The National Associ
ation of Home Builders, in conjunction with Wells Fargo, released their monthly Housing Market Index last month, and the report, which gauges builder confidence in the housing market nationwide, provided some promising new information. Nationally, builder confidence in new construction is higher than it has been since before the market crash, and while the index number is still relatively low—standing in February at 29—it is on a consistently upward trajectory, and is now the highest it has been since May 2007. While the report does not touch on individual markets, it does imply good news for builders and renters of apartments in Manhattan.
The NAHB/Wells Fargo Housing Market Index works like this: development companies who build single-family homes are asked three questions. The first is how they feel sales of single-family homes are at the moment. The second is how they feel sales of the same will be in six months. The third is what they think of the traffic of prospective buyers. For the first two questions, builders answer either “good,” “fair,” or “poor.” For the third question, they answer either “high to very high,” “average,” or “low to very low.”
These answers are then converted into digits and put into the report. A score of 51 or higher indicates that more builders are optimistic about the market than are not. A score of 29 indicates that, nationally, there is still skepticism about the strength of the market. Some builders are concerned that bargain-priced foreclosures will be more attractive to buyers than new construction buildings. But the fact that the number has risen steadily over the past five months means some of that skepticism is draining away.
In Manhattan, these numbers are particularly optimistic. As we’ve written, much of the health of the Manhattan rental market is due to the interest of foreign investors and the super-wealthy, who have a vested interest in having ultra-high-end apartments in the city that never sleeps. Regular middle- and upper-class buyers have had more trouble obtaining leases in the city. A spark of builder confidence will make it easier for those people to rent apartments in Manhattan. As the housing market nationwide improves, those in New York burdened by the problems that plague the rest of the country will begin to whither away.
Furthermore, increased confidence could lead to an increase in new rental construction in Manhattan. We’ve covered extensively the scarce inventory for new rentals in Manhattan, but if builders are more confident that there is a market for their new construction, it could lead to a growth in the amount of new buildings, which will mean more inventory and cheaper rent. We’ve already covered how permits for new construction have increased already this year; this report may indicate that the number of new apartments for rent could jump even higher.
