Destiny Homes has been building Minneapolis luxury homes and remodeling fine residences in residential communities since 1977. Consumers are confident enough to schedule new luxury home builds.
Our Confidences Have Been Wrong - And Right Sometimes
Realtors and home builders are glad to see the strong monthly reports that add some validity to their hard work and the story that the home sector finally is, actually, recovering. It's true that we've been hearing it for years, and maybe that was simply being hopeful, the housing industry has been at best uneven. Today we hear more about increases and a positive expectation for more housing improvements and residential construction as we head into another year.
Consumer Confidence Means Real Dollars At Approximately 70% of Economic Spending
Destiny Homes finds consumer confidence is closely observed because consumer spending drives approximately 70% of economic activity. We are seeing record highs coming in from multiple trusted sources of data and opinion, the opinion component is perhaps due in part to trusting election promises.
FHFA Home Prices Report
According to FHFA's housing market report, the seasonally adjusted purchase-only index for the United States has increased for 8 consecutive months. Seasonally adjusted house prices rose 4.0 percent from the third quarter of 2011 to the third quarter of 2012, a significant increase from a year ago.
FHFA Principal Economist Andrew Leventis says,“With significant growth in home prices during the quarter and a modest inventory of homes available for sale, house price movements in the third quarter were similar to what we observed in the spring. The past year has seen consistent price increases.”
“With significant growth in home prices during the quarter and a modest inventory of homes available for sale, house price movements in the third quarter were similar to what we observed in the spring. The past year has seen consistent price increases, but a number of factors continue to affect the recovery in home prices such as stagnant income growth, high unemployment levels, lingering uncertainty about the macroeconomy, and the large number of homes in the foreclosure pipeline.” ~ FHFA Principal Economist Andrew Leventis.
The Conference Board Measures Consumer Confidence Index
The Conference Board November studies of the housing market show a stronger than anticipated increase in the number of consumers who believe the housing recovery is looking up. We are seeing a marvelous third consecutive monthly increase in the Conference Board’s measure of consumer confidence. The Consumer Confidence Index increased to its highest level in more than four and a half years, from 76.4 in Feb. 2008.
Lynn Franco, Director of Economic Indicators at The Conference Board explained why: “This month’s moderate improvement was the result of an uptick in expectations, while consumers’ assessment of present-day conditions continues to hold steady. Over the past few months, consumers have grown increasingly more upbeat about the current and expected state of the job market, and this turnaround in sentiment is helping to boost confidence.”
While the data from the Conference Board illustrates a sustained improvement in consumer confidence, growth has slowed. Prior to the 0.6 point increase in the Conference Board’s Consumer Confidence Index that was recorded in November, the Index rose by 4.7 points between September and October, 2.3 points lower than the 7.1 point increase between August and September.
“The very positive economic expectations of consumers stand in sharp contrast to growing concerns expressed by investors and companies about the impending fiscal cliff as well as the impact of a slowing global economy. While the surge in confidence will act to bolster consumer spending during the upcoming holiday season, it also means that this higher level of optimism is more vulnerable to reversal depending on how and when the fiscal cliff is bridged. The surge in consumer optimism may be largely due to the implied election promises of both candidates that most of the Bush tax cuts and the payroll tax cuts will be promptly extended.” ~ Surveys of Consumers chiefeconomist, Richard Curtin.
Key findings in the Thomson Reuters / University of Michigan Surveys of Consumers are:
In summary, consumers were more confident about economic prospects in October than any other time during the past five years. Nonetheless, these substantial gains still left many consumers uncertain.
The Sentiment Index was 82.6 in the October 2012 survey, up from 78.3 in September and 74.3 in August, and well above last October’s 60.8.
The largest gains were in the Expectation Index, which improved by 7.5% from a month ago and by 52.8% from the debt ceiling debate a year ago.
In contrast, the Current Conditions Index was 88.1 in October, up from 85.7 in September but just below August’s 88.7.
NAHB Housing Market Index
The National Associatiom of Home Builders (NAHB) Builder confidence in the NAHB Housing Market Index for newly built, single-family homes posted a commanding, five-point gain to 46 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for November, released on November 19. The five point gain reaches overhead with a seven consecutive monthly increase in the confidence gauge. Surpasing previous highs seen in 2012, it has never been this upbeat since May of 2006. Home buyers are saying "yes" to new construction in order to take advantage of today’s favorable prices and interest rates.
“While our confidence gauge has yet to breach the 50 mark -- at which point an equal number of builders view sales conditions as good versus poor -- we have certainly made substantial progress since this time last year, when the HMI stood at 19,” observed NAHB Chief Economist David Crowe. “At this point, difficult appraisals and tight lending conditions for builders and buyers remain limiting factors for the burgeoning housing recovery, along with shortages of buildable lots that have begun popping up in certain markets.”
New Construction Is Up But Still Low Historically
To frame this day in a larger view - even with our current strong gains, new home construction is at hovering around half the level considered healthy.
It is true new homes represent less than 20% of home sales. However, more importantly, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.
Home Building Permits
Home builders started work on new homes and apartments at a greater clip this fall than four years ago. More building permits were pulled numbering higher than we have seen in four years. When home builders pull permits, it is a sign of their confidence that recent gains in home sales will continue upward.
Destiny Homes is confident with a combined wise cautious view as we rely on a mix of MarketWatch data and opinion to point out the possibility that ample optimism is already in the stocks of the homebuilders. If you are ready to move forward and make your home renovation dreams a reality, give us a call. We are booking new home builds for 2013.
In summary, advance planning and gaining professional help to secure a lot to build on may be needed in today's tight Minneapolis real estate market. Butch and Liz enjoy building strong friendships with their clients and it all starts well before the actual build work begins. If you are planning to build a new home in the Twin Cities in 2013, call now to talk to Butch about your needs for a lot.
Butch and Liz Sprenger, owners of Destiny Homes Remodeling And Renovation Services Home page: www.destiny-homes.com. Service the entire Twin Cites Metro, from our main office in Deephaven, MN working as home Remodeler and owner of Destiny Homes.