NAHB: Home Builder Confidence Up Three Months Straight

Posted by Patrick Barnard on August 18, 2014 No Comments
Categories : Residential Mortgage

Despite the fact that wage growth is seriously lagging behind inflation and that many prospective home buyers are unable to obtain a mortgage due to tighter lending standards, builder confidence in the market for newly built, single-family homes rose two points to 55 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for August.

It was the third consecutive month that home builder confidence increased, according to the NAHB. Much of the increase was driven by the improvement in the rate of unemployment as well as increased interest in new homes from prospective buyers.

‘As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market,’ says Kevin Kelly, chairman of the NAHB, in a release. ‘However, builders still face a number of challenges, including tight credit conditions for borrowers and shortages of finished lots and labor.’

The monthly survey gauges builder perceptions of current single-family home sales and sales expectations for the next six months as ‘good,’ ‘fair’ or ‘poor.’ It 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 conditions as good than poor.

All three HMI components posted gains in August, NAHB reports. The indices gauging current sales conditions and expectations for future sales each rose two points to 58 and 65, respectively. The index gauging traffic of prospective buyers increased three points to 42.

‘Builder confidence appears to be firming following an uneven spring,’ says David Crowe, chief economist for the NAHB. ‘Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand.’

Every region saw a gain in its three-month moving average HMI score in August. The Midwest posted a seven-point increase to 55 and the West registered a four-point gain to 56. The Northeast posted a two-point gain to 38 and the South was up one point to 52.

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