Builder confidence in the market for newly built, single-family homes in July reached new heights not seen since November 2005. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Thursday, builder confidence hit a level of 60 in July, while the June reading was upwardly revised one point to 60.
“The fact that builder confidence has returned to levels not seen since 2005 shows that housing continues to improve at a steady pace,” said Tom Woods NAHB chairman and a home builder from Blue Springs, Missouri. “As we head into the second half of 2015, we should expect a continued recovery of the housing market.”
The index determines 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.
According to the NAHB, two of the three HMI components posted gains in July. The index that determines current sales conditions rose one point to 66 and the index charting sales expectations in the next six months increased two points to 71. Meanwhile, the component measuring buyer traffic dropped a single point to 43. The West and Northeast each rose three points to 60 and 47, respectively when looking at the three-month moving averages for regional HMI scores. The South and Midwest posted one-point gains to 61 and 55, respectively.
"Builders report more serious buyers are visiting models and discussing prices and features," said David Crowe, NAHB's chief economist. "While buyers are taking more time to decide to buy, more of them are finally making those decisions. However, builders remain concerned about their access to lots and labor. Ready-to-build lot supply continues to be the biggest concern among builders as the cheaper lot supply left from the bust is about exhausted, the pipeline of new developments was interrupted by very limited access to capital from regional and community banks and competition for the available lots has intensified.”