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U.S. Home Builder Confidence Index Upticks in November

U.S. Home Builder Confidence Index Upticks in November

Residential News » Residential Real Estate Edition | By Michael Gerrity | November 16, 2010 11:00 AM ET



According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today, U.S. home builder confidence in the market for newly built, single-family homes improved slightly in November. The HMI rose one notch to 16 from a downwardly revised level of 15 in the previous month.

"Though the gains have been incremental, the fact that builder confidence has improved over the past two months is encouraging," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "Many builders are reporting that while the quantity of buyer traffic through their model homes has not improved dramatically, the quality of that traffic seems to be getting better - meaning that more people appear to be serious about buying in the near future. Builders remain very concerned, however, about the lack of available financing for new-home construction at a time when inventories of completed new homes are quite thin; after all, you can't sell what you can't build."

"The most positive aspect of today's report is the future expectations component, which not only held onto the five-point gain it registered in October, but improved by an additional two points to 25 for November," said NAHB Chief Economist David Crowe. "This is the highest that component of the HMI has been since the home buyer tax credit program spurred sales activity this spring." At the same time, he noted, "The most concerning aspect of the report is that survey participants say they have observed absolutely no improvement in their ability to access credit to build viable new projects. This problem is clearly a roadblock to recovery in many markets."

Derived from a monthly survey that NAHB has been conducting for more than 20 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.

Two out of three of the HMI's component indexes registered improvement in November, while the third component held steady. The component gauging sales expectations in the next six months rose two points to 25, the component gauging traffic of prospective buyers rose one point to 12, and the component gauging current sales conditions held unchanged at 16.

The Northeast was the only region to post a decline in its HMI score in November, with a three-point drop to 13. Meanwhile, the Midwest posted a five-point gain to 18, the West posted a three-point gain to 15 and the South held even at 18.




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