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Homebuilder Confidence Back Into Positive Territory

by devteam July 16th, 2014 | Share

Homebuilder confidence in the market forrnnew homes crossed into positive territory in July, the first time the measurernhas been above the crucial 50 mark since January.   The National Association of Home Builders (NAHB)/WellsrnFargo Housing Market Index (HMI) jumped four points to 53 and two of its threerncomponent measures were also firmly positive.   The HMIrntopped 50 in June 2013 for the first time since the beginning of the housingrnbust and remained positive until early this year when it crashed by 10 points,rnfalling to 46 in February. </p

The HMI is derived from a survey of newrnhome builders conducted monthly for over 30 years by NAHB. Respondents arernasked to rate the current market for new home sales and their expectations for inrnsix months on a scale of “good,” “fair,” or “poor.”  Builders are also asked whether they perceiverncurrent buyer traffic as “high to very high,” “average” orrn”low to very low.” Scores from each component is scored individually and is usedrnto calculate a seasonally adjusted index where any number over 50 indicatesrnthat more builders view conditions as good than poor.</p

Allrnthree HMI components posted gains in July. The index gauging current salesrnconditions increased four points to 57, while the index measuring expectationsrnfor future sales rose six points to 64.  The former index has been above 50 since Junern2013 and the latter since February 2013. rnOnly the index gauging current buyer traffic continues to lag.  It has been below 50 since September 2005, butrnit too increased this month, rising by three points to 39. </p

“An improving job market goesrnhand-in-hand with a rise in builder confidence,” said NAHB Chief EconomistrnDavid Crowe. “As employment increases and those with jobs feel more securernabout their own economic situation, they are more likely to feel comfortablernabout buying a home.”   NAHB ChairmanrnKevin Kelly added, “This is the first time that builder confidence has beenrnabove 50 since January and an important sign that it is strengthening as<bpent-up demand brings more buyers into the marketplace.” </p<pThe HMI three-month moving average rose in allrnfour regions, with the Northeast and Midwest posting a one-point and two-pointrngain to 35 and 48, respectively. The West registered a five-point gain to 52rnwhile the South rose two points to 51.

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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