Home Builder Confidence Tempered by Credit Access

Home builder confidence asrnmeasured by the National Association of Home Builders (NAHB)/Wells FargornHousing Market Index (HMI) popped up a notch from October figures to reach arnstill dismal 16.  </p

The index is compiled eachrnmonth from home builders’ responses to a survey in which they give theirrnperceptions of the market for houses along three measures; current sales and expectationsrnfor sales over next six months, each rated as either “poor,” “fair,”rnor “good” and builders perception of current buyer traffic measuredrnon a scale ranging from “very low” to “very high.”  The three responses are indexed separatelyrnand combined to form the HMI.  A score ofrn50 or more on the HMI or any of its components indicates that more builders viewrnthe market as good than “poor.”  The last time the HMI topped 50 was in Aprilrn2006 and it has not risen above 20 for 39 months.  </p

Builders however are demonstratingrnsome optimism in their perceptions of future sales.  That component, which gained five points inrnOctober, added another two points in November to reach 25.  According to NAHB Chief Economist David Crowe,rnthis is the highest that component has been since spring when the home buyerrntax credit spurred sales.   </p

The component gauging currentrntraffic of prospective buyers rose one point to 12, and the component gaugingrncurrent sales conditions held unchanged at 16.</p

Crowe noted “The mostrnconcerning aspect of the report is that survey participants say they havernobserved absolutely no improvement in their ability to access credit to buildrnviable new projects. This problem is clearly a roadblock to recovery in manyrnmarkets.”</p

NAHB Chairman Bob Jonesrnsaid it was encouraging to see builder confidence improve over the previous twornmonths, even though the improvement was incremental.  “Many builders are reporting that whilernthe quantity of buyer traffic through their model homes has not improvedrndramatically, the quality of that traffic seems to be getting better – meaningrnthat more people appear to be serious about buying in the near future.” </p

The Northeast was the onlyrnregion to post a decline in its HMI score in November, with a three-point droprnto 13. Meanwhile, the Midwest posted a five-point gain to 18, the West posted arnthree-point gain to 15 and the South held even at 18.

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