Builder confidence wanes in real estate market

July 18, 2005

Index sags in Midwest but remains strong in other regions


Inman News

Builder confidence in the market for newly built single-family homes edged down two points in July from a revised reading in June, and matches the index average for the year as a whole, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index released today.

July's HMI reading, at 70, reflects downward movement in both the index that gauges current single-family home sales, which declined from 77 to 75 this month, and the index that gauges sales expectations for the next six months, which declined from 80 to 77. Meanwhile, traffic of prospective buyers remained unchanged from the previous month's 55 reading.

NAHB Chief Economist David Seiders said, "Builders are...concerned about lot shortages and the high cost of land for development, especially in parts of the Northeast and West. Meanwhile, the relatively weak job market situation in the Midwest has had an impact on builder confidence in that part the country."

Derived from a monthly survey that NAHB has been conducting for approximately 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor."

Builders are also asked to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

NAHB President Dave Wilson, a custom homebuilder from Ketchum, Idaho, said, "While mortgage rates have risen slightly in recent weeks, financing conditions remain very favorable to families considering homeownership, and demand still outpaces the supply of new homes in many markets."

Confidence gauges declined somewhat for builders across all four regions of the country, with Midwest builders posting the biggest decline, of six points, to a relatively weak 46 reading in July. Meanwhile, builder confidence in the West dropped one point in the West, to 88; two points in the Northeast, at 69, and two points in the South, at 75, the association reported.

Index tables can be accessed online at: http://www.nahb.org/hmi. More information regarding housing statistics is also available at http://www.housingeconomics.com/.

Copyright 2005 Inman News