The housing market continued to disappoint in April, with a marked decline in housing starts and some slippage in existing home sales. Housing starts have been bouncing along the bottom since June of 2010.

Builders cite the lack of credit for buyers and builders as the primary hurdle in the market. Federal Deposit Insurance Corporation data supports the builder credit shortage — showing single-family acquisition, development and construction (AD&C) lending down 73% over the past three years compared to a 45% drop in all commercial real estate lending.

Weak housing demand, along with a high volume of foreclosures and distressed sales, continues to have an adverse impact on house prices, with the Federal Housing Finance Agency house price index down 2.5% in first quarter of 2011 and 5.5% year-over-year. The monthly data provide some hope that the downward pressure on house prices is easing, with the overall rate of decline slowing and prices ticking up in four of the nine Census divisions in March. In addition, foreclosures and seriously delinquent homes are beginning to trend down, reducing the downward pressure on house prices.

At the same time home buyers are bargaining for lower prices, builders are facing increasing costs. The producer price and consumer price indexes have been rising steadily since the beginning of the year, pushed up by surging energy and commodity price increases. It appears, however, that oil prices have peaked, suggesting prices will settle back to a more moderate pace in the second half of the year.

The outlook is better for the multifamily sector, with most indicators suggesting that rental markets will be the first to benefit from pent-up housing demand. The NAHB 55+ Housing Market Index showed builder confidence improving for apartment production and demand in the 55+ housing market.

The improving economy should soon bring some relief to depressed levels of housing activity — with more solid employment prospects boosting consumer confidence. Recent data indicate that job creation is slowly gathering momentum, with job openings rising to their highest level since late-2008 and lay-offs declining.

Latest Posts

• Mortgage Bankers: Little Change in Delinquencies and Foreclosures During First Quarter
  The latest Mortgage Bankers Association mortgage delinquency survey points to a mortgage market on the mend. Ongoing declines in the share of seriously delinquent loans and a shrinking percentage of new foreclosure starts are good news for the housing market’s recovery. Posted: May 26
  
  
• The Decline of AD&C Lending
  Data from NAHB’s survey of home builders and the FDIC indicate that AD&C lending conditions remain restrictive for home building, constraining residential construction’s from leading the economy out of recession, its traditional role. Posted: May 25
  
  
• Downward Pressure on House Prices Easing
  While there was a marked decline in the quarterly FHFA house price index, the monthly numbers indicate that the downward pressure on house prices is easing, with improvements already showing up in some states. Posted: May 25
  
  
• Joplin, Missouri and Housing
  In the wake of the devastating tornado in Joplin, Mo., NAHB economist Elliot Eisenberg postulates that rebuilding offers the affected communities hope for the future. Posted: May 24
  
  
• Existing Home Sales Underperforming With Low Appraisals Increasing Contract Cancellations
  Existing homes sales have lost momentum in the past three months, with low appraisals resulting in contract cancellations. Posted: May 19
  
  
• Disappointing April Housing Starts
  Housing starts fell 10.6% in April. Builders cite foreclosures, short sales and lack of credit for buyers and builders as the primary hurdles in the market. Posted: May 18
  
  
• Builders of 55+ Rental Units See Future Market Improvement
  The NAHB 55+ Housing Market Index shows builder confidence improving for apartment production and demand in the 55+ housing market. The data suggest that rental markets will be the first to benefit from pent-up housing demand. Posted: May 16
  
  
• Rising Energy Prices Push Consumer Prices Higher in April
  Rising energy prices pushed consumer prices higher for the 10th consecutive month, with an annual increase of 3.2%. However, year-over-year growth in core CPI has been a modest 1.3%. Posted: May 13
  
  
• Producer Price Index Marches Up as Energy Prices Continue to Rise
  The Producer Price Index continued its upward march in April, with rising energy prices accounting for around three-quarters of the increase. Posted: May 12
  
  
• More Labor Market Reporting: Job Openings Increasing But Construction Lags
  The Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS) indicates that job creation is slowly gathering momentum, but the construction sector continues to lag behind. Posted: May 11

Eye on the Economy is a bi-weekly digest of the latest economic and housing policy news, analysis and studies as posted on NAHB’s free Eye on Housing blog. The preceding is a reissue of his May 31 edition. To subscribe to Eye on the Economy, click here.

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