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Home builder confidence levels reach important milestone

Home builder confidence has hit a significant milestone, but not so fast, this doesn’t imply housing has recovered as some are stating it does.

home builder confidence

home builder confidence

Home builder confidence jumped in June

According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence rose eight points to 52 in June, the first time the HMI has been above 50 since April 2006 and was the biggest single-month gain in nearly 11 years. Any reading above 50 indicates that more builders view sales conditions positively than negatively. Gains have been made for many months in a row, but exceeding 50 is a milestone the NAHB is lauding.

“This is the first time the HMI has been above 50 since April 2006, and surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases,” said NAHB Chairman Rick Judson

“Builders are experiencing some relief in the headwinds that are holding back a more robust recovery,” said NAHB Chief Economist, Dr. David Crowe. “Today’s report is consistent with our forecast for a 29 percent increase in total housing starts this year, which would mark the first time since 2007 that starts have topped the 1 million mark.”

NAHB survey details

The HMI survey gauges builder perceptions of current single-family home sales, sales expectations for the next six months, and traffic of prospective buyers, all of which improved in June. Confidence in current sales conditions rose 8.0 points to 56, future sales expectations jumped 9.0 percent to 61, and sentiment on traffic rose 7.0 points to 40.

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The HMI three-month moving average was up in three of the four regions, with the Northeast and Midwest posting a one-point and three-point gain to 37 and 47, respectively. The South registered a four point gain to 46 while the West fell one point to 48.

Does this spell a comeback?

Some are implying this reading indicates a housing recovery is under way and in full swing, but is that really accurate? Imagine you put 100 builders in a room and ask them how they feel about the market and only 52 raise their hand to state they feel positively while the other 48 say they feel negatively, that’s hardly a comeback.

That said, reading confidence levels and seeing them above the 50 point mark is a sign that the recovery has begun, but the road to recovery is a long one and will continue to remain a challenge, particularly if lending remains unreasonably tight and uncertainty surrounding taxes and tax reform remain. This reading is good news, but should not be blown out of proportion as nearly half of all builders surveyed still feel negatively toward housing.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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