- By David M. Kinchen
Builder confidence in the market for new single-family homes improved for a fourth consecutive month in August with a two-point gain to 37 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released Wednesday, Aug. 15, 2012. This gain builds on a six-point increase in July and brings the index to its highest level since February of 2007.
“From the builder’s perspective, current sales conditions, sales prospects for the next six months and traffic of prospective buyers are all better than they have been in more than five years,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. “While there is still much room for improvement, we have come a long way from the depths of the recession and the outlook appears to be brightening.”
“This fourth consecutive increase in builder confidence provides further evidence of the gradual strengthening that’s occurring in many housing markets and providing a needed boost to local economies,” said NAHB Chief Economist David Crowe. “However, we are still at a very fragile stage of this process and builders continue to express frustration regarding the inventory of distressed properties, inaccurate appraisal values, and the difficulty of accessing credit for both building and buying homes.”
Derived from a monthly survey that NAHB has been conducting for the past 25 years, the NAHB/Wells Fargo Housing Market 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 from 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.
Every HMI component posted gains in August. The components gauging current sales conditions and traffic of prospective buyers each rose three points, to 39 and 31, respectively, while the component gauging sales expectations in the next six months inched up one point to 44. All were at their highest levels in more than five years.
Regionally, builder confidence rose nine points to 42 in the Midwest and two points to 35 in the South, but declined nine points to 25 in the Northeast and three points to 40 in the West in August. For the August HMI release, NAHB is introducing an alternative trend comparison of regional HMIs by also showing a three-month moving average of each region’s index. The current three-month moving averages show a two-point decline to 29 in the Northeast, a five-point gain to 35 in the Midwest, a three-point gain to 32 in the South and a three-point gain to 38 in the West.
The HMI report comes a day after the NAHB released a report showing that Rising house prices in metros across the country contributed to slightly lower housing affordability in the second quarter of 2012. The NAHB/Wells Fargo Housing Opportunity Index (HOI), released Tuesday, Aug. 14, 2012, reveals that 73.8 percent of all new and existing homes sold in the second quarter were affordable to families earning the national median income of $65,000. This is down from a record high 77.5 percent of homes that were affordable to median-income earners as of the first quarter, and is largely attributable to rising prices in metros across the country. A full 92 percent of metros covered in the latest HOI saw their median home prices rise between the first and second quarter.