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Slightly Better Sales Conditions Lift Builder Confidence in July
The National Association of Home Builders announced that builder confidence is rising with the economy as the United States and national markets slowly emerge from the recession. Builders, such as Ron Lee Homes and Hearthstone Home by Ron Lee, are starting to echo potential home buyers in seeing the hope of buying a new home in local markets such as Mandeville, Madisonville, and Covington in St. Tammany Parish. These smaller local real estate markets were not as impacted by the downturn in housing and may be first to come back with new building starts edging upward.
A slight improvement in sales conditions helped nudge builder confidence in the market for newly built, single-family homes up two points to its highest level since September 2008, according to the NAHB/Wells Fargo Housing Market Index (HMI), released on July 16.
The HMI rose two points to 17 in July as builders saw an improvement in current sales conditions but continued to express concerns about the future.
“Builders are seeing slightly better sales conditions this month as consumers take advantage of the first-time buyer tax credit, low interest rates and attractive home prices, but many remain quite concerned about the road that lies ahead,” said NAHB Chairman Joe Robson. “A true recovery in the housing market and overall economy cannot take place until the continuing foreclosure crisis is abated and a decent flow of credit is restored to housing production. Meanwhile, the stalled jobs market is a major concern to builders and potential home buyers alike.”
“Although today’s HMI is positive news that helps confirm the market is bouncing around a bottom, the gain was entirely contained in the component gauging current sales conditions, while the component gauging sales expectations for the next six months remained virtually flat for a fourth consecutive month,” said NAHB Chief Economist David Crowe. “Builders recognize the recovery is going to be a slow one and that we are facing a number of substantial negative forces.”
For example, said Crowe, a quarter of all new-home sales are falling through due to appraisal issues that are tied to the use of distressed and foreclosed properties as comps.
“This is a tremendous obstacle for a housing market that is struggling to get back on its feet, as is the lack of available credit for acquisition, development and construction financing,” he said.
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales, sales expectations for the next six months and 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 of the three HMI component indexes posted gains in July. The index gauging current sales conditions rose three points to 17, while the index gauging traffic of prospective buyers rose a single point to 14. Meanwhile, the index gauging sales expectations for the next six months remained flat at 26.
Regionally, the South posted the biggest HMI gain, with a five-point increase to 20. The Northeast posted a three-point decline, to 16, while the Midwest and West were each unchanged, at 14 and 15, respectively.
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