Builders See Flicker of Hope in Home Buyer Demand
Builders are starting to seern”a flicker of interest” from potential home buyers according to the NationalrnAssociation of Home Builder (NAHB)/Wells Fargo Housing Market Index (HMI)</areleased on Monday. That index rosernthree points in October, the first increase in five months. HMI, a measure of builder confidence in thernoutlook for home sales currently and in the near future, has been issued byrnNAHB and Wells Fargo for 20 years. </p
NAHB gauges its members perceptionsrnof current single family home sales and their expectations about their salesrnover the next six months as “good” rn”fair” or “poor” and their opinion of current buyerrntraffic as “high to veryrnhigh,” “average” or “low to very low.” Scores from each of the three measures are usedrnto calculate a seasonally adjusted index for each component and the compositernHMI. Any number over 50 indicates thatrnmore builders view conditions as good than poor; the HMI has not achieved arnlevel of 50 since late in 2006. </p
All three of the component indices improved in October with the indexrngauging current sales conditions rising three points to 15; the one looking sixrnmonths into the future was up five points to 23 and the index gauging buyerrntraffic rose from 9 to 11. The HMIrnitself registered 16, a return to the level last seen in June.</p
NAHB Chairman Bob Jones said that builders are hopeful that flicker of buyerrninterest they see will translate to more sales in the coming months. “However,rnbecause most builders still have no access to credit for building homes, therernis a real concern that we will not be able to meet the pent-up demand whenrnconsumers are ready to get back in the market. This problem threatens tornseverely slow the housing and economic recovery.”</p
Builder confidence improved across every region in October. The Southrnand West each posted four-point gains, to 18 and 12, respectively, while thernNortheast and Midwest each posted single-point gains, to 17 and 13,rnrespectively.</p
“The new-homes market is finally moving past the lull that occurredrnwhen the home buyer tax credits expired and economic growth stalled thisrnsummer,” noted NAHB Chief Economist David Crowe. “While challengesrnsuch as competition from foreclosures, inaccurate appraisal values, and generalrnconsumer uncertainty about the economy and job market continue to be majorrnfactors, builders have seen a slight increase in consumers who are consideringrna home purchase. The toughest obstacles really come down to financing – thernscarcity of construction credit for builders along with tougher mortgagernrequirements for consumers.”
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