Homebuilder Sentiment Stabilizes in November

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By Richard Leong

NEW YORK -- U.S. homebuilder confidence stabilized in November after falling for two straight months, though steady home demand was tempered by worries about further fiscal battles in Washington, the National Association of Home Builders said Monday.

The NAHB/Wells Fargo Housing Market Index came in at 54 in November. The October figure was downwardly revised to 54 from the originally reported 55.

Economists polled by Reuters had predicted a November reading of 55.

"Given the current interest rate and pricing environment, consumers continue to show interest in purchasing new homes, but are holding back because Congress keeps pushing critical decisions on budget, tax and government spending issues down the road," the Washington-based industry group's chairman Rick Judson said in a statement.

Homebuilders sentiment were also pressured by rising construction costs and low appraisals, Judson said.

Still, the index has held above 50 for a sixth straight month. Readings below 50 mean more builders view market conditions as poor than favorable.

"The fact that builder confidence remains above 50 is an encouraging sign, considering the unresolved debt and federal budget issues cause builders and consumers to remain on the sideline," %VIRTUAL-article-sponsoredlinks%NAHB Chief Economist David Crowe said in the same statement from the group.

Though tension over fiscal issues remains, the jump in mortgage rates this summer has been the main culprit behind the disruption in the housing recovery.

Mortgage rates climbed to two-year highs in August on fears the Federal Reserve might consider reducing its $85 billion monthly purchases of Treasuries and mortgage-backed securities in September as the labor market had shown signs of gaining traction earlier this year.

U.S. central bank officials decided against tapering its bond-purchase stimulus two months ago, and have since downplayed the chances of such a move until some time in 2014.

"In short, the report still implies net improvement in sales relative to before mortgage rates started to rise in May, but activity has stalled in the last few months," Jim O'Sullivan, chief U.S. economist at High Frequency Economics wrote in a research note.

The survey's index on homebuilders' views on current sales conditions held steady for a second month at 58, the industry group said.

The gauge of expectations for single-family home sales for the next six months fell for a third straight month to 60 from a downwardly revised 61 in October, which was initially reported at 62.

The component on prospective buyer traffic fell to 42, which was the lowest since June, from a downwardly revised 43 last month. The October reading was initially reported at 44.

On a regional basis, homebuilders in the Midwest reported the most severe deterioration in confidence. The reading on that region's sentiment fell to 54 points in November from 62 in October. The index's three-month average fell to 60 from 63.

The Northeast showed the biggest improvement in sentiment. The NAHB index for that region rose to 44 from an 11-month low of 30, lifting its three-month average to 39 from 38.

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Homebuilder Sentiment Stabilizes in November
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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