Builder Confidence Trickles up to 10 Year High

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) ratcheted up another point this month continuing a steady rise in builder confidence in the new home market.  The composite HMI rose to 62, its highest reading since October 2005.

"The HMI shows that single-family housing is making solid progress, said NAHB Chairman Tom Woods.  "However, our members continue to tell us that they are concerned about the availability of lots and labor."

NAHB Chief Economist David Crowe. "NAHB is projecting about 1.1 million total housing starts this year. Today's report is consistent with our forecast, and barring any unexpected jolts, we expect housing to keep moving forward at a steady, modest rate through the end of the year."

NAHB constructs its HMI from a monthly survey of its member builders which it has conducted for the past 30 years.  The builders are asked for their perceptions of current single-family home sales as well as their expectations for those sales over the next six months as either "good," "fair," or "poor." Builders are also asked to rate current prospective buyer traffic 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.

The index measuring buyer traffic has lagged the other two indices for years but increased two points this month to 47, edging closer to the benchmark of 50 which it has not reached since October 2005.  The component gauging current sales conditions rose one point to 67, its highest level since November 2005. Meanwhile, the index charting sales expectations in the next six months dropped from 70 to 68.

Looking at the three-month moving averages for regional HMI scores, the West and Midwest each rose one point to 64 and 59, respectively. The South posted a one-point gain to 64 and the Northeast dropped one point to 46.