Week of May 16, 2005
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Home Buyers Opt for Upscale Smaller Homes

Builder Confidence on Home Sales Holding Strong

The nation’s home builders continue to maintain the high level of confidence that they have had for more than 16 months, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), which was released on May 16.

Robust buyer demand for new single-family homes — supported by continued low mortgage rates and an improving job market — nudged up builder confidence by three points to 70 on a seasonally adjusted annual basis, on the high end of the strong 67-71 confidence range that builders have held for more than a year.

“Builders have seen an uptick in traffic and sales brought on by improving economic conditions and mortgage rates that continue to remain at affordable levels,” said NAHB President Dave Wilson. “They have confidence in the overall housing market and expect sales to stay strong for the next six months.”

“Builders obviously continue to see strong buyer demand for single-family homes,” said NAHB Chief Economist David Seiders. “With unsold inventories in good shape, housing starts should be solid in coming months.”

The NAHB/Wells Fargo Housing Market Index (HMI) is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Each month, builders report on current sales of single-family homes, prospects for sales in the next six months and the traffic of prospective buyers. Any index number over 50 indicates that more builders view sales conditions as good than poor.

The component index gauging current single-family sales rose three points to 76 in this month’s index, while the components gauging sales expectations and traffic of prospective buyers were 77 and 53, respectively.

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