Builders show optimism in latest survey

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Confidence by homebuilders approached its yearly high in August as the National Association of Home Builders/Wells Fargo Housing Index rose two points to 55, nearing a high of 56 reached in January.

The monthly survey of members marked the third month of increases in builder confidence.  The index measures builders’ perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.”  It also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores are tabulated from three different components the survey to calculate a seasonally adjusted index with any number more than 50 reflecting good conditions.

“As the employment picture brightens, builders are seeing a noticeable increase in the number of serious buyers entering the market,” said NAHB Chairman Kevin Kelly, a homebuilder and developer from Wilmington, Del., said in a release.

The current indexes for sales conditions and expectations for future sales each rose two points, to 58 and 65, respectively. The measure of traffic from prospective buyers increased three points to 42. The NAHB believes that the current sales measurement is a strong indication that new sales reported by the Census Bureau later this month will show significant improvement from its drop in June.

“Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand,” said NAHB chief economist David Crowe.

Regional indexes also showed an increase in confidence across the board. The three-month moving average for the South rose one point to 52, but is still below where it was in January and February. The Midwest saw the largest gain, at seven points, rising to 55. In the West, the index rose four points to 56. Confidence was lowest in the Northeast, even though the index rose two points to 38.

Labor shortages and higher costs for land and supplies continue to hamper the housing industry, the NAHB said. The land shortage is prompting larger builders with their own source of credit to bid up the price of lots, a cost which they pass on to buyers in the way of higher home prices. Developers facing tight credit have been unable to buy raw land and develop sites for builders.