August 22, 2012 (Jeff Alan)

Confidence among the nation’s new home builders continued to move higher in August and builds on a decade high six-point jump in July according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The HMI is derived from a survey that the National Association of Home Builders (NAHB) has been conducting for over 20 years. The index gauges builder perceptions of current single family home sales and sales expectations for the next six months as “good, fair, or poor.” Builders are also asked to rate traffic of prospective buyers as “high to very high, average or low to very low.” Each component is then used to calculate a seasonally adjusted index where a score over 50 indicates builder’s view sales conditions as good.

The index climbed two points, from 35 in July to 37 in August, and follows a six-point jump in july, the largest increase the HMI had seen in the last decade.

All three of the components that make up the HMI posted a gain for the second consecutive month. The component gauging current sales conditions increased by three points, climbing to 39 from a revised 36 in July, and follows a five point gain in July.

The component gauging traffic of prospective buyers also increased by three points in August, climbing from 28 to 31, while the component gauging sales expectations over the next six months edged up 1 point, from a revised 43 to 44 and follows a ten point jump last month.

NAHB Chief Economist David Crowe stated, “This fourth consecutive increase in builder confidence provides further evidence of the gradual strengthening that’s occurring in many housing markets and providing a needed boost to local economies. However, we are still at a very fragile stage of this process and builders continue to express frustration regarding the inventory of distressed properties, inaccurate appraisal values, and the difficulty of accessing credit for both building and buying homes.”

Two of the four regions in the HMI posted gains for the month. The Midwest led with a nine point jump to 42 followed by the South which posted a gain of two points to 35. The Northeast suffered a decline of nine points, falling to 25, while the West fell three points to 40.

Tags: NAHB, Wells Fargo, Housing Market Index, HMI, homebuilders, sales expectations, builder confidence, single-family homes