Longer Term Home Sales Outlook at 1-Year Highs

Measuresrnof builder confidence in the new home market rose again this month.  The third consecutive monthly increase in thernNational Association of Home Builders (NAHB)/Wells Fargo Housing Market Indexrn(HMI) brought that metric back to its highest level since January.</p

The HMI wasrnat 55 in August, a two point gain from July. rnThe number is a composite based on responses to a monthly survey inrnwhich new home builders are asked for their perceptions about currentrnsingle-family home sales and future prospects for such sales.  Any score over 50 indicates more buildersrnperceive the market as good than perceive it as poor.</p

“As the employment picturernbrightens, builders are seeing a noticeable increase in the number of seriousrnbuyers entering the market,” said NAHB Chairman Kevin Kelly. “However, buildersrnstill face a number of challenges, including tight credit conditions forrnborrowers and shortages of finished lots and labor.”</p

In the survey, which NAHB has beenrnconducting for 30 years, respondents are asked to rank home sales at presentrnand their expectations for sales over the upcoming six months as “good,” “fair”rnor “poor.”  They are also asked to rate trafficrnof prospective buyers as “high to very high,” “average” or “low to very low.”  Each individual component receives a scorernfrom which the composite is derived.</p

Each of the three components postedrngains in August. The indices gauging current sales conditions and expectationsrnfor future sales (6-month/longer-term home sales outlook) each rose two points to 58 and 65, respectively.  It was the highest score for the future salesrnindex since August 2013 when it was at 68. rnThe index gauging traffic of prospective buyers increased three pointsrnto 42 but continues to drag down the composite score.  The buyer traffic measure, which finallyrnclimbed above 20 in January 2012 after 5-1/2 years in the teens was last abovernthe milestone 50 mark in October 2005.  </p

“Each of the three components of thernHMI registered consecutive gains for the past three months, which is a positivernsign that builder confidence appears to be firming following an uneven spring,”rnsaid NAHB Chief Economist David Crowe. “Factors contributing to this riserninclude sustained job growth, historically low mortgage rates and affordablernhome prices, which are helping to unleash pent-up demand.”</p

Every region saw a gain in itsrnthree-month moving average HMI score in August. The Midwest posted a seven-pointrnincrease to 55 and the West registered a four-point gain to 56. The Northeastrnposted a two-point gain to 38 and the South was up one point to 52.

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