The National Association of Home Builders (NAHB) released its Housing Market Index (HMI) Tuesday, which showed a sharp 5-point increase to 46 for November 2012. This is the highest the index has been since May 2006, creating a very positive outlook for the Florida home market!
What is the Housing Market Index?
The Housing Market Index is a measure of builder confidence, published monthly, based on a survey sent to NAHB members which asks them to rate housing market conditions.
- Readings under 50 indicate unfavorable housing conditions for builders.
- Readings over 50 signal “good” conditions.
In November, home builders reported gains in two of the three areas surveyed:
- Current Single-Family Sales: 49 (+8 from October 2012)
- Projected Single-Family Sales: 53 (+2 from October 2012)
- Buyer Foot Traffic: 35 (unchanged from October 2012)
Builders report growing demand for new homes as inventories for alternative properties — distressed and foreclosed homes, for example — shrink nationwide.
The South Region showed a 4-point gain to 43; the West Region showed a 3-point gain to 47; the Midwest Region showed a 3-point gain to 45; and the Northeast Region showed a 2-point gain to 31.
Despite the gains, builders in Orlando and nationwide still report challenges with home appraisals and tight credit conditions. In addition, a shortage of lots in some areas is limiting the ability for home builders to put more single-family homes on the market.
What does this mean for the Florida home buyers?
My honest opinion? It means home prices will most likely continue to go up in the near future. This would go hand in hand with an increase in housing demand overall. This could even cause Florida mortgage rates to go up. How? Well, mortgages are just like any other product in that it is priced on the basis of supply and demand. So, the higher the demand for the housing, the less the banks would have to entice new clients with low interest rates.
The bottom line: As builder confidence grows, today’s home buyers throughout Florida should prepare for the possibility of higher prices. Home sellers will be confident in their ability to move their home on the market and are less likely to make price concessions or to offer free upgrades. If you are in the market for a new Florida home, the time to buy is between now and the start of the new year. The housing market just may make a New Year’s resolution to start upping the price tags on Florida homeownership.