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Aggressive Selling Helps Stabilize Builder Confidence
Breaking a string of eight consecutive monthly declines, the NAHB/Wells Fargo Housing Market Index (HMI), which gauges builder sentiment in the single-family housing market, posted a modest one-point gain to a level of 31 in October.
“While the index remains at a low level, the increase suggests that builder attitudes for new-home sales may be stabilizing,” said NAHB Chief Economist David Seiders. “This is attributable to several key economic factors: mortgage interest rates have fallen substantially from their summer highs, energy prices have dropped dramatically from their recent peaks, consumer sentiment has posted a strong rebound and the job market is doing reasonably well.”
“More than three out of four builders are offering substantial sales incentives to move their product and limit cancellations, and this aggressive strategy is working — making this an opportune time for home buyers to enter the market,” said NAHB President David Pressly. “The market correction appears to be approaching the bottom in terms of sales volume, and we expect the supply-demand balance to improve considerably before long.”
Derived from a monthly survey that NAHB has been conducting for 21 years, the index gauges builders’ perceptions of current single-family home sales, sales expectations for the next six months and the traffic of prospective buyers. The scores for each component are then used to calculate a seasonally adjusted index; any number over 50 indicates that more builders view sales conditions as good than poor.
Current single-family home sales registered a 32 on this month’s index, the same as the September reading; expected sales climbed four points, to 41; and traffic was up one point to 23.
Regionally, the HMI rose five points to 33 in the Northeast and four points to 20 in the Midwest. Builder confidence dropped five points, to 32, in the West, which has been dogged by high prices and a major decline in investor buying activity; and one point, to 37, in the South.
 Attend the NAHB Construction Forecast Conference in Person or on the Web
Don't miss NAHB's fall Construction Forecast Conference for the latest economic news about the housing industry. Join NAHB on Oct. 25 for the Construction Forecast Conference — Fall 2006 in Washington, D.C.
If you can't attend in person, sign-up for the Webcast.
To register for either, visit www.nahb.org/cfc.
 Want to Know the Housing Starts Through 2015?
Find out in HousingEconomics.com’s Long-Term Forecast.
HousingEconomics.com includes downloadable Excel tables featuring the housing starts forecast, GDP, demographics and more.
To learn more, visit www.housingeconomics.com.
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