When Home Builders Say “Home Sales Will Rise”, Take Note!!

Home builders know their business well, it seems. Over the last 4 years, builders have predicted with high accuracy the number of home sales they’ll make 6 months into the future. It’s among the reasons why today’s home buyers should rising homebuilder confidence levels.
Today’s home builders feel as good about their sales prospects as at any time in the last 5 years. Buyers should expect rising home prices through the end of 2012 and into early-2013
Earlier this week, the National Association of Homebuilders released its Housing Market Index for August 2012.
More commonly called as the “Homebuilder Confidence Survey”, the HMI is a composite survey, measuring builder sentiment on three fronts — current home sales, current buyer foot traffic, and projected home sales for the next six months.
As reported by this month’s HMI, home builder homes sale expectations through Q4 2012 and Q1 2013 are at their highest points since early-2007. Low mortgage rates vis-à-vis rising rents have changed the Rent vs Buy relationship in a host of U.S. cities. For many would-be buyers, it’s now less expensive to own a home than to rent one.
Buyer foot traffic is soaring, as are home sales are. New Home Sales volume are currently at a 2-year high on a seasonally-adjusted, annualized basis.

So what about all the Shadow Inventory that was going to ruin the market?

While the shadow is very large, one often-overlooked fact is that the shadow isn’t nearly as large as it was two years ago.

Barclays Capital estimates that at the end of May there were around 1.8 million mortgages in the foreclosure process and another 1.45 million where borrowers have missed at least three payments. That puts the total number of properties that could be repossessed and resold by banks at around 3.25 million mortgages.

But it is down from a peak of 4.25 million in February 2010.

[Housing analyst Ivy Zelman] published an in-depth research note earlier with the title: “Shining a bright light on the shadow: Why what’s lurking doesn’t concern us.” In it, she explains how it’s more important to focus on the pace at which foreclosures are being liquidated, and not the absolute number.

“Just like the Wizard of Oz, shadow inventory is not very intimidating once you pull back the curtain,” the report said.

Source WSJ

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