In another sign pointing to housing beginning its slow road to recovery, builder confidence improves for the third consecutive month.
According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, builder confidence in the market for newly built, single-family homes rose six points to 57, marking the index’s third consecutive monthly gain and its strongest reading since January of 2006.
“Today’s report is particularly encouraging in that it shows improvement in builder confidence across every region as well as solid gains in current sales conditions, traffic of prospective buyers and sales expectations for the next six months,” said NAHB Chairman Rick Judson. He cautioned that “This positive momentum could be disrupted by threats on the policy side, particularly with regard to the mortgage interest deduction and federal support for the housing finance system.”
“Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten,” noted NAHB Chief Economist David Crowe. “Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften.”
All HMI components posted gains
The NAHB reports that all three HMI components posted gains in July. The component gauging current sales conditions rose five points to 60, its highest level since early 2006. Meanwhile, the component gauging sales expectations in the next six months gained seven points to 67 and the component gauging traffic of prospective buyers rose five points to 45 – marking the strongest readings for each since late 2005.
All four regions also posted gains in their HMI scores’ three-month moving averages. The Northeast showed a four-point gain to 40 while the Midwest reported an eight-point gain to 54, the South posted a five-point gain to 50 and the West measured a three-point gain to 51.
Some analysts indicate that housing has recovered or is nearly recovered, but we will continue to assert that the long road to recovery has begun, like an auto accident victim who has been taken off of life support and is now starting rehab. Most indicators are improving, but there are endless ways a recovery can be hindered, so we exercise caution in calling this a recovery quite yet, as we have a long way to go until we are at pre-recession levels for most housing indicators.