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Short-Term Ups and Downs for Housing
David Crowe / NAHB / April 25, 2013
Recent housing market data have illustrated that while the long-run trend for housing remains one of improvement, there will be bumps along the road. In particular, availability of building lots and skilled labor, rising building material prices, and big picture economic and policy developments will present month-to-month challenges for home builders and other housing businesses.
For instance, the share of first-time home buyers remains lower than the historic average. For the housing market to return to normal, these buyers need access to credit and stable labor market conditions to afford a home.
As a result of these challenges, builder confidence has declined slightly in 2013. The NAHB/Wells Fargo Housing Market Index (HMI) dropped two points to 42 in April. This is the third monthly decline from a peak of 47 in December and January. Two of the three components pulled the composite index down: The current sales component fell two points to 45 and the normally lower traffic component fell four points to 30.
However, consistent with long-run improving trends, the component measuring expectations for future sales increased three points to 53, tied for the highest level since February 2007.
One factor holding builder confidence back is a rise in the cost of some building materials. Since last March, Production Price Indices have significantly increased for gypsum (18%), softwood lumber (30%) and OSB (68%).