Builders Gaining Confidence in New Home Market

March 15, 2011

After sitting stagnant for the past four months, builder confidence in March for new home construction increased to its highest level in almost a year.

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built, single-family homes improved one point this month to 17, its highest level since last May.

construction worker looking at plans in a home being builtWhat makes that even more impressive is that last May’s survey period corresponded with the final days of the federal home buyer tax credit program.

“Builders are cautiously looking forward to the spring home-buying season in hopes that improving economic conditions will help bring more buyers to the table,” said NAHB Chairman Bob Nielsen.

Nielson said there are still factors weighing down the new home construction recovery, including competition from short sales and foreclosures, homeowner’s inability to sell their existing homes, appraisals coming in below construction cost and extremely tight lending conditions.

Two of the three HMI component indexes remained unchanged in March, while the one predicting the future improved:

*The component gauging current sales conditions held at 17.

*The component gauging traffic of prospective buyers held at 12.

*The component gauging sales expectations in the next six months rose two points to 27, its highest level since May 2010.

“While many home buyers are still holding off on making a purchase, builders did indicate slightly increased optimism about the future with a two-point gain in the HMI component gauging sales expectations for the next six months,” said NAHB Chief Economist David Crowe.

“In fact, prevailing indicators portend some improvement in the overall economy, which should generate modest housing market gains later this year.”

We’re looking forward to it.

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