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52 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T DATA THE LATEST Single-Family Housing Shows 'Slow, Gradual Growth' Home builders harbored a positive outlook for the single-family housing market over the past few months. T he growth of the sin- gle-family housing sec- tor has been slow and gradual over the last few months due to the steady and solid level of builder senti - ment during that period, accord- ing to the National Association of Home Builders (NAHB)/ Wells Fargo Housing Market Index (HMI) for November. The HMI reported a reading of 63 in November, the third straight month it has been higher than 60 and tied for the second-highest level for any month in 2016. In September, the HMI shot up to an 11-month high of 65 from its August reading of 59 amid solid job growth, near record-low inter - est rates, and strong single-family housing demand. The HMI's three components (builder perceptions of current single-family home sales, sales ex - pectations for the next six months, and prospective buyer traffic) are scored and then averaged; an index score over 50 indicates that more builders view conditions as good rather than poor. For the November HMI, the component measuring buyer traffic increased by one point up to 47; the current sales component stayed flat at 69; and the component measuring sales expectations de - clined by 2 points down to 69 in November, according to NAHB. "Builder sentiment has held well above 60 for the past three months, indicating that the single- family housing sector continues to show slow, gradual growth," said Robert Dietz, Chief Economist with NAHB. "Ongoing job cre - ation, rising incomes, and attractive mortgage rates are supporting de- mand in the single-family housing sector. These factors will help keep housing on a steady, upward path in the months ahead." Dietz noted that the data for the November HMI was gathered prior to the election, meaning that builder sentiment remained above 60 even amid the uncertainty around the election's results. David Berson, Chief Economist with Nationwide, said the November HMI "suggests continued strong demand from homebuyers for new housing. The survey shows that homebuilders' confidence in the direction of the new home market continues to grow." Berson added, "Job and income gains, as well as stronger household formation this year are driving de - mand for new construction across the country. Homebuyer traffic for new homes remains elevated with mortgage rates near record lows and the supply of existing homes on the market still tight." The findings of the HMI concur with those of Nationwide's Health of Housing Markets report, which indicated a generally healthy hous - ing market for almost all of the county's 400 metro areas. "There are only a few cities where the energy sector remains a drag on housing-sector growth and these negative impacts are slowly- receding," Berson said Are Home Prices Sustainable? Maybe Not Everywhere The Pacific Northwest is home to the fastest-growing home prices, but analysts say the rate won't last. H ome prices in the Pa- cific Northwest in the second quarter were the fastest growing in the country, according to Fitch Ratings' Q2 report on sustainable home prices. The growth, in fact, has been so fast that properties in major Pacific Northwest cities like Seattle and Portland are now con - sidered overvalued on par with those in California's Bay Area. "Portland home prices have risen at the fastest clip of any nation since second-quarter 2014, at 22 percent," the report stated. "Much of the increase can be explained by underlying economic drivers. Meanwhile, Seattle is not far behind with home prices rising 19 percent during the same timeframe." As a result, Fitch estimated home prices in these cities to be 5 to 15 percent overpriced. This rivals San Francisco, which had a two-year gain of 21 percent lead - ing up to the start of 2016 (and a 69 percent growth since 2012). The hottest market at the beginning of this year, San Francisco, has since cooled considerably. The market has grown 11 percent since a year ago and is considered 5 to 10 percent overvalued for Q2. "The recent rate of home-price growth in the Pacific Northwest is hard to rationalize," said Grant Bailey, Managing Director at Fitch. "Foreign investors and spillover from tech employees priced out of San Francisco are likely playing a role in the run up, though to what degree is hard to ascertain." Bailey said that the rocket-like growth of home prices in the Pacific Northwest is causing some familiar issues, mainly stretching affordability for local businesses and employees. Due to this, Fitch reported, the escalation won't last long.