Builder confidence up after endless months of decline

With this morning’s news that luxury builder Taylor Morrison was acquired for nearly a billion dollars, it is no surprise as we suspected builder confidence would soon perk up, even if only slightly.

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July builder confidence is up two points after a three point dip in June, with declining points for the majority of the last year.

The outlooks that rose most were the sentiments on current sales with the highest jump in confidence in sales over the next six months while feelings toward traffic didn’t change.

Although the index is simply holding right now and regional outlooks vary, this is good news for the sector most hard hit by tightened lending.

Regionally, the index rose one point in the Midwest which maintains the lowest confidence of all regions. The West rose three points and follows the Midwest in low levels, and although the Northeast dropped, it is still second highest in confidence beaten only by the South which rose three points and now has the highest confidence level of all regions.

“The improvement in builder confidence in July is a positive sign that the outlook perhaps isn’t quite as bleak as was feared in June,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB). “While builders continue to confront serious challenges with regard to competition from foreclosed properties that are priced below replacement cost, inaccurate appraisals of new homes, and a very restrictive lending environment for new home construction, select markets are showing gradual improvement as consumers begin to take advantage of very favorable buying conditions.”

“We view the upward movement in the July HMI as a correction from an exceptionally weak number in June that was at least partly attributable to negative economic news and the close of a disappointing spring selling season,” said NAHB Chief Economist David Crowe. “The strong rebound in sales expectations for the next six months likewise marks a return to trend. Basically, the market continues to bounce along the bottom, with conditions in some locations beginning to improve.”

This article published on Monday, July 18th, 2011 at 3:59 pm | Contact the editor Tags: featured, new home construction, real estate economy, Real Estate News

Category: Economy

Tara Steele is the News Director at AgentGenius, covering real estate news, technology news and everything in between. If you’d like to reach Tara with a question, comment, press release or hot news tip, she frequently checks her email, simply click the link below.

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Home sellers who bought after 2007 now overprice their homes 14%

Seattle real estate signs, photo by AR McLin.

According to a study performed by real estate search company Zillow.com, home sellers who bought their home after the housing bubble burst in 2007 overprice their homes an average of 14.1% as opposed to people who bought before the bubble (prior to 2002) and those who purchased during the bubble (2002-2006).

Home sellers who bought prior to 2002 price their homes an average of 11.6% over market value and those who bought during the bubble are the most conservative at 9.3% over market value. The bottom line here is also that listings are still roughly 10% or over market value when listed, regardless of home values struggling across the nation and sales remaining anemic.

Most interesting to us is that the study reveals post-bubble buyers were the most likely to base their asking price on the original purchase price of their home than home sellers who bought before or during the bubble. Zillow notes that despite home values have been dropping since 2006 and are at 2003 levels, post-bubble buyers are sticking to their guns on pricing and going to market with the original price they paid rather than the current state of the market. Zillow sums up by saying, “buyers who bought during bubble years more likely to price realistically.”

Zillow Chief Economist Dr. Stan Humphries points to a litany of reasons. “Post-bubble buyers seem to believe they escaped the worst of the housing recession, as evidenced by how they price their homes today. But 2006 was just the beginning of the housing recession, and it is continuing in earnest to this day. That means that even people who bought after the bubble burst need to break out the pencil and paper and do serious research into what has happened in their market since they first bought their home, whether it was four years ago or six months ago.”

Zillow studied current listings but set out to do some forecasting. They surveyed homeowners who indicated they plan on selling their homes in the next four years and found that of those that purchased their home prior to the bubble, 17% noted purchase price would be the primary factor in pricing their home to sell in the next four years. Of those who purchase prior to the bubble, only 4% indicated they would use the original purchase price as the primary factor and 9% of owners that purchased during the bubble would. Homeowners who purchased after the bubble burst are four times more likely to use the original purchase price of their home to price it now or within the next four years.

It is unclear the impact of having a Realtor versus not having a Realtor makes on this equation and although it gives a bit of predictability to seller mentality over the next few years, it presents a challenge to Realtors struggling to get homeowners to understand market conditions.

Realtors should understand the three types of home sellers as studied by Zillow- those that bought before, during and after the bubble, and take the year of purchase into account as an indicator of seller mentality.

This article published on Wednesday, July 13th, 2011 at 11:01 pm | Contact the editor Tags: featured, real estate economy, Real Estate News, Zillow

Category: News

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