Builder Confidence at Highest Rate in Two Years
By Mike Sorohan
After months--many months--of dismal news for home builders, new data suggest hope for recovery.
The National Association of Home Builders yesterday reported that builder confidence in the market for newly built, single-family homes rose for a second consecutive month in May to its highest level in more than two years. The NAHB/Wells Fargo Housing Market Index gained three points to 22 in May, its highest point since August 2007.
The numbers remain subdued in historical context; an index figure under 50 indicates that home builders are more pessimistic about their short-term prospects. But 22 sounds much better than 9, which is where the Index bottomed out last year.
“Sales expectations for the next six months continued to gain, despite the expiration of the home buyer tax credits at the end of April,” said NAHB Chief Economist David Crowe. “This means builders are more comfortable that the market is truly beginning to recover, and that positive factors for buying a new home--low interest rates, great selection, stabilizing prices and a recovering job market--are taking the place of tax incentives to generate buyer demand.”
The Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
Each of the Index’s three component indexes posted three-point gains in May. The component gauging current sales conditions climbed to 23, its highest level since July 2007. The component gauging sales expectations in the next six months rose to 28, its highest point since November 2009; the component gauging traffic of prospective buyers improved to 16, its best showing since September 2009.
Every region gained in May. The Northeast, which has the smallest survey sample and is therefore subject to greater month-to-month volatility, rose 14 points to 35, its highest point since June of 2007. The Midwest posted a two-point gain to 17, while the South registered a one-point gain to 22 and the West posted a seven-point gain to 20. Crowe noted that builders still face numerous obstacles to a full recovery. “It’s worth repeating that continued challenges such as the critical lack of project financing, inappropriate appraisal procedures, competition from short sales and foreclosures and the soaring costs of some building materials are major obstacles on the path to a healthier housing market and economy,” he said
Printed with permission by MBA NewsLink.
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