Builder Confidence increases in December, Highest since April 2006
by Bill McBride on 12/18/2012
The National Association of Home Builders (NAHB) reported the housing market index (HMI) increased 2 points in December to 47. Any number under 50 indicates that more builders view sales conditions as poor than good.
From the NAHB: Builder Confidence Continues Improving in December
Builder confidence in the market for newly built, single-family homes rose for an eighth consecutive month in December to a level of 47 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. This marked a two-point gain from a slightly revised November reading, and the highest level the index has attained since April of 2006.
“While there is still much room for improvement, the consistent upward trend in builder confidence over the past year is indicative of the gradual recovery that has been taking place in housing markets nationwide and that we expect to continue in 2013,” noted NAHB Chief Economist David Crowe.
Two of the HMI’s three component indexes are now above the critical midpoint of 50. The component gauging current sales expectations rose two points to 51 in December, while the component gauging sales expectations in the next six months slipped one point, to 51. The component measuring traffic of prospective buyers increased one point, to 36.
Click on graph for larger image.
This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the December release for the HMI and the October data for starts (November housing starts will be released tomorrow). This was at the consensus estimate of a reading of 47.
Read more at http://www.calculatedriskblog.com/2012/12/builder-confidence-increases-in.html#KwBHwV3CQxwZTWhQ.99
Builder Confidence Continues Rise in November
by David Crowe — Eye on Housing
The NAHB/Wells Fargo Housing Market Index rose another five points to a 6-year high of 46 in November. The component measuring traffic remained unchanged at 35; the component measuring current sales rose 8 points to 49 while the component measuring future demand rose two points to 53. The expectation component has been above the tipping point of 50 for three consecutive months (above 50 being the point where more builders see a better market ahead than see a poorer market).
Regional three-month moving average index levels also rose two to four points, Northeast to 31, Midwest to 45, South to 43 and West to 47. The Northeast index is the only region that has hesitated in the last several months, remaining in a narrow band of 29 to 31 for six months. Single-family permits have behaved similarly, running between 40,000 and 45,000 since March 2012. The FHFA price index changes for the two divisions within the Northeast region have been among the lowest recently. The Northeast is the only region with a higher unemployment rate now than one year ago and in two months ago.
Builders report continued difficulties with buyers qualifying for mortgages and low appraisals below the contract price. But the source of the increasing optimism centers on improved buyers’ attitudes. Builders report buyers who are able to obtain a mortgage are ready to buy after postponing their purchase for years. Low inventory or the wrong inventory in the existing home market has also benefited home builders. Over the past year, new home sales have increased 27% while existing home sales have increase 11% as the available and appropriate inventory of existing homes dries up.
The new home inventory is also very low but builders are able to respond to orders, at least as the market begins to recover. Lot inventory is low and in some markets will soon become a limiting factor to continued expansion. Material prices, particularly lumber and wood products, have risen and in a few markets construction labor and subcontractor availability has begun to worry builders. A continued home building expansion will require attracting the resources, materials, labor and land, from their current usage and that will likely mean a rise in home prices.