Builders Credit Consumers for Increased Optimism

New home builders regained some of the confidence in the market they had displayed in September after wavering significantly in October.  The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), a measure of builder attitudes about the current and prospective market for newly built single-family homes, rose four points to 58 this month after falling five points from September to October.

The HMI is compiled from responses to a monthly survey NAHB conducts among its new home builder members.  The survey asks for their perceptions about current single family home sales and their expectations for 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 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.

Scores for all three HMI components increased this month.  The index rating current sales conditions rose five points to 62, nearly offsetting a six point drop last month.  The index gauging future sales rose two points to 66, one point below the September reading which had been the highest in over a year.  The third component measuring current buyer traffic was up four points to 45 after falling six points in October.

"Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery," said NAHB Chief Economist David Crowe. "After a slow start to the year, the HMI has remained above the 50-point benchmark for five consecutive months, and we expect the momentum to continue into 2015." 

Looking at the three-month moving averages for regional HMI scores, the Northeast rose three points to 44, the South posted a four-point gain to 62, and the West edged up one point to 58. The Midwest registered a two-point loss to 57.

"Growing confidence among consumers is what's fueling this optimism among builders," said NAHB Chairman Kevin Kelly "Members in many areas of the country continue to see increasing buyer traffic and signed contracts."