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Builder Confidence Rises for the Third Consecutive Month

by Chicago Agent

Builder confidence is now at its highest level in 19 months, according to the NAHB.

Builder confidence continues to rise in the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), a key measurement of builder sentiment and an influential projection on future housing activity.

Derived from a monthly survey that the NAHB has maintained for 20 years, the HMI rose from November to December from 19 to 21, bringing the index to its highest level since May of 2010.

Bob Nielsen, the chairman of the NAHB, said that though builder confidence remains depressed, the gains of the last three months are an undeniably good sign.

“While builder confidence remains low, the consistent gains registered over the past several months are an indication that pockets of recovery are slowly starting to emerge in scattered housing markets,” Nielsen said. “However, the difficulties that both builders and buyers continue to experience in accessing credit for new homes are holding back potential sales even in areas where economic conditions are improving.”

According to the index’s markers, any rating below 50 indicates that more builders are negatively viewing housing construction than positively.

David Crowe, the NAHB’s chief economist, reacted to the index in ways similar to Nielsen, citing the continued difficulties in construction while emphasizing the positive nature of the results.

“This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend,” Crowe said. “While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months.”

Even Calculated Risk’s Bill McBride saw positive trends in the data. Noting that builder confidence has been essentially moving sideways since 2009, McBride noted that the first-time homebuyer tax credit notwithstanding, the index is at its highest level since 2007.

Builder confidence for the Midwest was unchanged at 24, which is the second highest regional rating to the South.

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