REPOST: Housing Market Blows Hot and Cold

 Is the endless snow affecting the housing market? This article from Bloomberg View explains the seasonal trends in housing sales.

THIS ONE HAS GREAT CURB APPEAL. | Image Source: bloombergview.com

The northern third of the U.S. is locked in a straitjacket of snow, ice and bleak weather better suited to staying at home than going out and hunting for a new one. I can almost hear it now: Remember how awful last year’s polar vortex was for the fledgling housing-market recovery? Looks like we're in for more of the same this year.

Except that this construct reflects a significant misunderstanding about the practical nature of housing sales. Homebuyers who decide not to view property during a bout of cold weather don't drop out of the market. They just delay their search until the weather becomes more agreeable, usually in a few weeks or months at most.

Consider the chart below, which uses the average temperature of the 48 contiguous states from the National Oceanic and Atmospheric Administration and the number of non-seasonally adjusted existing home sales from the National Association of Realtors. Notice anything? The seasonal trends are remarkably in sync: Housing sales rise in warm weather and fall in cold weather no matter the availability of credit, what direction interest rates are moving or the extent of wage and job growth.

Image Source: bloombergview.com

The reality is that housing sales are seasonal -- always have been, always will be.

Here's where things can get confusing, though.

Most national housing studies, such as those by the NAR, emphasize a month-over-month analysis of seasonally adjusted numbers. Throw in a federal housing-stimulus plan or a change in housing tax policy and those seasonal adjustments distort the market trends.

Other reports, such those by S&P/Case Shiller and CoreLogic, are based on a methodology that essentially strips away seasonal trends. That's a key reason those reports feel out of step with actual market patterns. 

Over the years I’ve had conversations with a number of well-respected economists about the virtues of their seasonal-adjustment methodologies. Yet consumers and real-estate brokers have a very different perspective and see the housing market as a series of “waves.” That probably is a more accurate representation of what's going on.

And that’s pretty cool.

Learn more about the US housing market by following this Galloway Custom Homes Google+ page.

REPOST: Homebuilder Confidence Rises in June: Is Housing Recovering?

According to a report on zacks.com, homebuilding is recovering from its funk in the past months with its improved results in the June housing market index. Read the full article below for more details.

****

Image Source: toptennewhomecommunities.com

The beleaguered housing market is finally showing some signs of improvement as construction spending appears to have gained steadily over the spring and summer months.

Homebuilders’ confidence, as indicated by the National Association of Home Builders (NAHB)/Wells Fargo housing market index, rose four points to 49 in June – indicating that the builders’ expectations for the next six months have improved.

Image Source: homes.com

 The index dropped to below 50 in the past four months from 56 recorded in January, indicating increasing builder concerns about meeting ongoing and future demand due to a shortage of lots and labor. The June number is just a point shy of the benchmark of 50 which indicates good housing conditions.

The housing slowdown that began in the second half of 2013 was aggravated by harsh winter in the December quarter, delaying construction and raising serious doubts as to the strength of the housing market.

Moreover, shortage of lots and skilled labor, rising cost of materials and declining inventory of new homes were not making things easier for the builders. Also, the spike in mortgage rates and rising home prices were hurting demand. As a result, many companies witnessed declining order trends in the December quarter.

However, as the winter chill subsided and spring selling season set in, many homebuilders recorded improving order trends in the March quarter. Order trends improved sequentially for D.R. Horton Inc. (DHI - Analyst Report), PulteGroup, Inc. (PHM - Analyst Report), Toll Brothers, Inc. (TOL - Analyst Report) and Ryland Group, Inc. (RYL - Snapshot Report) (RYL - Snapshot Report). Around this time, the sector also reported some encouraging numbers indicating that the housing sector is gathering steam.

New home sales for April, as reported by the Commerce Department, rose 6.4% from March. Though sales were down 4.2% compared with the prior year, it nevertheless marks an improvement from the previous month. New home sales numbers for May are expected on later this month.

Building permits, a gauge of future construction, also bucked the previous trend. After declining for four times in five months, building permits grew 8% in April from the previous month.

Existing home sales data increased 1.3% to a seasonally adjusted annual rate of 4.65 million in April from 4.59 million in March. Existing home sales rose for the first time this year at the fastest pace since Dec 2013.

Image Source: bidorbuy.co.za

These encouraging data signal that the housing sector might be on the verge of a recovery. Though headwinds from supply shortage and rising land, material and labor costs exist, homebuilders are increasingly optimistic of improving demand in the future quarters.

Follow this Twitter page for Tom Galloway Custom Homes, a leading custom home builder in Muskegon, West Michigan, for more information on custom home building.