Builder Confidence Gets a Two Point Bump in July

According to the National Association of Home Builders, builder confidence in the market for newly built, single-family homes — the National Association of Home Builders/Wells Fargo Housing Market Index — was up two points in July, to 15, offsetting a three point June downturn and marking the ninth time in the last ten months that the index has remained within the three point range.

“The improvement in builder confidence in July is a positive sign that the outlook perhaps isn’t quite as bleak as was feared in June,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “While builders continue to confront serious challenges with regard to competition from foreclosed properties that are priced below replacement cost, inaccurate appraisals of new homes, and a very restrictive lending environment for new home construction, select markets are showing gradual improvement as consumers begin to take advantage of very favorable buying conditions.”

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 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 from 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 bounced back in July from drops in the previous month. The component gauging current sales conditions was up two points to 15, returning to its May level, while the component gauging sales expectations in the next six months rose seven points to 22. The component gauging traffic of prospective buyers was unchanged from June, at 12.

For a regional look, the Midwest posted a gain of one point in its HMI score for June, rising to 12. Meanwhile, the South and West regions both added three points to 17 and 14 respectively, while the Northeast was the only region that saw a decline, falling two points to 15.