Tuesday, January 15, 2019

NAHB: Builder Confidence decreases for the 55+ Housing Market in Q3

by Bill McBride on 1/15/2019 04:06:00 PM

I haven't posted this in some time. This is a quarterly index that was released last year 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 Drops in the Third Quarter

Builder confidence in the single-family 55+ housing market dropped seven points to 60 in the third quarter, according to the National Association of Home Builders' (NAHB) 55+ Housing Market Index (HMI) ... Although the index declined, it is still in positive territory as a reading above 50 means that more builders view conditions as good than poor.

“Although various headwinds are starting to have an impact on the 55+ housing market, there are many parts of the country where the market is still doing well,” said Chuck Ellison, chairman of NAHB's 55+ Housing Industry Council and Vice President-Land of Miller & Smith in McLean, Va. “In some places it is becoming a challenge for builders to provide housing at prices their customers can afford.”
...
“The decline in the single-family 55+ HMI is consistent with the recent weakness in new and existing home sales,” said NAHB Chief Economist Robert Dietz. “The high readings seen in the previous three quarters are not sustainable with high construction costs and rising interest rates.”
emphasis added
NAHB 55+ Click on graph for larger image.

This graph shows the NAHB 55+ Single Family HMI through Q3 2018.  Any reading above 50 indicates that more builders view conditions as good than as  poor.  The index decreased to 60 in Q3 down from 67 in Q2.

There are two key drivers in addition to the improved economy: 1) there is a large cohort that recently moved 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.