NAHB: Builder Confidence improves in the 55+ Housing Market in Q2

This is a quarterly index from the the National Association of Home Builders (NAHB) and is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008, so the readings have been very low.  This is the first ever reading above 50.

From the NAHB: Builder Confidence in the 55+ Housing Market Shows Significant Improvement in Second Quarter

Builder confidence in the 55+ housing market for single-family homes showed strong continued improvement in the second quarter of 2013 compared to the same period a year ago, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI) released today. The index increased 24 points to a level of 53, which is the highest second-quarter number since the inception of the index in 2008 and the seventh consecutive quarter of year over year improvements. [CR Note: NAHB is reporting the year-over-year increase]
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All of the components of the 55+ single-family HMI showed major growth from a year ago: present sales climbed 24 points to 54, expected sales for the next six months increased 25 points to 60 and traffic of prospective buyers rose 26 points to 48

The 55+ multifamily condo HMI posted a substantial gain of 24 points to 43, which is the highest second-quarter reading since the inception of the index. All 55+ multifamily condo HMI components increased compared to a year ago as present sales rose 26 points to 44, expected sales for the next six months climbed 26 points to 46 and traffic of prospective buyers rose 19 points to 38.

The 55+ multifamily rental indices also showed strong gains in the second quarter as present production increased 19 points to 50, expected future production rose 20 points to 52, current demand for existing units climbed 20 points to 62 and future demand increased 21 points to 63.

“The 55+ HMI for single-family homes almost doubled from a year ago,” said NAHB Chief Economist David Crowe. “Sentiment in other segments of the 55+ market housing was strong as well. This is consistent with the increase in builder confidence we’ve seen in other NAHB surveys recently. At this point, the main challenge for builders in many parts of the country is finding enough buildable lots in desirable locations and workers with the necessary skill set to respond to the increased demand.”
emphasis added

Click on graph for larger image.

This graph shows the NAHB 55+ HMI through Q2 2013.  This is the first reading above 50, and this indicates that more builders view conditions as good than poor.

This is going to be a key demographic for household formation over the next couple of decades, but only if the baby boomers can sell their current homes.

There are two key drivers: 1) there is a large cohort moving 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.