NAHB study: Builder confidence rises two points in July

NAHB study: Builder confidence rises two points in July

July 16, 2009

Builder confidence in the market for newly built, single-family homes notched up two points in July to its highest level since September 2008, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI rose two points to 17 in July as builders saw an improvement in current sales conditions but continued to express concerns about the future.
“Builders are seeing slightly better sales conditions this month as consumers take advantage of the first-time buyer tax credit, low interest rates and attractive home prices, but many remain quite concerned about the road that lies ahead,” said NAHB Chairman Joe Robson, a home builder from Tulsa, Okla. “A true recovery in the housing market and overall economy cannot take place until the continuing foreclosure crisis is abated and a decent flow of credit is restored to housing production. Meanwhile, the stalled jobs market is a major concern to builders and potential home buyers alike.”
“Although today’s HMI is positive news that helps confirm the market is bouncing around a bottom, the gain was entirely contained in the component gauging current sales conditions, while the component gauging sales expectations for the next six months remained virtually flat for a fourth consecutive month,” noted NAHB Chief Economist David Crowe. “Builders recognize the recovery is going to be a slow one and that we are facing a number of substantial negative forces.” For example, said Crowe, a quarter of all new-home sales are falling through due to appraisal issues that are tied to the use of distressed and foreclosed properties as comps. “This is a tremendous obstacle for a housing market that is struggling to get back on its feet, as is the lack of available credit for acquisition, development and construction financing.”
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
Two out of three of the HMI’s component indexes posted gains in July. The index gauging current sales conditions rose three points to 17, while the index gauging traffic of prospective buyers rose a single point to 14. Meanwhile, the index gauging sales expectations for the next six months remained flat at 26.
Regionally, the South posted the biggest HMI gain, with a 5-point increase to 20. The Northeast posted a three-point decline, to 16, while the Midwest and West were each unchanged, at 14 and 15, respectively.
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