Home Builder Confidence at 6-year High

The National Association of Home Builder’srn(NAHB)/Wells Faro Housing Market Index (HMI) again edged closer to positivernterritory this month, increasing one point to 41, the sixth consecutivernincrease and the strongest showing since June 2006.  NAHB said the increase reflected growingrnconfidence on the part of home builders in the market for newly built singlernfamily homes.  The increase was apparentrnnationwide with three regions also reporting higher scores and the fourthrnremaining unchanged from September.</p

NAHB’s index is derived from a monthlyrnsurvey of its builder members in which they are asked to gauge the currentrnmarket for new homes and estimate the market in six months as “good,” “fair,”rnor “poor.”  They are also asked to raternthe traffic of prospective buyers as “high to very high,” “average,” or “low tornvery low.”  NAHB calculates scores forrneach component and a composite score. rnAny number over 50 indicates that more builders view sales conditions asrngood than poor.</p

 Only the component measuring traffic ofrnprospective buyers advanced this month but it bounced five points to 35, thernhighest point since June 2006.  The otherrntwo components, current sales and prospects for the next six months, both ofrnwhich had increased substantially in September, held steady in October at 42rnand 51 respectively.  </p

“Many builders are reportingrnincreases in the number of serious buyers visiting their sales offices, and thernoverall confidence measure is much higher than it was at this time lastrnyear,” noted NAHB Chairman Barry Rutenberg.   “The concern is that, even though demandrnfor new homes is rising, overly tight credit conditions are still constrainingrnnew building and new purchases at a time when that kind of economic activityrnand the job growth it generates are greatly needed.”</p

Looking at three-month moving averagesrnin the four regions, the HMI gained two points in the Midwest and West to 42rnand 44, respectively, and three points in the South, to 39. A three-monthrnmoving average for the Northeast’s HMI held unchanged at 29.

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