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Builders Battle Shortages But Brighter Days May be Ahead

house-graphupBuilder confidence for newly-built, single-family homes fell slightly from June to July after largely holding steady for the last six months—but improved economic fundamentals may bring steady housing market growth later in the year, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July released Monday.

The builder confidence level ticked down from 60 to 59 over-the-month in July. HMI’s three components are scored (builder perceptions of current single-family home sales, sales expectations for the next six months, and prospective buyer traffic) and then averaged; an index score over 50 indicates that more builders view conditions as good rather than poor.

“For the past six months, builder confidence has remained in a relatively narrow positive range that is consistent with the ongoing gradual housing recovery that is underway,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Illinois. “However, we are still hearing reports from our members of scattered softness in some markets, due largely to regulatory constraints and shortages of lots and labor.”

In July, all three components of the HMI dropped slightly from the previous month, with current sales expectations and buyer traffic each falling by one point down to 63 and 45, respectively. For sales expectations in the next six months, the index rating fell to 66, a decline of three points.

“The economic fundamentals are in place for continued slow, steady growth in the housing market.”

Robert Dietz, Chief Economist, NAHB

Considering the declines over the three components of the HMI, the three-month moving averages for regional HMI scores were fairly consistent. HMI scores in the Northeast (39), Midwest (57), and South (61) were unchanged, and in the West, the HMI score bumped up by one point up to 69.

That being said, improvements in home sales may be on the horizon, according to NAHB.

“The economic fundamentals are in place for continued slow, steady growth in the housing market,” NAHB Chief Economist Robert Dietz said. “Job creation is solid, mortgage rates are at historic lows and household formations are rising. These factors should help to bring more buyers into the market as the year progresses.”

7-18 WF-NAHB graph

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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