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Builder Confidence at Five-Year High in June: NAHB

Builder confidence rose one point in in June to 29, its highest level since May 2007, the ""National Association of Home Builders"":http://www.nahb.com/ said Monday. The index for May, originally reported as 29 was revised down to 28.


Economists had expected the index to be flat to the original report for May.

The total index in June was up 16 points from June 2011, the strongest year-over-year gain since December 1998. The index has improved year-over-year for 12 straight months as it did from July 2009 through June 2010 before going into a five month swoon.

Of the three components of the index ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô current sales, sales six months out and buyer traffic ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô only the assessment of current market conditions improved in June, increasing two points to 32, the highest level since April 2007. The forecast of sales six month out remained at 34 and the gauge of traffic of prospective buyers was flat at 23.

The current sales component was up 19 points in the last year, also the strongest year-over-year gain since December 1998. The six├â┬ó├óÔÇÜ┬¼├óÔé¼┼ômonth sales forecast component was also up 19 points over one year ago, the strongest year-over-year increase since December 1992.

The buyer traffic component showed an 11-point year-over-year improvement, its biggest year-over year gain since November 2002.

The month-over-month improvement in the HMI was driven by the present sales index.


The Index, considered a measure of builder confidence, could be reflected in permits and starts data reported for June. That report from the Census Bureau, will be issued in July. Census will report Tuesday on permits and starts for May when builder confidence, as reported by NAHB, rose four points to 28.

The ""traffic"" measure does not always show up in new home sales. The ""traffic"" index fell four points in April yet new home sales rose that month.

""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,"" said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.

The index, built based on surveys conducted jointly by the NAHB and Wells Fargo, 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 from 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. Even with the improvement in June, the index has been below 50 for 73 straight months ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô more than six years.

Regionally, the index improved in two of the four census regions: up five points to 31 in the Midwest and up four points to 33 in the West. It fell two points each in the Northeast and Midwest to 29 and 26 respectively.

The HMI survey followed a disappointing payroll report for May which showed the nation added 69,000 jobs, far below the 150,000 the market had been expecting. The same report showed a drop in the average workweek and a two-cent gain in average hourly earnings putting a strain on consumers ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and potential homebuyers.

""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,"" said NAHB Chief Economist David Crowe. ""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.""

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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