Home/Mortgages/Home Builder Confidence Rebounds in April

May 16, 2012 (Jeff Alan)

Confidence by the nation’s new home builders rebounded in April after falling in March leaving the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) at its highest level since May 2007.

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 five points, from 24 in March to 29 in April, and follows a four point decline in March. The decline in March was the first drop for the Index in six months.

Barry Rutenberg, chairman of NAHB, stated, “Builders in many markets are reporting that buyer traffic and sales have picked back up after a pause this April. It seems we have resumed the gradual upward trend in confidence that started at the beginning of this year, as stabilizing prices and excellent affordability encourage more people to pursue a new-home purchase.”

The three components that make up the HMI posted gains for the month with the component gauging sales expectations over the next six months gaining three points, climbing to 34 from a revised 31 in March. April’s gain follows a four point loss in March.

The component gauging current sales conditions increased five points, up from a revised 25 the previous month to 30 in April, and the component gauging traffic of prospective buyers also increased by five points, rising from 18 in March to 23 in April.

Three of the four regions in the HMI posted gains for the month. The Northeast reported a gain of six points to 32, followed by five point gains in both the Midwest and the South to 27 and 28, respectively, while the West suffered the only decline, falling two points to 29.

NAHB Chief Economist David Crowe stated, “While home building still has quite a way to go toward a fully healthy market, the fact that the HMI has returned to trend is an excellent sign that firming home values, improving employment and low mortgage rates are drawing consumers back. The pace of this emerging recovery could be stronger were it not for the significant impediments that the market continues to face with regard to builder and consumer access to credit, inaccurate appraisals, and more recently, rising materials prices.”

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