Buyer Traffic Improves, Builders Still Leery of New Home Market

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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