Home/Mortgages/Home Builder Confidence Rises for a Second Month

June 28, 2012 (Chris Moore)

Confidence by the nation’s new home builders increased for a second consecutive month following a modest one point rise in June 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 one point, from a revised 28 in May to 29 in June, and follows a four point gain in May.

Barry Rutenberg, chairman of NAHB, stated, “This month’s modest uptick in builder confidence comes on the heels of a four-point gain in May and is reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates.”

Only one of three components that make up the HMI posted a gain for the month while the other two components remained unchanged from the previous month. The component gauging current sales conditions gained two points, climbing to 32 from a revised 30 in May. June’s gain follows a five point improvement in May

The component gauging sales expectations over the next six months and the component gauging traffic of prospective buyers remained unchanged at 34 and 23, respectively.

Two of the four regions in the HMI posted gains for the month. The Midwest reported a gain of five points to 31, followed by a four point gain to 44 by the West, while the Northeast and the South suffered similar declines of two points leaving each at 29 and 26, respectively.

NAHB Chief Economist David Crowe stated, “While the June HMI is in keeping with our forecast for gradually improving single-family home sales this year, recent economic reports that have shown some weakening in the pace of recovery likely factored into the marginal gain. In addition, builders across the country continue to report that overly tight lending conditions and inaccurate appraisals are major obstacles to completing sales at this time.”

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