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Builder Confidence Reaches Highest Level Since 2005

construction-twoProgress among the single-family housing market is moving at a slow but sure pace. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment in the market for newly built, single-family homes in August rose one point to a level of 61, the highest reading since November 2005.

“The fact the builder confidence has been in the low 60s for three straight months shows that single-family housing is making slow but steady progress,” said Tom Woods, NAHB chairman and a home builder from Blue Springs, Missouri. “However, we continue to hear that builders face difficulties accessing land and labor.”

The NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

In August, the NAHB reported that two of the three HMI components posted gains. The index measuring buyer traffic increased two points to 45 and the component gauging current sales conditions rose one point to 66. Meanwhile, the index charting sales expectations in the next six months held steady at 70.

Looking at the three-month moving averages for regional HMI scores, the West and Midwest each rose three points to 63 and 58, respectively. The South posted a two-point gain to 63 and the Northeast held steady at 46.

"Even with the slow rise in confidence, builders continue to face difficulty obtaining lots to build on and labor to build the homes," said David Crowe, NAHB chief economist. "Prices are rising for both inputs putting some profit squeeze on builders and making it more difficult to build affordable homes for first time buyers. While existing home prices have risen, they have not risen enough to compensate builders for the added supply costs, particularly land. While actual sales prices of new homes have been rising because of the compositional shift, quality constant new home prices have risen less than quality controlled existing home prices. This trend is likely to shift to higher new home prices in order to induce more builders to build."

Source: NAHB

About Author: Xhevrije West

Xhevrije West is a writer and editor based in Dallas, Texas. She has worked for a number of publications including The Syracuse New Times, Dallas Flow Magazine, and Bellwethr Magazine. She completed her Bachelors at Alcorn State University and went on to complete her Masters at Syracuse University.
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