In what could be good signs for the future, builder confidence for newly built, single-family homes increased in May for the second consecutive month, and the remodeling market started to show signs of improvement, according to new reports released by the National Association of Home Builders (NAHB).According to the latest report, builder confidence was at its highest level since September of 2008. The finding is based on the NAHB/Wells Fargo Housing Market Index (HMI), released this week. The HMI rose two points to 16 this month.

“Builders are responding to what they perceive to be some of the best home buying conditions of a lifetime,” says NAHB chairperson Joe Robson, a home builder from Tulsa, Okla. “You’re not likely to get a better deal in terms of mortgage rates than what’s available right now. Combine that with the affordable prices, multitude of home choices and $8,000 tax credit for first-time buyers that are now available, and you have a very appealing set of reasons to make a move.”

“The fact that the May HMI continued to tick up from April’s five-point increase provides confirming evidence that the improved confidence level was no fluke,” adds NAHB Chief Economist David Crowe. “This continued increase indicates that home builders feel we’re at or near the bottom of the market and that positive signs lie ahead for builders and potential home buyers, provided that builder access to production credit significantly improves.”

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for 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.

Two out of three of the HMI’s component indexes rose in May. The index gauging current sales conditions rose two points to 14, while the index gauging sales expectations for the next six months rose three points to 27. The index gauging traffic of prospective buyers remained unchanged, at 13.

Regionally, the Northeast posted a three-point gain in its HMI score, to 18, while the South posted a one-point gain to 18, the West rose four points to 12, and the Midwest held even at 14.

In addition, the residential remodeling market showed signs of improvement during the first quarter of 2009 with significant growth in all indicators, according to the latest NAHB Remodeling Market Index (RMI). The current market conditions measure rose to 34.5 from 25.5 in the fourth quarter of 2008. Future expectations jumped to 30 from a historic low of 18.6 the previous quarter.

The RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view market conditions as improving. The RMI has been running below 50 since the final quarter of 2005, following decreasing remodeling expenditures since that time.

“Remodelers are starting to receive more calls for bids and requests for proposals, although getting customers to sign for a job continues to remain a challenge,” says NAHB Remodelers Chairman Greg Miedema, CGR, CGB, CAPS, CGP, a remodeler from Tucson, Ariz. “While the size of the jobs is smaller, remodelers are optimistic about this uptick in market activity.”

The index component for national market conditions for major additions and alterations increased to 32.7 from 19.4 in the fourth quarter of 2008, while minor additions improved to 39.1 from 31.5. Maintenance and repair remained also climbed, to 30.4 from 23.6.

Measures for future expectations showed healthy growth during the first quarter, with the component for calls for bids rising to 34.2 from 20.6. The backlog of remodeling jobs component climbed to 28.5 from 18.4, and appointments for proposals jumped to 35.3 from 19.1. Finally, the component that measures the amount of work committed for the next three months rose to 21.8 from 16.4.


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