Builder Confidence Hits another Post Crisis High

The National Association of Builders’rn(NAHB) measure of builder confidence took a big jump in November, rising to itsrnhighest level since May of 2006.  ThernNAHB/Wells Fargo Housing Market Index (HMI) jumped 5 points to 46, the seventhrnconsecutive monthly gain.</p

The HMI is derived from responses to arnsurvey sent by NAHB to its builder members which asks them to assess therncurrent market for new homes on a scale of “good,” “fair,” or “poor” andrnquantify their expectations for the market over the next six months on thatrnsame sale.   They are also asked to rate the traffic ofrnprospective buyers as “high to very high,” “average,” or “low to veryrnlow.”  NAHB calculates scores for eachrncomponent and a composite score.  Anyrnnumber over 50 indicates that more builders view sales conditions as good thanrnpoor.</p

In addition to the composite index twornout of three of the HMI’s component indices registered gains in November. Therncomponent gauging current sales conditions posted the biggest increase, with anrneight-point gain to 49 – its highest mark in more than six years. Meanwhile,rnthe component measuring sales expectations for the next six months held abovern50 for a third consecutive month with a two-point gain to 53.  The component measuring traffic ofrnprospective buyers was unchanged at 35 following a five-point gain in thernprevious month.<br / <br /"Builders are reporting increasing demand for new homes as inventories ofrnforeclosed and distressed properties begin to shrink in markets across therncountry," said NAHB Chairman Barry Rutenberg.   “In view of the tightening supply andrnother improving conditions, many potential buyers who were on the fence are nowrnmotivated to move forward with a purchase in order to take advantage of today’srnfavorable prices and interest rates.”<br /<br /"While our confidence gauge has yet to breach the 50 mark — at whichrnpoint an equal number of builders view sales conditions as good versus poor –rnwe have certainly made substantial progress since this time last year, when thernHMI stood at 19,” observed NAHB Chief Economist David Crowe. “At thisrnpoint, difficult appraisals and tight lending conditions for builders andrnbuyers remain limiting factors for the burgeoning housing recovery, along withrnshortages of buildable lots that have begun popping up in certainrnmarkets.”<br /<br /All four regions of the country posted gains in their HMI three-month movingrnaverages as of November. The South posted a four-point gain to 43, while thernMidwest and West each posted three-point gains, to 45 and 47, respectively, andrnthe Northeast posted a two-point gain to 31. </p

NAHB noted that its survey was conductedrnin the two weeks immediately following Hurricane Sandy and therefore doesrnreflect builder sentiment during that period.

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