Builders Confidence Improves

May 19, 2012

Builders have had it hard lately with access to credit remaining difficult, inaccurate appraisals and the rising cost of materials draining their confidence in the housing market. However, for the first time in a while builders have noticed some positivity in the market resulting in improved builder confidence for newly built single-family homes according to the National Association of Home Builders/Wells Fargo Market Housing Index (HMI) released on Tuesday.

Builder Confidence Picture“Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB). “It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase.”

“While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back,” said NAHB Chief Economist David Crowe.

So what is the NAHB/Wells Fargo Market Housing Index exactly?

The index focuses on builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” Furthermore,  the survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” The scores from each aspect of the survey are tallied up and used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

And the results?

Each component of the index showed an uptick compared to the previous month. Both current sales conditions and traffic of prospective buyers rose 5 points this month to 30 and 23 respectively. The rise in the traffic of prospective buyers reached its highest level since April 2007. The component gauging sales expectations in the next six months rose three points to 34.

Improving builder sentiment in the Midwest, which includes the Chicago real estate area, saw a five point gain to 27.

Overall, the magic number for the month of May is 29 for newly built single-family homes, the strongest showing since May of 2007.

How long do you think it will take for the HMI to reach 50 or above? Six months? A year? 2020? Let us know what you think by leaving a reply.

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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