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Builder confidence up, sense of urgency among buyers

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Builder confidence is improving, and buyers are feeling urgent, but more than half of all builders still lack confidence in all areas but one – future expectations.

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Builder confidence sees improvement in May

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for May, builder confidence in the market for newly built, single-family homes improved three points to a 44 reading from a downwardly revised 41 in April.

The three indices measured in the report measured gains for the month of May, with optimism around current sales conditions up four points to 48, expectations for future sales up one point to 53 (its highest level since February 2007), and sentiment toward traffic of prospective buyers up three points to 33.

Although any reading under 50 means that more builders are pessimistic about the market than optimistic, the index hit a ten year high last July, and continued to climb through the end of 2012. Current readings continue to show a split in the market, with roughly half reporting optimism, the other half reporting pessimism.

Looking at the three-month moving averages for regional HMI scores, no movement was recorded in the Northeast, Midwest or South, which held unchanged at 37, 45 and 42, respectively. Only the West recorded a decline, of six points to 49 in May.

Sense of urgency among buyers

“Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale, continuing affordable mortgage rates and strengthening local economies,” noted National Association of Home Builders (NAHB) Chairman Rick Judson. “This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor.”

“While industry supply chains will take time to re-establish themselves following recession-related cutbacks, builders’ views of current sales conditions have improved and expectations for the future remain quite strong as consumers head back to the market in force,” said NAHB Chief Economist, Dr. David Crowe.


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