Homebuilders Say Market Positives Trump High Gas Prices
Sales of newly built homesare still stumbling along at historically low levels, but builders claim they are beginning to see the light at the end of a very long tunnel.
Sales may not be surging back, but in some of the better local economies, buyer interest is.
We saw it at open houses over the President's Day weekend, and it's starting to show up on line even more dramatically. Virginia-based NewHomesGuide.com, the website of New Homes Guide magazine, saw a 46 percent jump in unique visitors from December 2011 to January 2012 and a 47 percent jump from one year ago. Page views were up 59%.
"We always see a seasonal jump in January," said Publisher, Leslie Stritmatter in a press release, "but the increases from the same period last year show this to be a much more significant bounce. I'm very hopeful that this is a sign of consumer confidence returning to the markets.
Consumer sentiment is improving. "Right now the improving labor market trumped rising gasoline prices in influencing confidence, which is good in that new jobs and wages can help cushion the blow of an ever rising cost of living," says analyst Peter Boockvar at Miller Tabak.
When it comes to housing, the same may be true of high affordability, improving employment, better confidence, record-low mortgage rates and lower-priced homes; they all trumprising gasoline prices.
"We don't think there's going to be a big impact from gas prices because we have so many forces taking us to recovery," says Richard Kettler of Kettler/Forlines Homes.
Kettler says they have seen a substantial increase recently in the number of visits to his homes, which largely straddle the suburbs and exurbs of Washington, DC.
"The attitude of the home buyer is much better, they're more excited," he adds. He also notes there is now suddenly more interest in larger homes, not McMansions, but moving from the 2 thousand square foot range to 3000.
Higher gas prices may not hit buyer demand overall, but they will affect some choices.
"We are more sensitive today because of the economic scenario we are still recovering from," says Mark Fleming, chief economist at CoreLogic. "From a housing perspective, this impacts the exurban communities, as an increased cost of living will reduce demand to buy homes, and these are the same communities hit the hardest by the housing crash anyway."
A study by the Federal Reserve in 2010 found that a 10 percent increase in gas prices reduces home construction by 10 percent after four years in locations with a long average commute time, compared with other locations.
The effect of higher gas prices on home buyers will depend on how long the spike lasts. If consumers think it's temporary, they won't factor it as much into their decision.
There are, however, continuing obstacles to the new home market. Sales are still barely above where they were last year, and last year was the worst on record for the nation's builders. This despite all the stimulus in the market.
And as I'm writing this, Mr. Kettler just came out of his office, grumbling that one of his sales is being held up by an appraisal that came in too low.