Builder Confidence Continues Upward in August

       Builder confidence in the market for newly built, single-family homes rose one point in August to its highest level in more than a year, according to the latest reading of the NAHB/Wells Fargo Housing Market Index (HMI), which was released on Aug. 17. Building on a two-point gain in July, the HMI reached 18 this month, its highest point since June of 2008.

       “Home builder expectations have been buoyed by the success of the first-time home buyer tax credit and its anticipated boost to buying activity leading up to the Nov. 30 expiration date,” said NAHB Chairman Joe Robson. “The question is what happens after that — whether there will be enough momentum to keep us moving toward a recovery, particularly in light of significant headwinds such as the severe credit crunch for housing production loans and inappropriate appraisal practices that are scuttling a quarter of all new-home sales. Unless Congress and the Administration focus their attention on housing right now, this improvement may well be short-lived,” he said.

       “One very positive aspect of today’s report is the big gain registered in the component gauging home builders’ expectations for the next six months,” noted NAHB Chief Economist David Crowe. “This reflects anticipated sales stemming from the tax credit as well as recent signs that an economic recovery has begun. There is definitely a sense of hope among builders that the worst of the downturn is over and that a turning point is near at hand. Meaningful action by Congress could ensure that this upward momentum continues and that housing can help push the economy back onto solid ground.”

       NAHB is calling on Congress to extend the first-time home buyer tax credit for another year and to offer it to all income-eligible buyers. In addition, NAHB is urging Congress to help eliminate the credit crunch, correct faulty appraisal practices and expand Net Operating Loss tax provisions that can help avoid more layoffs. Each of these actions would generate thousands of new jobs and provide a much-needed boost to economic recovery.

       Derived from a monthly survey that NAHB has been conducting for more than 20 years, the HMI gauges builder perceptions of current single-family home sales, sales expectations for the next six months and the traffic of prospective buyers. Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

       Two out of three of the HMI’s component indexes recorded substantial gains in August. The biggest boost, of four points, was for sales expectations in the next six months, which rose to 30. The index gauging traffic of prospective buyers climbed three points to 16 and the index on current sales conditions held unchanged at 16.

       Regionally, all but the South recorded HMI gains in August. The index rose eight points to 24 in the Northeast, two points to 16 in the Midwest and three points to 17 in the West. The South posted a one-point decline to 18.