The Housing Market Losing Steam!

July 18, 2006 - Increased concerns about interest rates and housing affordability caused builder confidence in the market for new single-family homes to slip three more notches to 39, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, reported today.

src: National Association of Home Builder

One reason is maybe the surge in building material costs:

In May, the producer price index -- the selling price received by domestic producers of goods -- of gypsum, a component of wallboard, rose 26.4 percent compared to the same month in 2005. Plastic construction materials jumped 18 percent, cement rose nearly 15 percent, and copper and brass products increased 86.9 percent from the same period a year ago.

src: Building Design & Construction homepage

The Housing Market Index (HMI) has reached a 15 years low in July:

Fig. 1 Housing Market Index (HMI) from 1995 to now (src: NAHB).

The HMI is the average of three components as shown on Fig .1. The historical data for the HMI and its components can be found here and we can see that the current HMI value is near an all-time low for this time of the year and was almost twice as large one year ago.

Fig. 2 Traffic of Prospective Buyers index. The gray background gives the observed values between 1985 and 2005, the darker the shade the more frequent the corresponding value.

Fig. 3 Single Family Sales: Next 6 Months. The gray background gives the observed values between 1985 and 2005, the darker the shade the more frequent the corresponding value.

Fig. 4 Current Single Family Sales. The gray background gives the observed values between 1985 and 2005, the darker the shade the more frequent the corresponding value.

Fig. 5 Housing Market Index. The gray background gives the observed values between 1985 and 2005, the darker the shade the more frequent the corresponding value.