Interest Rate Roundup

Wednesday, September 16, 2009

NAHB index climbs to 19 in September

The National Association of Home Builders released its latest batch of data on housing market conditions this afternoon ...

* The overall index rose to 19 in September from 18 in August. That matched the average forecast of economists polled by Bloomberg. It was the highest this index has been since May 2008.

* What about the subindices in the report? The index measuring current sales rose to 18 from 16, while the index measuring prospective buyer traffic inched up to 17 from 16. The index measuring builder's expectations about future sales dipped to 29 from 30.

* The regional breakdown was positive across the board. The Northeast index rose to 24 from 22, the Midwest index climbed to 19 from 16, the South index increased to 19 from 17, and the West index inched up to 18 from 17.

The housing market data continues to take on a more positive tone. We saw strength in current sales and buyer traffic in August, and broad gains across all regions of the country. Builders are naturally somewhat concerned about what the future will hold, should the first time buyer tax credit be allowed to expire by Congress. But I believe the tax credit is the icing on the cake of this housing market recovery, not the cake itself.

What do I mean? The credit is helping around the edges. But the REAL reason home sales are picking up is that home prices have collapsed. That collapse has made housing affordable once again in many markets, using traditional valuation ratios (home price to median income, monthly ownership cost vs. monthly rental cost, etc). In other words, as I have said numerous times, falling home prices were NEVER part of the problem. They were ALWAYS the solution to the housing bust.


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