Smart Borrower Blog

New Home Starts Remain Low

Dec 25th, 2007 @ 7:23 AM by MortgageMentor

Despite all the recent publicity about the mortgage market and its effect on the housing market, one tends to forget about the segment that is most affected by the crunch: home builders. The National Association of Home Builders is predicting that they will experience another “rough patch” through 2008.

The NAHB/Wells Fargo Housing Market index is at a record low. This is a score between 0 and 100 that describes the current condition of the housing market. A high score indicates a strong market overall; if the score is low, it indicates that the starts on new home construction is slow. The index is based on the results of surveys conducted among members of the National Association of Home Builders. These builders rate their market conditions on three items: the sale of new single-family homes at the current time, the sale of new homes over the next six months, and the “traffic” they are experiencing (prospective new home buyers). These results are then average, seasonally adjusted, and weighted.

The HMI is at 19, where it has been for three months. This is a record low. However, NAHB’s economist, David Seiders, points out that the fact that the index has stabilized, which probably means the market has reached its lowest point. Most builders remain confident that by this time next year, business will be on the upswing.

What does this mean for you?

If you are contemplating building a new home, this could be the perfect time to get started. If your contractor is normally in hot demand, he might be less busy, and therefore could have more time for you and your project. In some cases you may also get a better price than you would have if new home construction was at a higher level. All in all, current market conditions can work in your favor.

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