Builder Confidence Stays Strong

The National Association of Home Builders (NAHB) and Wells Fargo reported a solid market for new single-family homes in the April NAHB/Wells Fargo Housing Market Index (HMI), a measure of market conditions based on three factors, with a range of zero to 100.

The March HMI was unusually high, according to the NAHB, reaching 71, compared to the previous month’s 65, and April stayed steady at 65. All three individual components (present single family sales, next six-month single family sales, and prospective buyer traffic) reported losses month over month, but are still strong.

The prospective buyer traffic component indicated rising interest in new home sales, as it scored above the breakeven level of 50. It topped 52 in April, a slight drop from 53 in March.

Present single-family sales and single-family sales for the next six months both showed slight decreases month-over-month, but remain high. Present single-family sales for April dropped to 74 from 77 in March, and single-family sales for the next six months dropped to 75 from 78 in March.

NAHB reports that there is a continuing demand for home construction, although builders have faced several challenges such as high regulatory costs and increasing material prices.

On a regional basis, the all regions experienced loss, but on a three month moving average for HMI scores, the West and Midwest managed to gain a point each, up to 77 and 78 respectively. The South stayed strong at 68, and the northeast fell two points to 52.

The NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months, and also asks builders to rate traffic of prospective buyers. 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.

Data from the NAHB/WellsFargo HMI can be found here.