With For Sale signs abundant across most of the United States, any releases on the housing sector data are closely analyzed and dissected for signs the recovery is firmly in place. With four major indicators scheduled this week, homebuyers, sellers, investors and even the mere curious will be watching closely for something positive to grow on.
Today, we receive info on the National Association of Home Builders (NAHB) Housing Market Index. The Housing Market Index provides a reading on homebuilder sentiment, and Wall Street consensus is expecting a print of 20, versus 19 for the month of September. The index has been creeping up since February; however, an index reading below 50 is a sign of weakness in the sector. The NAHB is expected to release its reading at 1:00 p.m. EST today.
Tomorrow, we’ll have two housing reports to analyze with September housing starts and building permits. For housing starts, the consensus is expecting a number of 610,000 against a reading of 598,000 in August. Housing starts data is considered to be the most inadequate of the four scheduled for the week because the figures come with a huge statistical margin for error. On the other hand, building permits data are considered the most reliable.
Also scheduled for release tomorrow, building permits for September are expected to post a slight increase to 590,000 from 580,000 in August. Both housing starts and building permits will be released at 8:30 a.m. EST.
To conclude the week in housing, data on existing home sales will be released on Friday at 10:00 a.m. EST. Wall Street consensus is expecting the figure to jump to 5.40 million units sold in September versus 5.10 million in August. The first-time homebuyer tax credit is widely considered to be the catalyst for the large increase in existing home sales.
MarketWatch offered this explanation on the homebuyer tax credit incentive:
The tax credit has enlivened the market, but the gains have been largely at the bottom end, where first-time buyers can afford to buy. The National Association of Realtors figures the credit will boost sales by about 350,000, while the homebuilders’ group thinks the net number of additional purchases will be 200,000.
Improvement in the housing sector is not considered to be exclusively from the homebuyer tax credit. “Economic conditions are slowly improving, price declines and low mortgage rates are keeping affordability high, and there are many distressed sales,” wrote Michael Feroli and Abiel Reinhart, economists for JPMorgan Chase & Co., to MarketWatch.
Inventories of unsold new homes have cratered to the lowest level in 16 years. “Starts will likely need to be low for a while to reduce vacancies,” wrote Kevin Cummins, an economist for UBS Securities. “However, the current pace is probably about 1 million units (at an annual rate) below the long-term trend based on household formation and replacement building.”
A decline in home values has also helped the sector. However, even with mortgage rates at historic lows, many would-be homebuyers cannot obtain a mortgage to take advantage of the lower prices. This roadblock is largely considered a hurdle in a complete housing recovery.
“There’s willingness and then there’s ability,” said Jack Ablin, chief investment officer at Harris Bank in Chicago, to Forbes magazine. “There may be a myriad of starry-eyed home buyers who are willing to buy a home but unfortunately are just unable to because of the lack of credit.”
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