Homebuilder confidence is up again, but the headline does not tell the real story. Please consider Homebuilder confidence at 2-1/2 year high in May:
The NAHB/Wells Fargo Housing Market index increased three points to 22, the highest since August 2007, the group said in a statement. It was the second straight month of gains in the index. In addition to the tax credit, builders were also cheered by growing evidence that economy’s recovery from the longest and deepest recession since the 1930s was gaining momentum.
All three subindexes of the Housing Market Index, including a measure of future homebuilding activity, saw decent gains this month.
“This means builders are more comfortable that the market is truly beginning to recover, and that positive factors for buying a new home are taking the place of tax incentives to generate buyer demand,” said NAHB chief economist David Crowe.
The current sales conditions gauge rose three points to 23, the highest since July 2007. The sales expectations measure for the next six months also gained three points to 28, the highest in six months. The traffic of prospective buyers index increased three points to 16, the highest since September.
Traffic is up to 16 and David Crowe is excited? The only thing that remotely looks like it is headed up is “sales expectations” sitting at 28.
Even still, on the diffusion index, 50 is the break even point.
Huckster Hype in Las Vegas
The New York Times reports Building Is Booming in a City of Empty Houses:
In a plastic tent under a glorious desert sky, Richard Lee preached the gospel of the second chance.
The chance to make money on the next housing boom “is like it’s never been,” Mr. Lee, a real estate promoter, assured a crowd of agents, investors and bankers. “We’re going to come back like you’ve never seen us before.”
Home prices in Las Vegas are down by 60 per cent from 2006 in one of the steepest descents in modern times. There are 9,517 spanking new houses sitting empty. An additional 5,600 homes were repossessed by lenders in the first three months of this year and could soon be for sale.
Yet builders here are putting up 1,100 homes, and they are frantically buying lots for even more.
Brent Anderson, a marketing executive with another Southwest builder, Meritage Homes, said it bought 713 lots in stricken Arizona last year, and was on the verge of starting construction in a new Phoenix community called Lyon’s Gate.
“We’re building them because we’re selling them,” Mr. Anderson said. “Our customers wouldn’t care if there were 50 homes in an established neighbourhood of 1980 or 1990 vintage, all foreclosed, empty and for sale at $10,000 less. They want new. And what are we going to do, let someone else build it?”
Gospel of Second Chance
Richard Lee hypes the opportunity to get in on the next real estate boom. An opportunity for who?
Supposedly everyone wants a new home. Well, today’s new home is tomorrow’s resale. In a sea of empty houses, one year from now, who would be able to sell them and at what price if they needed to move?
Even if prices have bottomed (in some areas that is likely true), the supply of existing homes will keep a lid on resale prices for a long time to come, possibly a decade.
There is no second housing boom coming, just local huckster hype scattered in an ocean of empty houses with more foreclosures coming every month.