Builders Report Favorable Market Conditions
A drop in mortgage rates and a rise in consumer confidence have helped this month to stabilize the confidence and market expectations of single-family home builders participating in the NAHB/Wells Fargo Housing Market Index (HMI).
Following a six-month slide from peak confidence levels reached during the middle of last year, the HMI in January registered 57 for the second consecutive month, indicating that builders by a comfortable margin see positive conditions in their markets.
"Housing markets across the country have cooled, as predicted, and builders are aware that some slowing in demand is inevitable following the record-breaking sales for the past three years," said NAHB President David Pressly. "While the recent decline in mortgage rates has helped buoy builder confidence, they are adjusting to the changes they are seeing and hearing in their sales offices."
"Single-family housing affordability has been eroded by the accumulation of large house price increases in recent years, but some softening of long-term interest rates since the early-December survey helped to maintain builder attitudes," said NAHB Chief Economist David Seiders. "This has been bolstered by the fact that consumer confidence has rebounded nicely from post-Hurricane Katrina lows."
Derived from a monthly survey that NAHB has been conducting for approximately 20 years, the index gauges builder perceptions of current single-family home sales, sales expectations for 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 of the HMI gauging current sales edged down two points to 62 this month, while expectations for the next six months and prospective buyer traffic remained unchanged from December, at 65 and 40, respectively.
Confidence in January dropped from 75 to 65 in the West, from 67 to 66 in the South and from 59 to 56 in the Northeast. The Midwest, which has yet to generate significant economic and job growth, registered a slight uptick, from 34 to 36.
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