Builder Confidence Higher Than Expected

July 19, 2011

U.S. builder confidence in the market for newly built, single-family homes actually rose this month.

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), home builder confidence in new construction rose from 13 to 15 in July.

Economists had expected the index to rise to 14.

It’s a nice return from June’s index, which fell three points, and it marks the ninth time out of the past 10 months in which the index has held within the same three-point range.

“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.”

All regions but one posted an increase:

*Midwest: Rose one point to 12

*South: Rose three points to 17

*West: Rose three points to 14

*Northeast: Fell two points to 15

Two of the three index components posted increases as well:

*The component gauging current sales conditions rose two points to 15 to return to its May level.

*The component gauging sales expectations over the next six months rose seven points to 22 to return to its April level.

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

“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 Bob Nielsen, NAHB chairman.

“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.”

Categories: Economy

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