Home Builder Confidence Continues Increase in July

The July NAHB/ Wells Fargo Housing Market Index jumped six points to a level of 35.  The new level is the highest in more than five years and the largest one-month increase since the recession recovery in 2002.  All three components and four regions increased as well.  The current sales sub-component rose six points to 37 and the expectations for sales in the next six-months rose 11 points, both the highest in over five years.  The 11 point gain in the expectation component is the largest in the 27 year history of the index.  The traffic component rose six points, hitting a level last seen six years ago.

The increase was accompanied by a large number of builder comments about increased buyer interest.  Builders commented that buyers were more serious and feeling some urgency to act as interest rates remained low but inventory of new homes also remained low.  Buyers remain very price conscious and continue to search for bargains just as builders are feeling price pressures on some rising material prices.

Credit access remains a problem for builders and buyers as well as low appraisals and competition from distressed properties.  A number of builders also offered some concern that the supply pipeline of developed lots and development dried up over the past several years and that price competition in markets with little supply was possible.

The forecast for the rest of 2012 calls for continued modest increases in production as more buyers realize home prices have stabilized and are beginning to rise in many markets.

 

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