Only seven large homebuilders (1000+ closings) have sold more homes so far in 2010 than they did a year earlier.  Our data feature this week, courtesy of Housing IntelligencePro, shows their rank in terms of percentage gain from a year ago.  While this has been another brutal year for home builders, these seven companies have adapted to difficult conditions and continued to move product.  Subscribers to Housing IntelligencePro have the ability to examine the individual areas and subdivisions that have driven the successful increases in volume.  Is it price?  Is it location?  Amenities?  Being armed with this sort of intelligence has never been more vital.

In broader housing news, both new and existing home sales reported moderate gains in September albeit coming off near record lows.  The recent halt in foreclosure activity by some of the nation’s largest financial institutions may stall further sales activity in the near-term, especially in regards to sales of distressed/foreclosed properties.

Recent data showed that the economy is still on a path of sluggish growth.  GDP estimates for the third quarter were slightly stronger than final second quarter figure which was encouraging.  Economic growth was fueled by stronger consumer spending during the third quarter.  Speaking of the consumer, consumer confidence rebounded slightly in October after reaching its lowest levels since February last month.  Corporate earnings remained strong this earnings season which is also a positive sign for the economy going forward.

The possibility of a double-dip recession seem less and less likely now but keep an eye out for a slowdown in resale activity in the coming months.  Any major shock to the housing market can spark another crisis for the financial system and the economy.

The Economy
Advance estimates for third quarter gross domestic product showed the economy growing slightly faster than the previous quarter. The U.S. economy grew 2.0% during the third quarter which is stronger than the 1.7% pace in the final second quarter report. This marks the fifth straight quarter that the U.S. economy has expanded.  The economy was aided by stronger consumer spending in the third quarter which accounts for over two-thirds of GDP.

The labor market continued to show signs of slight improvement this past week.  First-time jobless claims fell by 21,000 to 434,000 in the week ended October 22nd.  This was the third straight week that initial unemployment claims have declined and the lowest they have been since early July, although prior weeks' data have been consistenly revised upward, so it is likely this figure will be revised upward as well.

Consumer confidence rebounded slightly in October after reaching its lowest levels since February last month in September. The consumer confidence index increased to a reading of 50.2 in October from a revised September figure of 48.6. The consumer confidence index is slightly higher compared to the same year-ago period when the index stood at 48.7.

Housing Market
Falling mortgage rates helped drive demand in both the new and existing home markets during September.  While the recent increase in sales activity is a positive sign, home sales still remain at historically depressed levels.

New home sales increased 6.6% from the previous month to a seasonally-adjusted annual rate of 307,000 units in September.  This is the second straight month that the pace of new home sales has improved.  New home sales are still significantly slower compared to both this time last year and before the tax credit expired.  New home sales are down 25.8% from April levels before the expiration of the homebuyer tax credit and down 21.5% from September of last year.

Revisions in the September data showed that home prices were firmer than previously expected in past months and remained stable in September.  Median new home prices increased to $223,800 from an upwardly revised August figure of $220,500.  This was the second straight month that new home prices have increased and the highest they have been since May. 

New home inventory continued to decline in September which will help prices stabilize further as demand picks up with reduced supply.  New home inventories declined to 204,000 units on a seasonally-adjusted basis in September.  Inventory has declined for four consecutive months and has not recorded a monthly increase in eight months.

Existing home sales rose by 10% from the previous month to 4,530,000 units in September.  Sales of existing single-family homes increased 10% to 3,970,000 units while condo and co-op sales rebounded 9.8% from last month to 560,000 units.  This was the second straight month that resales have increased after reaching record-low levels in July.

Increased demand in the resale market has been fueled by all-time record high levels of affordability.  Record-low mortgage rates along with falling home prices pushed the existing home affordability ratio to a new all-time high of 68.7% in September. 

The median existing home price declined to $171,700 in September compared to $177,500 in August and $175,900 during this same month last year.  This was the third straight month that existing home prices have declined and the lowest they have been since March.

Existing home inventory levels remained above the 4 million unit mark for the third straight month in September.  However, inventory of existing homes did decline 1.9% in September to 4.04 million units.

National average mortgage rates increased from the previous week to 4.23% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on October 28th.  While this is the second straight week that mortgage rates have increased, they remain just slightly higher than all-time record lows.  Mortgage rates have now averaged less than 5.0% for 25 straight weeks and remain near all-time record lows.

In the week ending October 22nd, the MBA’s seasonally-adjusted purchase index increased 3.95% from the previous week but was down 30.80% compared to the same time last year.  Overall mortgage application also increased due to higher refinance and purchase activity driven by record-low mortgage rates.  However, the purchase index remains near its lowest levels in 14 years.

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