We’re in the city of brotherly love next week on October 28 at our Philadelphia Housing Seminar. Come see us to gain insight on both the national and local new housing market.  Click here for more info.  As a preview, our data feature of the week focuses on how the Philadelphia region’s largest builder by unit volume has capitalized on current housing conditions, courtesy of Housing IntelligencePro.  This builder increased their market share to 16% in 2010 despite difficult conditions, up from 13% a year ago, and handily outpaces the other builder competition in this market area.  Come see us on October 28 to find out who this builder is, and how they’ve been so successful in difficult market conditions.

In broader housing news, record-low mortgage rates have recently helped to buoy homebuilder confidence and construction activity.  For October, the National Association of Homebuilders’ Housing Market Index posted its first increase since May to a reading of 16.  Signs of a stabilizing economy along with record-high housing affordability caused by lower prices and falling mortgage rates helped to boost homebuilder confidence this month.  Residential construction activity also increased for the third consecutive month in September which suggests that conditions are stabilizing in the housing market.  Building activity jumped leading up to the expiration of the federal homebuyer tax credit in April but plunged after it expired.

The stoppage in foreclosure proceedings by many of the nation’s largest mortgage companies have caught headlines for the past several weeks but the latest news coming out of this debacle may help allay fears of longer-term damage to the housing market and the economy.  Officials from the Obama administration said there is no sign of “systemic damage” to the financial system stemming from these events.  Bank of America, which announced they would halt foreclosures in all 50 states on Oct. 8th, also stated on Monday that they would start foreclosure sales again in 23 states.

According to the Fed’s Beige Book, the U.S. economy grew at a “modest pace” in recent months.  Leading economic indicators also suggested that they economy will continue to grow in the coming months albeit at a slower pace.  Although recent economic data and news continue to point towards a sluggish recovery, they are also dispelling fears of a double-dip recession.  As of now, the expectations for the U.S. economy for the coming year will be slowly recovering labor market, housing market, and economy.

The Economy
The leading index increased to a reading of 110.4 in September which is a 0.30 point increase from August levels. The index is up 0.90 points from its levels six months ago when it stood at 109.50 in March. While it is a positive sign that the leading index continues to increase, the gains have been flatter since April which suggests that growth going forward will be slower and more moderate.

A drop in initial unemployment claims along with an increase in the index for stocks offset declines in building permits and vendor performance to help push the leading index slightly higher in September.  Five out of the ten components showed month-over-month increases from August levels while only four out of the ten components experienced an increase from their levels six months ago in March.

First-time unemployment claims declined this past week and have recorded declines in three out of the past four weeks, although it is notable that the prior release was revised upward as have 25 of the last 26 revisions from the BLS.  Initial jobless claims dropped by 23,000 to 452,000 in the week ended October 15th.  With weekly claims still averaging in the mid-400 level, labor market conditions may be stabilizing but are not showing any substantial signs of a recovery.

Housing Market
Housing starts increased slightly in September while figures for August were also revised higher which gives further evidence that the housing market may be stabilizing.  Total housing starts increased 0.3% from August levels to a seasonally-adjusted annual rate of 610,000 units while August figures were revised 10,000 units higher.

Single-family housing starts increased 4.4% to a seasonally-adjusted annual pace of 452,000 units, which is the highest they have been since May, while multi-family starts declined 9.7% to a seasonally-adjusted annual pace of 158,000 units.  Stabilization in the single-family segment is important since it is a better gauge of the overall health of the residential real estate market.

Building permits declined in September due to weakness in the multi-family segment.  Total permit activity fell 5.6% in September to a seasonally-adjusted annual rate of 539,000 units.  Single-family building permit activity remained steady while multi-family permits plunged.  Single-family issuances increased a slight 0.5% from August to a seasonally-adjusted annual pace of 405,000 units.  Multi-family building permits dropped 20.2% from last month to a seasonally-adjusted annual rate of 134,000 units. 

Record-low mortgage rates helped builder confidence to rebound in October. The National Association of Homebuilders' housing market index increased three points from the previous month to a reading of 16 in October. This is the first monthly increase for the index since May and the highest the index has been since June.

National average mortgage rates increased from the previous week to 4.21% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on October 21st.  This is the first time in the last five weeks that mortgage rates have recorded a weekly gain.  Mortgage rates have now averaged less than 5.0% for 24 straight weeks and remain near all-time record lows.

In the week ending October 15th, the MBA’s seasonally-adjusted purchase index declined 6.66% from the previous week and was down 36.87% compared to the same time last year.  This is the second straight week that the purchase index has declined despite mortgage rates reaching new all-time record lows.  This is also the lowest the index has been since mid-August.  The purchase index remains near its lowest levels in 14 years.

For market-level data and analysis please visit our website at http://www.hwmarketintelligence.com.  For more detailed information on the indicators discussed in this key indicator alert, please visit the following links: