Builder Confidence in Mature-Housing Remained Weak in Q1

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Active adult home builder activity and confidence remain low, according to 2010 first-quarter data from the National Association of Home Builders' 55+ Housing Market Index (55+ HMI) - a quarterly survey of the association's builder members engaged in the production of mature-market housing.

"The 55+ segment of the market is still stalled in most regions," said NAHB's Chief Economist, David Crowe. "Since the builders' potential buyers are having difficulty selling their existing property, they are unable to move to a more appropriate home." Noting that a large share of prospective buyers for active adult housing are still in the workforce, and expect to remain so, Crowe added that "many buyers and renters are concerned about their current job security, and may be holding off on any decision to move until the economy becomes more predictable."

The 55+ single-family HMI measures builder sentiments based on current sales, prospective buyer traffic and anticipated six-month sales for the 55+ single-family market.  A number greater than 50 indicates that more builders view conditions as good than poor. Although the index recorded a slight rise in the first quarter of 2010 - moving up two points to 19 from its 2009 Q1 level of 17 - the level of confidence remains low.

The two-point rise in the index was a result of a rise in the present sales component to 17, from last year's first quarter level of 13 - possibly reflecting some increased activity fueled by the tax credit. But builder expectations for the next six months remained at 30, the same level reported by builders in the first quarter of 2009. Traffic of prospective buyers also remained at the same level - 18 - as the previous year's first quarter.

The 55+ multifamily condo HMI, already weak, dropped from 13 to 11 year over year - matching its lowest level in the six-quarter history of the series. Expectations for the next six months are at 17 - down from 20 a year ago. Traffic of prospective buyers also dropped, from 15 to 12.

Builder sentiment in the 55+ multifamily rental sector is based on current and expected production, as well as present and expected demand for existing units.  In the first quarter of 2010, the current production index stood at 131, but responses show the current demand index at 28. The index level for expectations of demand six months from now hit 34,  yet production levels are expected to rise only slightly, if at all, as reflected in an index number of 19.  These numbers indicate that respondents anticipate growing rental demand, but little growth in production of new rental apartments to support that demand.

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