Builder confidence in the market for newly built, single-family homes rose two points to 55 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August. This third consecutive monthly gain brings the index to its highest level since January.
"As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market," said NAHB chairman Kevin Kelly, a home builder and developer from Wilmington, Del. "However, builders still face a number of challenges, including tight credit conditions for borrowers and shortages of finished lots and labor."
Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index 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.
All three HMI components posted gains in August. The indices gauging current sales conditions and expectations for future sales each rose two points to 58 and 65, respectively. The index gauging traffic of prospective buyers increased three points to 42.
"Each of the three components of the HMI registered consecutive gains for the past three months, which is a positive sign that builder confidence appears to be firming following an uneven spring," said NAHB chief economist David Crowe. "Factors contributing to this rise include sustained job growth, historically low mortgage rates, and affordable home prices, which are helping to unleash pent-up demand."
Every region saw a gain in its three-month moving average HMI score in August. The Midwest posted a seven-point increase to 55, and the West registered a four-point gain to 56. The Northeast posted a two-point gain to 38, and the South was up one point to 52.