Home Builder Confidence Mostly Unchanged in 2011

Builder confidence in the housing marketrnremained unchanged in August according to the National Association of HomernBuilders (NAHB)/Wells Fargo Housing Market Index (HMI) released Monday.  While two of the three indices that make uprnthe HMI improved, the index measuring the future prospects for new homes offsetrnthose gains. </p

The HMI is derived from a monthly surveyrnof new home builders which asks them to assess both current new home sales andrntheir expectations for sales in six months as “good,” “fair,” or “poor.”  Builders are also asked to rate the trafficrnof prospective buyers as “high to very high,” “average” or “low to very low.”  Any score of 50 or more on the threerncomponents or on the composite HMI indicates that more builders view conditionsrnas good than view them as poor.</p

The component gauging current sales conditions gained one point to 16 – itsrnhighest level since March of this year – and the component gauging traffic ofrnprospect buyers rose one point to 13 following two consecutive months at 12.rnHowever, the component gauging sales expectations for the next six monthsrndeclined two points to 19.  This followedrna six-point gain in July… </p

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Bob Nelson, chairman of NAHB said thatrn41 percent of the builders responding to a special questions section of the HMIrnindicated they had lost sales contracts due to buyers’ inability to sell theirrncurrent homes.  This follows a report lastrnmonth from the National Association of Realtors (NAR) on existing home sales.  In that report Lawrence Yun, NAR chiefrneconomist, said that 16 percent of the associations members reported a salesrncontract was cancelled in June, four times the cancellation rate in May.  NAR said those cancellations were the resultrnof tight credit and appraisal problems. rnPerhaps we are seeing a domino effect with underwriting issues thatrncancel one type of sale leading to the collapse of new home sales contracts.</p

“The uncertain economic climate and concerns about job security arerndiscouraging many potential buyers from exploring a home purchase at thisrntime,” said NAHB Chief Economist David Crowe. “While buyingrnconditions are very favorable in terms of prices, interest rates and selection,rnconsumers are worried about what the future will bring, and builders arernechoing those sentiments in their responses to the HMI survey.”</p

The survey results were mixed on a regional basis.  While the Northeast posted a four-point gainrnto 19, the West registered a one-point gain to 15, the South held even at 17rnand the Midwest posted a two-point decline, to 10.

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