Builder Confidence Continues to Rise

After two months of gains the index measuring builder confidence has reached its highest level in 17 months according to data released today by the National Association of Home Builders (NAHB) and Wells Fargo.  The Housing Market Index (HMI) for November was up three points to 20.  The index also rose three points in October.

NAHB and Wells Fargo have conducted the survey for over 20 years.  It measures NAHB members' confidence in the new home market through their responses to three questions.  The first measures builder perceptions of current single-family sales as "good", "fair", or "poor" and, using the same scale, their expectations of sales over the next three months.  The third question asks builders to rate the traffic of prospective buyers as "high to very high", "average" or "low to very low".  Responses to all three questions are used to construct the composite index.  An index total over 50 indicates the more builders have a positive view of market conditions than have a negative view.

The index measuring current sales conditions also rose three points to 20, while the index gauging future sales expectations increased two points to 25 and the component measuring traffic was up one point to 15.  All three components are at the highest levels since the spring of 2010.

On a regional basis the Northeast registered a three-point gain to 17; the Midwest was up 8 points to 23, and the South improved 2 points to 21.  The West, which had increased substantially in October, plunged six points to 15 in November.

"While this second solid monthly gain on the builder confidence scale is encouraging, the overall measure remains quite low due to the many challenges that home building continues to face with regard to the high number of foreclosures, the difficulties of obtaining construction financing and accurate appraisals, and the restrictive lending environment that is discouraging potential buyers," said Bob Nielsen, NAHB Chairman.  "These problems must be addressed so that housing can contribute to economic and job growth the way it has in the past."