The National Association of Homebuilders (NAHB) reported on Monday that its Housing Market Index (HMI) came in at 16 for the sixth time in seven months. The HMI is a measure of builder confidence gleaned from homebuilders' responses to a monthly survey that has been conducted by NAHB for over 20 years.
"Builder confidence has hardly budged over the past six months as persistent concerns regarding competition from distressed property sales, lack of production credit, inaccurate appraisals, and proposals to reduce government support of housing have continued to cloud the outlook," said NAHB Chairman Bob Nielsen. "In addition, many builders in this month's survey cited high gas prices as a further contributor to consumer anxiety and reluctance to go forward with a home purchase."
The NHAB/Wells Fargo survey asks homebuilders to gauge both current single-family home sales and their expectations for those sales over the next six months as "good," "fair," or "poor." They are also asked to rate current traffic of perspective buyers as "high to very high," "average" or "low to very low." In addition to the composit HMI, a component index is constructed for each of the three sets of responses. A score over 50 on any index indicates that more builders view sales conditions as good rather than as poor. The index has not had a score over 50 since late in 2006.
The component measuring buyer traffic increased one point to 14, the second month in a row and the second time this year for a one-point bump. It is also the highest score for the traffic index since May 2010. Current sales are rated at 16, also a one point increase but the index measuring future sales dropped two points to 20.
"The HMI component index measuring traffic of prospective buyers increased by one point for the second time this year as prospective buyers show growing interest but remain extremely hesitant due to a number of factors," said NAHB Chief Economist David Crowe. "Asked to identify reasons that potential customers are holding back at this time, 90 percent of builders surveyed said clients are concerned about being able to sell their existing home at a favorable price, while 73 percent said consumers think it will be difficult for them to get financing. Clearly, access to credit for both builders and buyers remains a considerable obstacle to the revival of the new-homes market."
Regionally, the HMI results were mixed, with the Northeast at 15 and the West 16, a five and a two-point drop respectively. The Midwest was unchanged at 14 while the South's HMI increased one-point to 16.