Home-Builder Confidence Rises Fourth Consecutive Month in January

Builder confidence rose for a fourth consecutive month in January as employment and consumer confidence slowly improved in a growing number of markets and builders witnessed greater interest among potential buyers.

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The NAHB/Wells Fargo Housing Market Index, or HMI, rose four points this month to 25 –the highest level the index has attained since June 2007.

The latest uptick is “universally represented across every index component and region,” noted Bob Nielsen, chairman of the National Association of Home Builders and a home builder from Reno, Nevada.

“This good news comes on the heels of several months of gains in single-family housing starts and sales, and is yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide,” said Nielsen

Still, “caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for an affordable mortgage, appraisals coming through below construction cost, and the continuing flow of foreclosed properties hitting the market,” said NAHB Chief Economist David Crowe.

The NAHB/Wells Fargo Housing Market Index has gauged builder perceptions of current single-family home sales and sales expectations for more than 20 years. It asks builders to rate as “good,” “fair,” or “poor” their perceptions of current home sales as well as sales expectations for the next six months. 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 used to calculate a seasonally adjusted index where any number over 50 indicates more builders view conditions as good than poor.

Each of the HMI’s three component indexes grew for a fourth consecutive month in January. The gauge of current sales conditions rose three points to 25, the highest since June 2007. The gauge of sales expectations in the next six months rose three points to 29, the highest since September 2009. And the component gauging traffic of prospective buyers rose three points to 21, the highest since June 2007.

The HMI posted gains in all four regions of the U.S., including a nine-point gain in the Northeast, a one-point gain in the Midwest, a two-point gain in the South, and a five-point gain in the West.

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