Homebuilders Feeling Grumpy; Consumer Debt Grows During 4Q

Builder confidence in the market for newly built, single-family homes posted an unusually large 10-point drop to 46 in February compared with January. But aggregate U.S. consumer debt increased in the fourth quarter of 2013 by $241 billion.

Builder confidence in the market for newly built, single-family homes posted an unusually large 10-point drop to 46 in February compared with January, according to the National Association of Home Builders/Wells Fargo Housing Market Index, which was released on Tuesday. The NAHB cited unusually severe weather conditions across much of the nation as one reason, but that’s not all. Builders are also vexed by concerns over the cost and availability of labor and lots.

All three of the major index components declined in February. The component gauging current sales conditions fell 11 points to 51 – just barely remaining optimistic, since the threshold is 50. The component reflecting sales expectations in the next six months declined six points to 54, while the component measuring buyer traffic, which probably has the strongest correlation to lousy weather, dropped nine points to 31.

“Constraints on the supply chain for building materials, developed lots and skilled workers are making builders worry,” NAHB chief economist David Crowe said in a statement. “The weather also hurt retail and auto sales, and this had a contributing effect on demand for new homes.”

Consumer Debt Grows During 4Q 

Americans are feeling confident enough again to borrow more. The Federal Reserve Bank of New York reported on Tuesday that aggregate U.S. consumer debt increased in the fourth quarter of 2013 by $241 billion. Total consumer indebtedness was $11.52 trillion, up by 2.1 percent from the third quarter of 2013, marking the largest quarter-over-quarter increase since the third quarter of 2007.

Also, the four quarters comprising 2013 were the first such period since late 2008 to register an increase ($180 billion, or 1.6 percent) in total debt outstanding. Still, the Fed said, overall consumer debt remains 9.1 percent below its third quarter of 2008 peak of $12.68 trillion.

Mortgages, the largest component of household debt, increased 1.9 percent during the fourth quarter of 2013. Mortgage balances shown on consumer credit reports stand at $8.05 trillion, up by $152 billion from the third quarter. Not only that, 2013 saw a net increase of $16 billion in mortgage balances, ending the four-year streak of year-over-year declines. Non-housing debt balances increased by 3.3 percent, with gains of $18 billion in auto loan balances, $53 billion in student loan balances, and $11 billion in credit card balances.

Wall Street had a mixed day on Tuesday, with the Dow Jones Industrial Average dropping 23.99 points, or 0.15 percent. By contrast, the S&P 500 gained 0.12 percent and the Nasdaq advanced by 0.68 percent.