A Boost in Builder Confidence

According to the National Association of Home Builders (NAHB) and the Wells Fargo Housing Market Index (HMI), homebuilder confidence has increased by 3 points in the month of August 2013. This month marks the fourth consecutive increase in builder confidence and brings us to a total confidence percentage of 59%.

What has brought on this big, sudden boost in builder confidence?

First, and probably the most obvious factor, is the white-hot home sales market. Builders are happily riding the wave of sales after a soggy market during the recession. As the economy continued to improve, buyers felt more confident to begin purchasing new homes again, which, in turn, led to increasingly confident builders.

A second factor that has helped lighten the mood of homebuilders is that home sales have not only increased, but as competition among buyers begins to become a factor again the price tag on the homes has also increased. As a result, homebuilders have enjoyed a boon in profit.

Yet another likely reason homebuilder confidence has increased is the end of the recession. New home sales plummeted during the recession and bottomed out around 2008. Since then, a steadily recovering economy has allowed builders to slowly but surely build more houses, and, finally, sell more houses. “Cautious” was a good word to describe the market, but now “confident” is a better fit.

“Builders are seeing more motivated buyers walk through their doors than they have in quite some time,” explained NAHB Chairman and North Carolina homebuilder Rick Judson. He continued, “What’s more, firming home prices and thinning inventories of homes for sale are contributing to an increased sense of urgency among those who are in the market.”

NAHB Chief Economist David Crowe said, “Builder confidence continues to strengthen along with rising demand for a limited supply of new and existing homes in most local markets. However, this positive momentum is being slowed by the ongoing headwinds of tight credit and low supplies of finished lots and labor.”

Don’t let this news get you down–all you need to do to stay on top of the market is keep buying land so you can keep building houses. Of course, it’s natural for the market to plateau, and this certainly doesn’t signal the end of a productive housing market by any means.

Regionally speaking, there were percentage increase differences across the United States. The Northeast did not increase or decrease in builder confidence at 39, while the South grew four points to 54, and the Midwest and the Western regions each gained six points, for respective totals of 60 and 57.

What do you think about the boost in builder confidence? Is it a sign of an improving market or something more? Leave us a comment!