Builder Confidence on the Rise in August

Builder confidence in the market for newly built, single-family homes rose three points to 59 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released today. This fourth consecutive monthly gain brings the index to its highest level in nearly eight years. "Builders are seeing more motivated buyers walk through their doors than they have in quite some time," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C. "What's more, firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market." "Builder confidence continues to strengthen along with rising demand for a limited supply of new and existing homes in most local markets," noted NAHB Chief Economist David Crowe. "However, this positive momentum is being slowed by the ongoing headwinds of tight credit and low supplies of finished lots and labor." Derived from a monthly survey that NAHB has been conducting for 25 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 from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. Two of the HMI's three components posted gains in August. The component gauging current sales conditions rose three points to 62, while the component gauging sales expectations in the next six months gained a single point to 68 and the component gauging traffic of prospective buyers held unchanged at 45. All but one region saw a gain in its three-month moving average HMI score in August. The Midwest and West each posted six-point increases, to 60 and 57, respectively, while the South posted a four-point gain to 54 and the Northeast held unchanged at 39.