Builder confidence reflects August increase in new-home sales nationwide

Posted by Tom Kalinski Founder RE/MAX of Boulder on Tuesday, October 14th, 2014 at 9:00pm.

Home builders remain confident in the market for new single-family homes, according to the National Association of Home Builders/Wells Fargo Housing Market Index.

Builder confidence in the market rose to a level of 59 in September, making it the fourth consecutive month confidence has grown – this time by four points – and bringing the index to its highest reading since November of 2005, according to a NAHB press release.

“Since early summer, builders in many markets across the nation have been reporting that buyer interest and traffic have picked up, which is a positive sign that the housing market is moving in the right direction,” says NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del.

And sales of new homes in the previous month seem to support that optimism: sales of newly built, single-family homes increased 18 percent in August to a seasonally adjusted annual rate of 504,000 units, the highest level in six years, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

“This jump in sales activity is in line with our latest surveys, which indicate builders are seeing increased traffic and more serious buyers in the market for single-family homes,” Kelly says.

NAHB Chief Economist David Crowe adds, “This robust level of new-home sales activity is a good sign that the housing recovery is moving towards higher ground. Historically low mortgage rates, attractive home prices and firming job and economic growth should keep the housing market moving forward in 2014.”

New home sales rose 50 percent in the West region, which includes Colorado. And builder confidence rose across every region of the country in September, with the West posting a two-point increase to 58.

Despite those reports, Crowe says little of that activity is from first-time home buyers.

“While a firming job market is helping to unleash pent-up demand for new homes and contributing to a gradual, upward trend in builder confidence, we are still not seeing much activity from first-time home buyers. Other factors impeding the pace of the housing recovery include persistently tight credit conditions for consumers and rising costs for materials, lots and labor,” he says.

Derived from a monthly survey that NAHB has been conducting for 30 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.

All three HMI components posted gains in September, the NAHB reports. The indices gauging current sales conditions and traffic of prospective buyers each rose five points to 63 and 47, respectively. The index gauging expectations for future sales increased two points to 67.

Tom Kalinski 
Owner and Founder
RE/MAX of Boulder

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