A builder ranking by price per square foot makes up our data feature this week, looking at which home builders have the highest average price per square foot on new closings so far in 2010.  Leading the list is Toll Brothers, reflecting their up-market product offerings, followed by Brookfield Homes and the builder of the active adult mecca The Villages in Florida.  Of note, the prevalence of highly ranking builders on the list who are known for catering to retirees reflects the typically larger asset holdings and savings of that demographic group.

In other new housing news, big builders are still struggling financially but largely have managed to weather the storm and are starting to experience some financial stabilization.  Less than two years ago, there was much doubt cast over the homebuilding segment and how many large national public homebuilders would emerge from the downturn unscathed.  Homebuilders have been hurt by slower demand, falling land prices, and an economic recession in recent years.  Remarkably today, most of these builders have survived the downturn and are now starting to return to profitability.

The latest earnings reports show that many builders have climbed back into the black due to a surge in sales activity leading up to the expiration of the federal homebuyer tax credit at the end of April and prudently controlling inventory.  Expectations are that sales will be sluggish for the remainder of the year with economic growth slowing and limited demand.  But the flurry of activity in the past year has helped the market reduce excess supply and put it on much firmer ground. 

The future of housing will very much depend on the economy and jobs.  Advance estimates for second quarter GDP indicate that growth is definitely slowing.  GDP growth for the past two quarters has declined which suggests that more moderate growth can be expected in the quarters to come.  As far as jobs go, there still are not many out there and initial unemployment figures remain stubbornly high.  The focus will be on tomorrow’s June employment numbers to give us an indication on where the economy might be heading for the second half of the year.

The Economy
Total non-farm employment in the U.S. declined by a seasonally-adjusted 131,000 payrolls in June.  Most of the payrolls lost in June were temporary Census jobs while the private sector added 71,000 payrolls.  The unemployment rate in June remained unchanged from the previous month at 9.5%.

First-time unemployment claims posted an unexpected increase this past week.  Initial jobless claims rose by 19,000 to 479,000 in the week ended July 31.  This is the highest level of first-time claims since early April and puts further doubt into an economic recovery.

Advance estimates for second quarter gross domestic product showed the economy expanding slower than the previous quarter pace.  The U.S. economy grew 2.4% during the second quarter which is weaker than the revised 3.7% pace in the final first quarter report.  This is the second straight quarter in which growth has slowed suggesting that an economic activity may be moderating.  A downward revision in consumer spending, which accounts for over two-thirds of GDP, along with a jump in import activity dragged on GDP in the advance second quarter report.

Personal incomes for the United States in June increased slightly from the previous month to $12,501.2 billion and were up 2.6% from the same period last year.  This is the ninth consecutive month that personal incomes have increased.  Personal incomes, nominally, not taking into account inflation is now back to their highest levels since June 2008.

The PCE price index, which is a leading gauge for inflation, declined 0.1% from the previous month.  This is the second straight month that prices have recorded a 0.1% decline which raises some concern about deflation.  The PCE price index excluding food and energy remained flat from the previous month.

Housing Market
The National Association of Realtors’ Pending Home Sales Index declined for the second straight week following the expiration of the federal homebuyer tax credit in April.  The pending home sales index fell 2.6% in June to a reading of 75.7 from an upwardly revised May figure of 77.7.  The index is significantly lower than it was this time last year, down 18.6% from the 93.0 reading in June 2009.

National average mortgage rates declined from the previous week to a new all-time low of 4.49% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on August 5th.  This is the third straight week that mortgage rates have declined.  Rates have not posted a weekly increase for the past seven weeks.

In the week ending July 30th, the MBA’s seasonally-adjusted purchase index increased 1.51% from the previous week but was still down 33.84% compared to the same time last year.  This is the third straight week that the purchase index has increased and the highest it has been in six weeks.  Despite this past week’s gains, the index remains near its lowest levels in almost 14 years.

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