Market Report: How Fares the Residential Market?

by Jonathan McGaha | 30 June 2015 12:00 am

We look at the residential construction market feeling caught between a sense of hope and hindrance. Everyone, no matter the market they work in, wants the residential market to do well. There are all kinds of benefits that thread their way through the entire economy when the housing market is strong. Better consumer confidence. Increased employment. Improved financial stability.

But right now, the residential market seems to be caught between the hope for growth and some weaknesses. After the long crawl out of the hole of the worst housing recession in history, homebuilders, remodelers, real estate agents and others are feeling more confident, but that confidence is not robust. There is a definite wait-and-see attitude to the residential market.

 

Existing Home Sales

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After a year of steady growth in the existing home sales market during the first three quarters of 2014, the fourth quarter and the beginning of 2015 showed a surprising weakness in the market. The rate of existing home sales suddenly dropped from a peak of 5.16 million in November to a low of 4.82 million in January. Then, just as surprisingly, the spring selling season brought a surge of sales, jumping the rate of sales to 5.21 million in March, as reported by the National Association of Realtors.

The drop followed by the sudden surge could be attributed, in part, to the surprisingly cold winter season. New England, especially, experienced record-setting snow falls seemingly once a week, which prevented buyers from getting out to search for homes. Even so, the slowdown matches the slow economy, which posted a decline in the first quarter.

 

New Home Sales

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The National Association of Homes Builders/Wells Fargo Housing Market Index tracks what is happening on the front lines of home construction with builders, and represents both the actual activity and builder sentiment. Following the pattern identified in the existing home market, home builders felt increasingly bullish about the home market through the first three quarters of 2014. Then, in the fourth quarter and into 2015, that confidence began to wane. Only as we edge toward the summer months has the index reasserted its climb, and in June reached the peak it had occupied in September the previous year.

 

Remodeling Market Index

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In concert with the home builders, remodelers experienced the same growth in confidence throughout 2014, then the same drop in the first quarter of 2015. The remodeling market tends to lag the new home market in upturns and downturns, and its peaks and valleys are not as severe.

The National Association of Home Builders Remodeling Index has been growing steadily since the dark days of 2008, but now it is experiencing the same uncertainty, with many economists uncertain about the next direction in the trend: up or down?

Even with increasing demand for existing homes, new homes and home improvement services, there are constraints on the residential market that could limit growth. A shortage of skilled labor is making it increasingly difficult for contractors to meet sales obligations. That shortage also affects the trucking industry, and many contractors report delays in shipping that have slowed down production. The next few months will show with some certainty whether the residential market will regain its full pre-2008 vitality.

Source URL: https://www.metalconstructionnews.com/articles/market-report-how-fares-the-residential-market/

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