Monday, May 17, 2010

NAHB Builder Confidence Increases in May

by Calculated Risk on 5/17/2010 01:00:00 PM

Note: any number under 50 indicates that more builders view sales conditions as poor than good.

Residential NAHB Housing Market Index Click on graph for larger image in new window.

This graph shows the builder confidence index from the National Association of Home Builders (NAHB).

The housing market index (HMI) was at 22 in May. This is an increase from 19 in April. This is the highest level since August 2007 - and builders were seen as depressed then!

The record low was 8 set in January 2009. This is still very low ...

HMI and Starts Correlation This second graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the May release for the HMI and the March data for starts (April starts will be released tomorrow).

This shows that the HMI and single family starts mostly move generally in the same direction - although there is plenty of noise month-to-month.

Press release from the NAHB: Builder Confidence Continues to Strengthen in May

Builder confidence in the market for newly built, single-family homes rose for a second consecutive month in May to its highest level in more than two years, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released today. The HMI gained three points to 22 in May, its highest point since August of 2007.

“Builders surveyed for the HMI at the beginning of May were undoubtedly reacting to the heightened consumer interest they had just witnessed as the deadline for home buyer tax credits arrived at the end of April,” said Bob Jones, Chairman of the National Association of Home Builders (NAHB) and a home builder from Bloomfield Hills, Mich. “Builders are also hopeful that the solid momentum that the tax credits initiated will continue even now that those incentives are gone.”

“The really encouraging part of today’s HMI is that sales expectations for the next six months continued to gain, despite the expiration of the home buyer tax credits at the end of April,” said NAHB Chief Economist David Crowe. “This means builders are more comfortable that the market is truly beginning to recover, and that positive factors for buying a new home – low interest rates, great selection, stabilizing prices, and a recovering job market – are taking the place of tax incentives to generate buyer demand.”

Crowe was quick to point out, however, that while builder confidence has improved from the depths of the housing downturn, it is still quite low by historic standards. “Obviously we still have a long way to go ..."

Each of the HMI’s three component indexes posted three-point gains in May. The component gauging current sales conditions climbed to 23, its highest level since July of 2007. The component gauging sales expectations in the next six months rose to 28, its highest point since November 2009, and the component gauging traffic of prospective buyers improved to 16, its best showing since September 2009.