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Housing Market Index Continues to Construct Optimism

by Chicago Agent

Builders are once again looking up, with the HMI reflecting a newfound optimism in the profession.

The National Association of Home Builder’s Housing Market Index (HMI) rose four points in January to 25, the fourth consecutive month of gains and the highest level for the index in more than four years.

Bob Nielsen, the chairman of the NAHB and a home builder from Reno, Nev., said the latest HMI is the latest indicator of a slow but steady recovery in housing.

“Builder confidence has now risen four months in a row, with the latest uptick being universally represented across every index component and region,” Nielsen said. “This good news comes on the heels of several months of gains in single-family housing starts and sales, and is yet another indication of the gradual but steady improvement that is beginning to take hold in an increasing number of housing markets nationwide – and that has been shown by our Improving Markets Index.”

Indeed, not since June 2007 has the index been at a higher level, and only once in the four years since did it break 20. Also, as Nielsen indicated, every facet of the index posted gains, with the current sales conditions segment rising three points, its highest level since June 2007, the sales expectations segment rising three points, its highest level since September 2009, and the traffic of prospective buyers segment rising three points, its highest level since June 2007. As CNBC noted, the shares at Hovnanian and Pulte both jumped in the morning’s trading following the release of the HMI.

David Crowe, the NAHB’s chief economist, said greater interest from potential buyers propelled the HMI’s gains.

“Builders are seeing greater interest among potential buyers as employment and consumer confidence slowly improve in a growing number of markets, and this has helped to move the confidence gauge up from near-historic lows in the first half of 2011,” Crowe said.

Derived from a monthly survey that the NAHB has conducted for more than 20 years, the HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor,” along with rating the 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.

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