Builder Confidence Surges in 55+ Housing Market

Builders in the 55+ housing market are more confident than they have ever been during the first quarter and they have reason to be, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI).

When compared to the first quarter of 2013, the single-family HMI increased 4 points to a level of 50, which NAHB notes is the highest first quarter reading since the inception of the index in 2008. The first quarter reading is also the 10th consecutive quarter of year-over-year improvements for the index. 

There are many factors contributed to the positive signs in the 55+ housing market, said Steve Bomberger, chairman of NAHB’s 50+ Housing Council and president of Benchmark Builders Inc. in Wilmington, Delaware.

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“Rising house prices and low interest rates are helping baby boomers sell their existing homes at a favorable price and in turn, purchase a new home more suited to their current lifestyles,” Bomberger stated.

When judging builder sentiment for the HMI, an index reading below 50 indicates that builders view conditions as poor than good. 

Two of the components of the 55+ single-family HMI posted increases from a year ago, as present sales rose six points to 52 and expected sales for the next six months climbed nine points to a reading of 62.

Though confidence is at  record high for the first wuarter, there are still headwinds preventing a stronger recovery.

“The 55+ segment of the housing market is stronger now than it was a year ago,” stated NAHB Chief Economist David Crowe. “But there are still some headwinds hampering a stronger recovery, as builders in many markets are facing tight credit conditions and a lack of lots and labor.”

Written by Jason Oliva

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  • In the midst of all this confidence, industry wide applications with case numbers assigned for HECMs for Purchase (or H4Ps) since September 30, 2013 through February 28, 2014 (the latest month for which HUD has provided statistics) are not even 37% of what they were for the five months ended September 30, 2013. They are significantly lower than they have been in several years.

    We have all heard the nonsense of the H4P advocates that history is no measure of the future success for the H4P program. As one who argued that such claims were wrong, I am wearing egg on my face; I did not realize H4P originations would be this bad industry wise this far into fiscal 2014.

    Unfortunately those who have been predicting great success for the H4P program during this fiscal year look like the inexperienced prognosticators they really are. Today the H4P program is even more of an uninteresting footnote than compelling reason to enter the HECM marketplace.

    It is interesting that some approved mortgagees are seeing good H4P numbers but the industry as a whole is not.

    (The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)

  • H4Ps are a great product but originator advice about them leaves something to be desired. Today more than ever we hear how H4Ps should only be taken as a full draw. In far more cases than not, this is bad advice, if the senior has the cash to otherwise complete the purchase and the senior can see the value of the HECM line of credit. H4Ps are literally no different than Traditional HECMs in any way other than they can be used to acquire a home and save what is referred to in the forward mortgage market as upfront “junk fees.”

    Other than their use in buying a home, there are no financial principles which are different when analyzing the financial reasons for obtaining a Traditional HECM. Yes, some talk about upsizing with a H4P but the financial analysis should not change. There are many reasons for not taking all of the proceeds from a H4P at initial funding such as the cost can be $10,000 more just in upfront MIP on a home with a $500,000 appraised value at closing.

    The arguments for full draws have not changed since September 29th nor should they. However, If one is trying to say that inherently there is more value in talking full draws than not, such reasoning indicates how far this industry has to go to really be working for the best interests of seniors.

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