Home Builders More Confident Going Into 2014

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By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

Housing Market ChartHousing supply has been a hot-button issue this year as demand from buyers has increased in markets across the U.S. One area that everyone watches closely in connection with supply is new home construction, which has made some gains but hasn’t really soared enough to pull supply up as much as needed in many areas.

The latest National Association of Home Builders/Wells Fargo Housing Market Index shows there could be more positive movement for new home construction in 2014. The index, which measures builder confidence based on factors like current sales conditions, sales expectations and prospective buyer traffic, climbed four points to 58 for December.

The index is up 11 points since December a year ago and has been above 50 for the past seven months, showing slow and steady underlying strength.

When you look at the three component parts of the index, all showed growth. The index for current sales conditions was up six points to 64. The index that gauges expectations for future sales climbed two points to 62, and the index that gauges prospective buyer traffic rose three points to 44.

While these types of indices measure confidence, they’re worth highlighting because they help show a sense of builders’ appetite for construction going into 2014.

The homebuilders association said they expect continued recovery in the housing market next year, with purchase volume growth of 5%. They expect home prices to rise by about 6.5% for the full year.

They also said they expect new home sales to increase by 10-15% in 2014, though the total share will still be less than the historical 10% of overall sales next year.

Also worth noting is that the recent spike in mortgage interest rates so far hasn’t stopped consumers from buying. While rates have moved up the past month or so (but moved down slightly last week), so far we’re not seeing a huge impact on demand.

Clearly, 2014 is looking to be another busy year for housing in both new and existing homes. It’s also looking like constrained supply will continue to be an issue in many markets.

For sellers, this means your value will likely continue to make gains, though how much depends largely on your local market, economy and appetite for selling.

For buyers, this means continued competition for homes, multiple bids and the need for a lot of patience – again, depending largely on your local market.

The good news is 2014 is likely to be another strong year!


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