Builder Confidence Highest Since 2005

Builder confidence may finally be backrnto stay.  After yo-yoing in and out ofrnthe “good” range of 50 or more for years, the National Association of HomernBuilders (NAHB) said on Thursday that its Housing Market Index (HMI), sponsoredrnalong with Wells Fargo, hit 60 this month and last month’s 59 reading wasrnupwardly revised to that level as well. rnIt is the highest level of the HMI since November 2005.</p

The HMI measures builder confidence inrnthe market for newly built, single-family homes. It fell below the benchmark ofrn50 in mid-2006, ultimately dropping as low as 8 in early 2009, and did notrntouch it again for 85 months.  It thenrndipped in and out of the low 50s range for another year before finally stabilizingrnexactly one year ago.  </p

“The fact that builder confidence hasrnreturned to levels not seen since 2005 shows that housing continues tornimprove at a steady pace,” said NAHB Chairman Tom Woods.  “As we head intornthe second half of 2015, we should expect a continued recovery of the housingrnmarket.”</p

“This month’s reading is in line withrnrecent data showing stronger sales in both the new and existing home markets asrnwell as continued job growth,” said NAHB Chief Economist David Crowe. “However,rnbuilders still face a number of challenges, including shortages of lots andrnlabor.”</p

NAHB derives its index from a monthlyrnsurvey which attempts to gauge builder perceptions of current single-familyrnhome sales and sales expectations for the next six months as “good,” “fair” orrn”poor.” The survey also asks builders to rate traffic of prospective buyers asrn”high to very high,” “average” or “low to very low.” Scores for each componentrnare then used to calculate a seasonally adjusted index where any number over 50rnindicates that more builders view conditions as good than poor. NAHB hasrnconducted the survey for over 30 years.</p

Two of the three HMI components postedrngains in July. The component gauging current sales conditions rose one point torn66 and the index charting sales expectations in the next six months increasedrntwo points to 71. Meanwhile, the component measuring buyer traffic dropped arnsingle point to 43.  This latterrncomponent has dragged on the composite for years.  It has not risen above 50 since August 2005.</p

Looking at the three-month movingrnaverages for regional HMI scores, the West and Northeast each rose three pointsrnto 60 and 47, respectively. The South and Midwest posted respective one-pointrngains to 61 and 55. 

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