Builder Sentiment Beats Expectations Hitting Another 7-Year High

The Housing Market Index (HMI) shot uprnsix points in July, reflecting the highest level of builderrnconfidence in the market for new homes since January 2006. ThernIndex, issued by the National Association of Home Builders (NAHB) andrnWells Fargo rose from 51 to 57, the third consecutive monthly gain. Similar increases were reported for each of the index’s threerncomponents. </p

The HMI reflects the answers given byrnNAHB’s homebuilder members to a series of monthly questions about thernnew home market. The survey, conducted for the last 25 years, asksrnrespondents to gauge their perceptions of the current market, theirrnexpectations from the market over the next six months, and therncurrent traffic of prospective buyers. Each component is scoredrnseparately and the scores are used to construct the composite index. Any score over 50 indicates that more builders view market conditionsrnas good rather than poor.</p

All three components improved inrnJuly. The component measuring current sales conditions rose fivernpoints to 60, the highest level since early 2006 and builderrnresponses about their expectations over the next six months resultedrnin an index of 67, a seven point jump from June. Responses put<bcurrent buyer traffic at a level of 45, up five points. Both therntraffic and six-month expectation levels are the highest since latern2005.</p

“Builders are seeing morernmotivated buyers coming through their doors as the inventory ofrnexisting homes for sale continues to tighten,” noted NAHB ChiefrnEconomist David Crowe. “Meanwhile, as the infrastructure thatrnsupplies home building returns, some previously skyrocketing buildingrnmaterial costs have begun to soften.”</p

All four regionsrnalso posted gains in their HMI scores’ three-month moving averages.rnThe Northeast showed a four-point gain to 40 while the Midwestrnreported an eight-point gain to 54, the South posted a five-pointrngain to 50 and the West measured a three-point gain to 51.</p

“Today’s report is particularlyrnencouraging in that it shows improvement in builder confidence acrossrnevery region as well as solid gains in current sales conditions,rntraffic of prospective buyers and sales expectations for the next sixrnmonths,” noted NAHB Chairman Rick Judson. However, he cautionedrnthat “This positive momentum could be disrupted by threats onrnthe policy side, particularly with regard to the mortgage interestrndeduction and federal support for the housing finance system.”</p<divrnrnrnrnrnrnrnrnrnrnrn