Builder confidence rises

Builder confidence in the market for newly built, single-family homes improved by two points in July to 15 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The gain largely offsets a three-point dip recorded in June, and marks the ninth time out of the past 10 months in which the index has held within the same 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 National Association of Home Builders (NAHB) chairman Bob Nielsen 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."

"We view the upward movement in the July HMI as a correction from an exceptionally weak number in June that was at least partly attributable to negative economic news and the close of a disappointing spring selling season," said NAHB chief economist David Crowe. "The strong rebound in sales expectations for the next six months likewise marks a return to trend. Basically, the market continues to bounce along the bottom, with conditions in some locations beginning to improve."

The NAHB has been conducting its monthly builder confidence survey for more than 20 years, asking builders of single-family homes to rate their sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to gauge traffic of prospective buyers as "high to very high," "average" or "low to very low." The index is then calculated and seasonally adjusted. Any number over 50 indicates that more builders view sales conditions as good than poor.

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