Builders upbeat despite downtick

Contractors continue to find conditions good

Instead of 5 buyers, they have 3

'From A-plus market to A market,' says official

November 23, 2003|By BLOOMBERG NEWS

U.S. homebuilder optimism slowed this month but remained healthy as housing starts hit 17-year highs and improvement in the labor market kept demand strong, according to an industry survey released last week.

The National Association of Home Builders' housing market index eased to 69 this month from 72 last month. Readings above 50 mean more builders view conditions as good than poor. The index has registered at more than 60 since June.

Local builders said the market has recently begun to slow slightly. A combination of rising home prices, an uptick in mortgage rates and the nearness of the holiday season have left some builders seeing fewer visitors at their model homes recently, the contractors' group said.

"We have been running at breakneck speed for so long that a slight slowdown - if you want to call it that - means we're going from an A-plus market to an A market, and that's really what we're seeing," said Earl Robinson, vice president of sales and marketing for Ryland Homes' Baltimore division. "It's not slower per se - it's just that instead of having five people for every lot, we now have three. So it's ever so slight."

In metropolitan Baltimore, sales of new homes fell 13.4 percent to 1,442 from July to September, according to the Meyers Group, a real estate information company that tracks builder sales in the region. The average sales price rose 28.7 percent to $246,807 for attached homes and 17.2 percent to $392,886 for detached homes.

U.S. builders achieved an annual rate of 1.96 million homes last month, the fastest clip since January 1986 and a 2.9 percent increase from a revised 1.9 million pace in September, the Commerce Department said in a report last week. Building permits, an indicator of future construction, rose 5.2 percent to 1.973 million, the highest level since 1984.

Housing is "the gift that just keeps giving," said Richard DeKaser, an economist at National City Corp. in Cleveland. Higher permits "guaranteed a solid fourth quarter. At this point it looks like we're going to see a further contribution to growth from housing" during the coming months.

The economy created 126,000 jobs last month and the number of people filing for unemployment benefits decreased, according to Labor Department reports.

The improving job market may help support housing sales, homebuilders said. The average rate on a 30-year fixed mortgage is less than a percentage point higher than the record low reached in mid-June.

The average 30-year fixed mortgage rate was 5.83 percent last week, down from 6.03 percent the previous week, according to Freddie Mac, the No. 2 buyer of mortgages. The rate reached a record-low 5.21 percent in mid-June and averaged 5.95 percent in October.

Home-loan rates are typically pegged to long-term securities such as 10-year Treasury notes, whose yields have risen since the end of September amid signs of broader economic growth.

This month's index of homebuilders' sentiment, a measure of optimism for the next six months, declined to 79 from 82. The National Association of Home Builders' index was based on a survey of 212 contractors.

Economists said housing stimulates the economy by encouraging spending on appliances and furniture. Homebuilding contributes 5 percent of gross domestic product.

An index measuring prices paid by U.S. consumers for all goods and services was unchanged last month after four months of increases, the Labor Department reported Wednesday.

Housing costs, which include some energy costs and account for one-third of the index, rose 0.3 percent after climbing 0.1 percent the month before.

An expanding economy might sustain demand for housing even as rates stay above the record low, said Joel H. Rassman, chief financial officer of Toll Brothers Inc., the largest U.S. builder of luxury homes.

"The economy, if it improves, will provide more jobs and more consumer confidence," Rassman said, "and that will be very good for our industry."

A Sun staff writer contributed to this article.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.