenders are less likely to make a loan unless builders put up a lot more of their own money. Meanwhile, builders large and small have reported a shortage of workers in markets where residential construction has picked up sharply, such as Texas and Arizona.

Many construction workers -- from roofers and drywall installers, to framers and carpenters -- appear to have fled to other fields, such as the booming oil and natural gas industry. While U.S. residential construction jobs increased 3.1 percent in February from a year earlier, they remain about 40 percent below the peak reached during the housing boom. "The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year," said David Crowe, the NAHB's chief economist. The latest builder confidence index, based on responses from 341 builders, comes as the critical spring home-selling season is under way.

A gauge of current sales conditions fell four points to 47, but a measure of traffic by prospective buyers improved three points to 35, while builders' outlook for sales in the next six months improved one point to 51, the highest level since June 2006. Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.

Copyright 2013 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.


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