Home Builders’ Confidence Holds Steady

Heading into the holidays, builders of new single-family homes continue to believe that the worst of the downswing in home buying is behind them, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December. At 32 for the present month, the overall HMI is down a single point from November but remains above the recent low of 30 in September. “This was the third consecutive month in which builder expectations for sales over the upcoming six-month period have improved, and it’s a good sign of things to come in the new year,” said NAHB President David Pressly, a home builder from Statesville, N.C. “The HMI has come off September’s low point, and other recent indicators confirm that buying conditions have improved and that demand is stabilizing – including improvements in measures of housing affordability, strengthening consumer assessments of home buying conditions and an upswing in applications for mortgages to buy homes,” said NAHB Chief Economist David Seiders. “Builders sense that the tide is turning in terms of buyer demand for their product and are feeling somewhat better about the prospects for home sales.” Seiders noted that the recent stabilization of home buyer demand largely reflects reductions in mortgage interest rates since mid-year, the retreat of energy prices from record highs and maintenance of solid growth in employment and household income. Reductions in home prices and widespread sales incentives offered by builders also have helped to buoy buyer demand. Derived from a monthly survey that NAHB has been conducting for 20 years, the NAHB/Wells Fargo Housing Market Index (HMI) gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as either “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 sales conditions as good than poor. The only component index to register a decline in December was the one measuring traffic of prospective buyers which, after a three-point jump last month, returned to its October level of 23. The component gauging current single-family home sales remained even at 33, up slightly from its recent low, while the component gauging sales expectations for the next six months rose three points to 48 – its third consecutive monthly gain. Regionally, the HMI posted the biggest gain this time around in the Midwest, which has shown the greatest weakness in this measure for many months. That region posted a 7-point gain to 22 on the confidence scale, while the Northeast was unchanged at 37, the South dropped a point to 39 and the West declined four points to 31.