Builder Confidence Jumps to Highest Level in Six Years

Builder confidence took its biggest leaprnin nearly a decade according to data released this morning by the NationalrnAssociation of Home Builders (NAHB).  ThernNAHB/Wells Fargo Housing Market Index (HMI) rose six points in July to 35, thernhighest level it has seen since March of 2007 and each of its component indicesrnimproved as well. </p

The HMI is derived from a monthlyrnsurvey NAHB has conducted among its home builder members for a quarterrncentury.  The survey asks for perceptionsrnof current single-family home sales and builder expectations for sales over thernupcoming six months as “good,” “fair,” or “poor,” and to rate traffic ofrnprospective buyers as “high to very high,” “average” “low to very low”.  The answers to each component question is usedrnto create a seasonally adjusted composite index where any number over 50rnindicates that more builders view conditions as good  than view them as poor. </p

The component gauging current salesrnconditions rose six points to 37 and the measurement of buyer traffic was uprnsix points to 29.  The componentrnindicating sales expectations for the next six months soared 11 points to 44.</p

“Combined with the upward movementrnwe’ve seen in other key housing indicators over the past six months, thisrnreport adds to the growing acknowledgement that housing – though still in arnfragile stage of recovery – is returning to its more traditional role of leadingrnthe economy out of recession,” noted NAHB Chief Economist David Crowe. “This isrnparticularly encouraging at a time when other parts of the economy have begunrnto show softness, and is all the more reason that the challenges constrainingrnhousing’s recovery – namely overly tight lending conditions, poor appraisalsrnand the flow of distressed properties onto the market – need to be resolved.”</p

The growing optimism was national inrnscope. The HMI in the Northeast region rose 9 points to 36 while the Midwestrngained 3 points to 34.  The Southrnregistered a 5 point increase to 32 and the West was up 12 points to 44.</p

 “Builder confidence increased by solid marginsrnin every region of the country in July as views of current sales conditions,rnprospects for future sales and traffic of prospective buyers all improved,”rnsaid Barry Rutenberg, chairman of the NAHB.  “This is greater evidence that the housingrnmarket has turned the corner as more buyers perceive the benefits of purchasingrna newly built home while interest rates and prices are so favorable.”

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