Builder confidence in the market for newly-built single-family homes rose four points in August to a level of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
Builder sentiment is being supporting by ongoing job and economic growth, attractive mortgage rates, and growing consumer confidence. The fact that builder confidence has returned to the healthy levels we saw this spring is consistent with the NAHB forecast for a gradual strengthening in the housing market. GDP growth improved in the second quarter, which helped sustain housing demand. However, builders continue to face supply-side challenges, such as lot and labor shortages and rising building material costs.
Derived from a monthly survey that NAHB has been conducting for 30 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 for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
All three HMI components posted gains in August. The component gauging current sales conditions rose four points to 74 while the index charting sales expectations in the next six months jumped five points to 78. Meanwhile, the component measuring buyer traffic increased a single point to 49.
Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 48. The West, South and Midwest all remained unchanged at 75, 67 and 66, respectively.
The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi.
Builder confidence was up here in 2007. Have to lure the last of the bears in with the melt up before anything can break down all buyers have to be exhausted. That’s the final leg of any bubble-action. I wouldn’t divest entirely from real estate, but if you have a lot and it is 90% of your portfolio, now is a good time to reduce exposure a bit when there are plenty of enthusiastic buyers.