Monday, May 04, 2015

NAHB: Builder Confidence improves Year-over-year for the 55+ Housing Market in Q1

by Bill McBride on 5/04/2015 11:09:00 AM

This is a quarterly index that was released last week by the the National Association of Home Builders (NAHB). This index is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008 (during the housing bust), so the readings were initially very low

From the NAHB: Builder Confidence in the 55+ Housing Market Remains Positive in the First Quarter

Builder confidence in the single-family 55+ housing market remains in positive territory for the first quarter of 2015, according to the National Association of Home Builders’ (NAHB) 55+ Housing Market Index (HMI) released today. Compared to the previous quarter, the single-family index edged down slightly by one point to 58, which is the fourth consecutive quarter above 50.

Two of the three components of the 55+ single-family HMI posted increases from the previous quarter: present sales increased one point to 64 and expected sales for the next six months rose three points to 67, while traffic of prospective buyers dropped eight points to 40.
“The strong eight-point surge in the 55+ HMI survey’s index for multifamily rental production is a positive sign, and a contrast to the relatively low attitudes builders are currently expressing towards 55+ multifamily condos,” said NAHB Chief Economist David Crowe. “This suggests that there is a significant number of 55+ households who desire to live in dense multifamily settings but not to own, at least not right away.”
emphasis added
NAHB 55+ Click on graph for larger image.

This graph shows the NAHB 55+ Single Family HMI through Q1 2015.  And reading above 50 indicates that more builders view conditions as good than as  poor.  The index declined slightly in Q1, and increased in Q1 2015 to 58 from 47 in Q1 2014. 

There are two key drivers in addition to the improved economy: 1) there is a large cohort moving into the 55+ group, and 2) the homeownership rate typically increases for people in the 55 to 70 year old age group. So demographics should be favorable for the 55+ market.