Builders Voice Current Optimism; Cautious on Future Gains

The National Association of Home Builder’s
(NAHB)/Wells Fargo Housing Market Index (HMI) ticked up one point this month to
reach its highest point since May 2007.   The HMI is a measure of builder confidence in
the health of the new home market. 

The HMI was at 29 in June compared to a revised
index of 28 in May.  The index is based
on a monthly survey of NAHB’s homebuilder members who are asked to assess the
market using three measures.  What is their
perception of current single family home sales, “good,” “fair,” or “poor?”  What do they expect sales to be over the next
six months on the same scale; and do they rate the current traffic of
prospective buyers as “high to very high,” “average,” or “low to very low?”  Each component is scored separately and also
used to construct the HMI.  A score of 50
on any of the four indices indicate that more builders view the market as good
than poor.

The June increase in the HMI came from increased optimism
over current sales while builders remain cautious about future prospects.  The component measuring current sales rose two
points to 32, the highest score since April 2007.  However, the components measuring sales
expectations over the next six months and current buyer traffic remained unchanged
at 34 and 23 respectively.

“This month’s modest uptick in
builder confidence comes on the heels of a four-point gain in May and is
reflective of the continued, gradual improvement we are seeing in many
individual housing markets as more buyers decide to take advantage of today’s
low prices and interest rates,” said Barry Rutenberg, chairman of NAHB. 

Regionally, the HMI results were
mixed in June, with the Midwest registering a five-point gain to 31 and the
West a four-point gain to 33.  The
Northeast and South each posted two-point declines, to 29 and 26, respectively.

“While the June HMI is in keeping
with our forecast for gradually improving single-family home sales this year,
recent economic reports that have shown some weakening in the pace of recovery
likely factored into the marginal gain,” said NAHB Chief Economist David Crowe.
“In addition, builders across the country continue to report that overly tight
lending conditions and inaccurate appraisals are major obstacles to completing
sales at this time.”

…(read more)

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