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Home Builder Confidence in Holding Pattern at 6 Year High
According to the National
Association of Home Builders (NAHB), its NAHB/Wells Fargo Housing Market Index
(HMI) for February was virtually unchanged as builders experience uncertainties
about the economy. The Index, a
reflection of home builders' confidence in the housing market, declined one
point from January's level to 46.
NAHB surveys its residential
builders monthly as to their impressions of the single-family home market on three
parameters; current home sales, builders' expectations for sales over the next
six months, and the current level of buyer traffic. The first two can be rated as "good," "fair,"
or "poor", the last as
"high to very high," "average" or "low to very low." Scores from each component
are then used to calculate individual seasonally adjusted indices and a
composite index. Any index number above
50 indicates that more builders view conditions as good than poor.
component measuring current sales conditions fell from 52 to 51. This was the
first component to break through the critical mid-point since the beginning of
the recession and has remained there for three months. The component measuring sales expectations
over the next six months was up one point to 50 but the indicator of buyer
traffic fell four points to 32.
"Following solid gains over the past year, builder confidence has
essentially leveled out and held in the same three-point range over the last
four months," noted NAHB Chairman Rick Judson.
"This is partly due to ongoing uncertainties about job growth and
consumer access to mortgage credit, but it's also a reflection of the fact that
builders are now confronting rising costs for building materials and, in some
markets, limited availability of labor and lots as demand for new homes strengthens."
"Having risen strongly in 2012, the HMI hit a slight pause in the beginning
of this year as builders adjusted their expectations to reflect the pace at
which consumers are moving forward on new-home purchases," observed NAHB Chief
Economist David Crowe. "The index remains near its highest level since May of
2006, and we expect home building to continue on a modest rising trajectory
Three-month moving averages for each region's HMI score were mixed in
February, with the Northeast up three points to 39 and the West up four points
to 55 and the Midwest and South each down two points, to 48 and 47,
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