Builder Confidence Unchanged in August

Builder confidence in the market for newly built, single-family homes held unchanged at a low level of 15 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released today.

"Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. He noted that 41 percent of respondents to a special questions section of the HMI indicated they had lost sales contracts due to buyers' inability to sell their current homes.

"The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time," said NAHB Chief Economist David Crowe. "While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two out of three of the HMI's component indexes posted marginal gains in August. The component gauging current sales conditions gained one point to 16 – its highest level since March of this year – and the component gauging traffic of prospect buyers rose one point to 13 following two consecutive months at 12. However, the component gauging sales expectations for the next six months declined two points to 19, partially offsetting a six-point gain from the last month's revised number.

Regionally, the HMI results were mixed in August. While the Northeast posted a four-point gain to 19, the West registered a one-point gain to 15, the South held even at 17 and the Midwest posted a two-point decline, to 10.

Zillow Reviews Bumpy Road Toward Stabilization

Home values in the United States fell 0.4 percent from the first to the second quarter of 2011, the smallest quarterly decline in more than four years, according to Zillow's second quarter Real Estate Market Reports. The Zillow Home Value Index fell 6.2 percent year-over-year to $171,600. Home values have fallen 28.8 percent since they peaked in June 2006.

Regionally, home values fell on a year-over-year basis in 142 of the 154 metropolitan statistical areas (MSAs) covered by Zillow and were flat in eight. In the short term, however, nearly two-thirds of MSAs (94 of 154) experienced home value appreciation, with the Zillow Home Value Index rising from the first to the second quarter.

Negative equity fell slightly to 26.8 percent of single-family homeowners with mortgages in the second quarter, down from 28.4 percent in the first. A homeowner is in negative equity when they owe more on their mortgage than their home is worth.

Meanwhile, the rate of foreclosure re-sales declined from its peak in March 2011, when 21.4 percent of all sales were foreclosure re-sales. In June, 19.7 percent of sales were foreclosure re-sales.

"While there are many positive signs in the second quarter, and it is clear the post-tax credit free-fall of home values is over, we're not out of the woods yet," said Zillow Chief Economist Dr. Stan Humphries. "It is very encouraging that two-thirds of markets in our report experienced home value appreciation, but we have to remember that this is coming on the heels of one of the worst quarters since the housing recession began.

"We expect a bumpy road ahead. There will be many ups and downs in home values before this is over, and we continue to expect a true bottom in 2012, at the earliest. There are still hazards in the form of a full foreclosure pipeline, high negative equity and fluctuations in demand."

While nearly two-thirds of markets showed appreciation from the first to the second quarter of 2011, far fewer have recorded a longer period of stabilization. Only 25 of the 154 MSAs covered in Zillow's Real Estate Market Reports showed two consecutive quarters of appreciation. Among those MSAs were Washington, D.C., where the median home value increased 1.7 percent from the first to the second quarter after increasing 0.2 percent from the fourth quarter of 2010 to the first of 2011; and Pittsburgh, where home values increased 2.8 percent from the first to the second quarter, and increased 0.1 percent from the fourth to the first quarter.

Fort Worth Has Region's Highest Tax Rate

The City of Grapevine sent around its July/August newsletter and on the cover was a graph showing tax rates in the region. Grapevine of course had the lowest tax rate, on the chart at least, but the highest tax rate may come as some surprise. No, it's not Southlake or Colleyville, it's Fort Worth. The publication notes that for a city its size, Grapevine is heavily reliant on sales tax and attracting businesses that provide amenities as well as bring in sales tax have been used to keep property tax rates low. 

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