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Home builder confidence makes seventh consecutive monthly gain

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Builder confidence is on the rise as the new home construction sector shows signs of improvement, particularly with current and expected sales numbers.

Builders’ optimism is improving, but…

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for November, builder confidence in the market for newly built, single-family homes posted a solid, five-point gain to 46, marking the seventh consecutive monthly gain in the confidence gauge and brings it to its highest point since May of 2006. While the gains are a very positive sign for the hardest hit sector of housing, it should be noted that any reading under 50 means less than half of all builders surveyed feel optimistic about conditions.

“While our confidence gauge has yet to breach the 50 mark — at which point an equal number of builders view sales conditions as good versus poor — we have certainly made substantial progress since this time last year, when the HMI stood at 19,” observed NAHB Chief Economist, Dr. David Crowe. “At this point, difficult appraisals and tight lending conditions for builders and buyers remain limiting factors for the burgeoning housing recovery, along with shortages of buildable lots that have begun popping up in certain markets.”

Two out of three of the HMI’s component indexes registered gains in November – sentiment regarding current sales conditions rose 8.0 points to 29.0, its highest mark in over six years, while the component measuring sales expectations for the next six months held above 50 for a third consecutive month with a two-point gain to 53. Meanwhile, the component measuring traffic of prospective buyers held unchanged at 35 following a five-point gain in the previous month.

All four regions of the country posted gains in their HMI three-month moving averages as of November. The South posted a four-point gain to 43, while the Midwest and West each posted three-point gains, to 45 and 47, respectively, and the Northeast posted a two-point gain to 31. The NAHB notes that the HMI survey was conducted in the two weeks immediately following Hurricane Sandy and therefore does reflect builder sentiment during that period.

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