Builders’ Sentiment Continues to Rise

Builders’ Sentiment Continues to Rise

by David Crowe — Eye on Housing 

The NAHB/Wells Fargo Housing Market Index for October increased one point to 41, the sixth consecutive month for an increase.  Two of the three components to the index remained the same, current and expected sales, while the traffic index rose five points to 35, the highest in over six years.  The index, however, remains below the tipping point of 50 where an equal number of builders see better conditions as see poorer conditions.

NAHB/Wells Fargo Housing Market Index

Comments of concern continue around tight credit conditions for borrowers and builders as well as appraisals below the contracted price.  Some markets are also beginning to feel the pitch from little or no development taking place for five or six years.  The inventory of buildable lots is declining rapidly and the supply of new lots is still some years off as the development and approvals must start up again while credit remains tight for this kind of activity.  As lot prices increase, builders are being squeezed by higher input costs, including some building materials, but only slight increases in housing prices.

The slowdown in builder sentiment is appropriate given the uncertain future of tax and government spending policy.  Until elementary federal spending policies are settled, buyers and builders are appropriately cautious and a full housing recovery will have to wait for more clarity on these issues.

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