The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index narrowed the gap with positive territory this month with a jump of four points. After lagging in the low to mid-40s for months, the index rose to 49 in June, one point shy of what is considered the threshold for perceptions of a good home building environment.
“After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry,” said NAHB Chairman Kevin Kelly. “However, builders are facing strong headwinds, including the limited availability of labor.”
NAHB and Wells Fargo derive their HMI from a survey of new home builders now in its 30th year. The survey attempts to gauge builder perceptions of the market for new single family homes now and in the near future. Builders are asked to quantify their expectations for current sales and sales over 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 for 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.
There was positive news from all three underlying scores as well. Current sales conditions gained six points to 54 and the component measuring future prospects rose three to 59. Buyer traffic perceptions rose three points but still lags badly at 39.
“Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase,” said NAHB Chief Economist David Crowe. “Builders are reacting accordingly, and are moving cautiously in adding inventory.”
The main HMI figure came in above expectations. Reuters said its survey of analysts had a consensus of 47, two points below the actual number.
Looking at the three-month moving averages for regional HMI scores, the South and Northeast each edged up one point to 49 and 34, respectively, while the West held steady at 47. The Midwest fell a single point to 46.
Senior Director, Coldwell Banker New Homes Division
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