Builders’ Sentiment Continues Rise

The NAHB/Wells Fargo Housing Market Index for August increased to 59, the highest in almost 8 years as builders continue to see a positive future for home building.  The index ranges from 0 to 100 and 50 is the tipping point where more builders are experiencing a good market than those seeing a poor market.  The overall index has been above 50 since June.

HMI AUG13

The component measuring current sales increased three points to 62 and the component measuring expected sales increased one point to 68, both the highest in almost 8 years.  These levels are also the levels the index reached in 2002 as the market was rising but before the boom that raised the overall index to 72 in mid-2005.

Even with the recent rise in mortgage rates, builders see customers recovering from the fears of the early stages of the recovery when house price movements were uncertain and more comfortable with the expected positive trends housing has exhibited in the past 6 months.  Pent up demand is coming forward and the limited supply of new and existing homes has generated additional motivation to buy sooner rather than wait.

Regional indexes increased for three of the four regions by 6 points in the Midwest to 60, by 4 points in the South to 54 and by 6 points in the West to 57.  The Northeast remained at 39 and has been lagging the rest of the country during the recovery.  Job creation has not been as strong and population growth has been less than the country indicating out-migration in the Northeast.

Housing production is expected to continue to rise as builders attempt to meet the pent up demand while continuing to face supply constraints in labor and land especially.

You can read more on the connection between the HMI and housing starts here.



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