Buyer Traffic Improves, Builders Still Leery of New Home Market

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Builder confidence levels as reported by the National Association of Home
Builders (NAHB) remained in the low 60s in April, a space it has now occupied
for three months.  The NAHB/Wells Fargo
Housing Market Index (HMI) a measure of confidence in the market for new homes,
rose 1 point to 63, continuing to slowly recover from the three year low of 56
it reached in December.

“Builders report solid demand for new single-family homes but they are also
grappling with affordability concerns stemming from a chronic shortage of
construction workers
and buildable lots,” said NAHB Chairman Greg Ugalde.

“Ongoing job growth, favorable demographics and a low-interest rate
environment will help to modestly spark sales growth
in the near term,” said
NAHB Chief Economist Robert Dietz. “However, supply-side headwinds that are
putting upward pressure on housing costs will limit more robust growth in the
housing market.”

The HMI is derived from a monthly survey of NAHB’s new home builder members
which asks them to report their perceptions of current single-family home sales
and their expectations for those sales over the next six months as “good,”
“fair” or “poor.” ¬†Builders are also
asked to rate traffic of prospective buyers as “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 conditions as good than poor.

The index charting expectations over the next six months slipped 1 point to
71, but the other two components were up. 
Current sales perceptions increased 1 point to 69, while builders’ opinions
of buyer traffic had an unusually large move for that component, gaining 3
points to 47.

Looking at the three-month moving averages for regional HMI scores, the
Northeast posted a three-point gain to 51, the Midwest increased two points to
53, and the South was up one point to 67. The West was unchanged at 69.

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