Builder Confidence Bucks Housing Data Trends; Near 8-yr High

Builder confidence has set anotherrnrecent benchmark, hitting the highest point on the NationalrnAssociation of Home Builders (NAHB)/Wells Fargo Housing Market Indexrn(HMI) in nearly eight years. The index, a measure of builderrnconfidence in the market for newly constructed single-family homesrnrose three points in August to 59. This was the fourth consecutivernmonthly gain. </p

“Builders are seeing more motivated buyers walk through theirrndoors than they have in quite some time,” said NAHB Chairman RickrnJudson. “What’s more, firming home prices and thinningrninventories of homes for sale are contributing to an increased sensernof urgency among those who are in the market.”</p

NAHB surveys its residential builder members each month, askingrnthem about their perceptions of the current market for single familyrnhomes and to quantify their expectations for sales over the next sixrnmonths as “good,” “fair,” or “poor.” Builders are alsornasked to rate traffic of potential buyers as “high to very high,”rn”average” or “low to very low.” Responses are used tornconstruct three seasonally adjusted indexes of builder confidence asrnwell as a composite index. A number of 50 on any of the indexesrnindicates that more builders view conditions as good than view themrnas poor. </p

The composite index fell below 50 in June 2006 and stayed belowrnthat breakeven mark for the next 84 months, dropping as low as 8 inrnJanuary 2009. It returned to positive territory only two months ago.rn </p

Two of the three component indexes rose in August. The componentrnreflecting current sales conditions increased three points to 62 andrnthe component measuring expectations over the next six months was uprnone point to 68. Builder perceptions of current buyer traffic wasrnunchanged from July at 45.</p

“Builder confidence continues to strengthen along with risingrndemand for a limited supply of new and existing homes in most localrnmarkets,” noted NAHB Chief Economist David Crowe. “However, thisrnpositive momentum is being slowed by the ongoing headwinds of tightrncredit and low supplies of finished lots and labor.”</p

All but one region saw a gain in its three-month moving averagernHMI score in August. The Midwest and West each posted six-pointrnincreases, to 60 and 57, respectively, while the South posted arnfour-point gain to 54 and the Northeast held unchanged at 39.

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