Home Builder Outlook Improves as Buying Season Approaches

ThernNational Association of Home Builders (NAHB)/Wells Fargo Housing Market Indexrn(HMI) released today revealed that home builders are more optimistic about homernbuying conditions now than they were one month ago and slightly more optimisticrnabout market conditions over the next six months. Overall, however, builder'srnconfidence levels remain near historic lows.

Thernsurvey asks residential builders about their perceptions of market conditionsrnat present, what their expectations are for sales over the next six months, andrnto rate the current traffic of prospective buyers.  Builders are asked to rate their dual perceptionsrnof marketing conditions as “good,” “fair,” orrn”poor,” and current traffic as “high to very high,”rn”average,” or  “low tornvery low.”  Each component is scoredrnseparately and then the three scores are combined to create the HMI.  A score of 50 or more on the index or any ofrnits components indicates that more respondents view conditions as favorablernrather than unfavorable. Survey results are seasonally adjusted.

The HMIrnrose two points to 17, the highest level since November 2009.  Two of three components also were higher;rncurrent sales conditions also rose from 15 to 17 and sales expectations overrnthe next six months rose one point to 27. The component assessing current buyerrntraffic was unchanged at 12.

Regionally results werernmixed. While the Midwest and South each registered two-point gains, to 13 andrn19, respectively, the Northeast and West each registered one-point declines, torn19 and 14, respectively.

NAHB andrnWells Fargo have conducted the survey for 20 years.  The HMI was near 70 in early 2006 beforernbeginning a precipitous decline that brought it below ten in mid 2009.

NAHBrnChief Economist David Crowe said that builders are beginning to see effects ofrnthe home buyer tax credit and are encouraged by recent improvements in thernemployment market.  But he said thatrnseveral factors including the number of foreclosures on the market along withrnresulting low appraisals based on distressed property comparables, as well as arnlack of available construction financing are still weighing down builderrnexpectations.

NAHB Chairman BobrnJones said that, “Continued low interest rates, very attractive home pricesrnthat appear to have stabilized in many markets, and the availability of thernhome buyer tax credit make this an opportune time for potential purchasers. Asrna result, builders are slightly more optimistic that the housing recovery isrnfinally beginning to take root.”

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