Builders’ Confidence is at its Highest Level Since November 2005July 16th, 2015 by Casey Flores
Builder confidence in the market for newly built, single-family homes in July hit a level of 60 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) while the June reading was revised upward one point to 60 as well. The last time the HMI reached this level was in November 2005.
“The fact that builder confidence has returned to levels not seen since 2005 shows that housing continues to improve at a steady pace,” says NAHB chairman Tom Woods. “As we head into the second half of 2015, we should expect a continued recovery of the housing market.”
“This month’s reading is in line with recent data showing stronger sales in both the new and existing home markets as well as continued job growth,” says NAHB chief economist David Crowe. “However, builders still face a number of challenges, including shortages of lots and labor.”
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index 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 of the three HMI components posted gains in July. The component gauging current sales conditions rose one point to 66 and the index charting sales expectations in the next six months increased two points to 71. Meanwhile, the component measuring buyer traffic dropped a single point to 43.
Looking at the three-month moving averages for regional HMI scores, the West and Northeast each rose three points to 60 and 47, respectively. The South and Midwest posted respective one-point gains to 61 and 55.