Builders Voice Current Optimism; Cautious on Future Gains

The National Association of Home Builder’srn(NAHB)/Wells Fargo Housing Market Index (HMI) ticked up one point this month tornreach its highest point since May 2007.   The HMI is a measure of builder confidence inrnthe health of the new home market.  </p

The HMI was at 29 in June compared to a revisedrnindex of 28 in May.  The index is basedrnon a monthly survey of NAHB’s homebuilder members who are asked to assess thernmarket using three measures.  What is theirrnperception of current single family home sales, “good,” “fair,” or “poor?”  What do they expect sales to be over the nextrnsix months on the same scale; and do they rate the current traffic ofrnprospective buyers as “high to very high,” “average,” or “low to very low?”  Each component is scored separately and alsornused to construct the HMI.  A score of 50rnon any of the four indices indicate that more builders view the market as goodrnthan poor.</p

The June increase in the HMI came from increased optimismrnover current sales while builders remain cautious about future prospects.  The component measuring current sales rose twornpoints to 32, the highest score since April 2007.  However, the components measuring salesrnexpectations over the next six months and current buyer traffic remained unchangedrnat 34 and 23 respectively.</p

“This month’s modest uptick inrnbuilder confidence comes on the heels of a four-point gain in May and isrnreflective of the continued, gradual improvement we are seeing in manyrnindividual housing markets as more buyers decide to take advantage of today’srnlow prices and interest rates,” said Barry Rutenberg, chairman of NAHB. </p

Regionally, the HMI results werernmixed in June, with the Midwest registering a five-point gain to 31 and thernWest a four-point gain to 33.  ThernNortheast and South each posted two-point declines, to 29 and 26, respectively.</p

“While the June HMI is in keepingrnwith our forecast for gradually improving single-family home sales this year,rnrecent economic reports that have shown some weakening in the pace of recovery</blikely factored into the marginal gain," said NAHB Chief Economist David Crowe.rn"In addition, builders across the country continue to report that overly tightrnlending conditions and inaccurate appraisals are major obstacles to completingrnsales at this time."