We are headed to a V-shaped housing recovery: expert
With the reopening of the states after the blocking of corona viruses, the housing market begins to recover.
A measure of building owner confidence has returned to positive territory, according to the National Association of Homebuilders / Wells Fargo Housing Market Index.
"I have to tell you, our economists have predicted that we will see a V-shaped recovery in housing construction and it looks like we're on the right track," said Jerry Howard, CEO of the National Association of Homebuilders ( NAHB). "We had a very strong year ahead of COVID and it looks like we're recovering and leading the economy out of this recession."
The mood of the builders reached 58 out of 100 points in June compared to 37 points in the previous month - the largest monthly increase since the start of the property market index in 2009. A value of over 50 is considered positive. The recovery follows after the property market index fell by 42 points to 30 points in April and only increased by 7 points in May.
But pent-up demand from the spring home season increases summer sales, and mortgage rates are expected to remain low until next year, bringing buyers to the market.
“Combine this [pent-up demand and low mortgage rates] with the fact that many people have been quarantined in a confined space. People want some of them in their first family home, [and] others [want] a bigger house, ”added Howard.
According to Redfin, demand for residential property in the first week of June was 25% higher than before the pandemic. Mortgage purchases for home purchases rose 8% in the week of June 8, the highest level in 11 years, and refinancing applications increased 10% YoY and 106% YoY, the Mortgage Bankers Association said.
The southeast, Texas, and Rocky Mountains are leading house-building sentiments, but even poor housing areas have improved in June, according to the Housing Market Index. The northeast jumped from only 17 points in May to 48 points, which comes very close to a positive market value.
"The northeastern states are among the most difficult to build for a number of reasons, so we're currently very, very optimistic," said Howard.
"The more hammers we use, the more houses we can build."
While sentiment has skyrocketed, actual construction data has missed estimates - but is still showing the beginning of a slow recovery, economists say. After the decline in April, construction began on 4.3% more houses in May, and building permits rose 14.4% Wednesday morning, according to the US Census Bureau.
"As long as no additional housing stock is available, this increase in demand cannot go hand in hand with the expected robust increase in home sales," said Mike Fratantoni, MBA senior vice president and chief economist, in a statement.
Construction of 4.3% more houses started in May after the decline in April. From the U.S. Department of Commerce.
US builders are still facing some threats in the coming months, such as supply chain disruption. According to a survey of 742 construction workers in the week of May 18 by the Associated General Contractors of America, 28% of construction workers said they had a shortage of building materials, equipment, or parts.
"If we are blocked for several months and the supply chain is really disrupted, we are most concerned about how it will affect us if we go into the construction season of the next spring," as the business continues in the winter months regardless Howard slows down, saying the supply chain is holding better than originally expected.
After the great recession, work became an industry-defining problem for the construction industry, and the shortage worsened in May, when 995,000 construction workers lost their jobs. Around 25% of the contractors stated that a shortage of craftsmen, according to AGC, delayed or disrupted projects.
But rising employment is reducing the labor shortage in March. In May, the construction industry regained almost half of the jobs lost in April, the Ministry of Commerce said on Wednesday. And 16% of construction workers said their firm plans to hire new employees in the next four weeks, according to the AGC survey.
"Another sign that builders are building new homes is the surge in housing employment in May," said Odeta Kushi, chief economist at First American Financial Corporation, a California-based financial services company. "The more hammers we use, the more houses we can build."
Sarah Paynter is a reporter for Yahoo Finance. Follow her on Twitter @sarahapaynter
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