Paper Economy - A US Real Estate Bubble Blog: Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings April 2009

Wednesday, April 15, 2009

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings April 2009

Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing an increase to the overall index as well as all component indices.

It’s important to recognize that although the series are seasonally adjusted, each series has generally shown notable strength or noticeable flattening during the first quarter of each of the last 4 years.

The new home market will likely not resume any significant form of healthy function until the considerable overhang of inventory is cleared.

Each component of the NAHB housing market index remains WELL BELOW the worst levels ever seen in the over 20 years and continues to remain firmly in uncharted territory.

Labels: economy recession, hmi, homebuilders, housing bubble

5 Comments:

SATT - Im curious. Since the improvement in this series often marks the end of recessions, If the index continues to improve, do you think the Govt will come back later and revise GDP to indicate the recession ended Q1 09?

Kinda like how they told us in Q3 08 that weve been in recession for 9 months now?

By Anonymous, at 1:49 PM
Anon,

Well that's actually standard operating procedure... they need to wait for all the data to settle out before declaring the peak... revisions to underlying data is substantial.

Look at this NBER page:

NBER Recession Dating PageScroll down to the bottom and you can see the past releases announcing tops and troughs... the official dating is always very lagged.

I think the end of this recession will take a long time to date and will turn almost exclusively on the jobs data.

As far as I'm concerned the jobs data is the most important indicator of contraction and expansion but the NBER looks also at GDP, Industrial Production and other measures.

By SoldAtTheTop, at 3:00 PM
"As far as I'm concerned the jobs data is the most important indicator of contraction and expansion but the NBER looks also at GDP, Industrial Production and other measures."

I agree. In fact, I wouldnt be surprised to see the NAHB confidence to continue to trade in this range (neither testing recent lows nor spiking past say 20) for months, only to perhaps spike to 40-50 some time in the late summer. Perhaps then jobs will be peaking and if the NAHB really spikes, then you can say its over.

By Anonymous, at 3:32 PM
Anon,

I'm pretty confident that builder sentiment is going to erode again... There is way too much inventory and they have to continually compete against foreclosures... that's not a good market.

I think we will see these series bottom out possibly sometime in 2010... possibly Q1 2010 will mark the literal low... I don't think Q1 2009 can be the bottom because they still need to bring the months supply of new homes down to like 6-8 rather than where it stands today at 12... that's a lot of inventory to burn through... plus they are still completing too many homes... and many prime recently new-home "owners" are now going bust so the inventory of foreclosed semi-new homes is still climbing...

This is simply the worst possible conditions so I still firmly believe that the bottom is not in yet.

By SoldAtTheTop, at 3:51 PM
"I'm pretty confident that builder sentiment is going to erode again... There is way too much inventory and they have to continually compete against foreclosures... that's not a good market."

Just because it isnt a good market FACTUALLY, doesn mean builders wont BELIEVE it. Builders are pollyannish by nature - I cant believe the series ever got to 8!

With all these reports of good news (factual or not) circulating, I doubt the builders will be that doomish again - I expect an L shaped index of 15-20 (a record low outside of a few months ago) for months to come.

By Anonymous, at 4:27 PM