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Housing ‘Taking a Breath’ as Starts and Confidence Decline

Daily Ticker

2013 is proving to be a tough year for housing.

U.S. housing starts fell 8.5% in January, missing their expectations of -3.1% by a long shot, the Commerce Department reported Wednesday. On Tuesday, the National Association of Home Builders said U.S. homebuilder confidence declined slightly in February, falling from five-year highs for the first time in 10 months.

According to data released on Tuesday, The National Association of Home Builders/Wells Fargo Housing Market Index fell one point to 46 from 47 in January. The Index rates consumer confidence on a scale of 0-100, with a score above 50 indicating that more builders think conditions are good than poor.

David Crowe, chief economist of the National Association of Home Builders, tells The Daily Ticker that this slight decline is nothing to worry about. “Given the strength [home builder confidence] showed during all of 2012 I think this is it just simply taking a breath," he says.

Crowe explains that uncertainty due to government manufactured crises are likely the culprit for this drop. “Many of the uncertainties we’re beginning to see in the fiscal field and federal government orb have given people the chance to say ‘perhaps lets hold on for a month of two and see how all of that works out’ before they all move forward with their plans," says Crowe.

Difficulty qualifying for mortgages, low appraisal rates, and competition from low-priced and foreclosed homes are also keeping homebuilder confidence low, says Crowe.

“These things are less of a difficulty than they were, but they’re still out there,” he notes.“This slow process in building will take some time.”

Crowe reiterates that it’s important to remember how far the industry has come from its index low of 8 in January 2009. Crowe imagines the housing market will advance in 2013 at the same pace as it did in 2012 but pick up speed by 2014 when the economy has fully broken out of the 2008 recession.

Meanwhile housing inventory dropped to an 11-year low, according to data from Realtor.com, with just 1.48 million homes for sale, down 16.5% from one year ago.

Homebuilder stocks have soared in the past year with Pulte (PHM) up 124%, Toll Brothers (TOL) up 59%, Hovnanian (HOV) up 90%, and DR Horton (DHI) up 64% indicating that February’s slight decline might be a fluke in an overall improving market.

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