NAHB Builder Confidence Index Reaches Highest Level in Five Years

by Chicago Agent

August 17, 2012

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Builder confidence hit its highest mark in five years in the NAHB’s Home Market Index, a key measure of the newly-built, single-family home market.

By Peter Ricci

The National Association of Home Builders latest Home Builders/Wells Fargo Housing Market Index (HMI) rose for the fourth consecutive month in August, reaching its highest point in more than five years.

A measure of builder confidence for the newly-built, single-family home market, the HMI rose two points to reach 37, which is the highest level since February of 2007.

Builder Confidence – Rockin’ in the Midwest

As always, there were some geographical differences in the HMI:

Builder confidence was the strongest in the Midwest, where it shot up nine points to 42.
Next was the West, which fell three points to 40; the Northeast also fell to 25.
The South, however, rose two points to 35. When the index is 50, that means more builders are optimistic than pessimistic.
Also, all the HMI’s individual components were positive in August, with the current sales and prospective-buyer traffic gauges rising three points to 39 and 31, respectively, while sales expectations rose one point to 44. Again, these are the highest levels in more than five years.

Gradually Strengthening Housing Market

David Crowe, the chief economist for the NAHB, said the latest HMI is further evidence of a gradually improving housing market.

“This fourth consecutive increase in builder confidence provides further evidence of the gradual strengthening that’s occurring in many housing markets and providing a needed boost to local economies,” he said.

Crowe did preach caution, though, with how real estate professionals approach that recovery.

“We are still at a very fragile stage of this process and builders continue to express frustration regarding the inventory of distressed properties, inaccurate appraisal values and the difficulty of accessing credit for both building and buying homes,” he said.

But as we’ve covered the last couple months, there’s definitely plenty for builders to smile about, from the dropping home vacancy rate, to the growing prominence of green construction, to the stratospheric second quarter orders for the nation’s largest homebuilders.