NAHB Builder Confidence index increases in January

NAHB Builder Confidence index increases in January

by CalculatedRisk on 1/18/2012  

The National Association of Home Builders (NAHB) reports the housing market index (HMI) increased in January to 25 from 21 in December. Any number under 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Rises Fourth Consecutive Time in January 

Builder confidence in the market for newly built, single-family homes continued to climb for a fourth consecutive month in January, rising four points to 25 on the NAHB/Wells Fargo Housing Market Index (HMI), released today. This is the highest level the index has attained since June of 2007.

Builders are seeing greater interest among potential buyers as employment and consumer confidence slowly improve in a growing number of markets, and this has helped to move the confidence gauge up from near-historic lows in the first half of 2011,” noted NAHB Chief Economist David Crowe. “That said, caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for an affordable mortgage, appraisals coming through below construction cost, and the continuing flow of foreclosed properties hitting the market.”

Each of the HMI’s three component indexes registered a fourth consecutive month of improvement in January. The component gauging current sales conditions rose three points to 25, which was its highest point since June of 2007. The component gauging sales expectations in the next six months also rose three points, to 29 — its highest point since September 2009. And the component gauging traffic of prospective buyers rose three points to 21, its highest point since June of 2007.

The HMI also posted gains in all four regions in January, including a nine-point gain to 23 in the Northeast, a one-point gain to 24 in the Midwest, a two-point gain to 27 in the South and a five-point gain to 21 in the West.

HMI and Starts CorrelationClick on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the January release for the HMI and the November data for starts (December housing starts will be released tomorrow).

Both confidence and housing starts had been moving sideways at a very depressed level for several years – but confidence has been moving up.

This is still very low, but this is the highest level since June 2007.

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