Home Builder Confidence Stays Steady in January

The HMI is out for January and shows very solid results for our home builders: remaining at level 47, this makes for the eighth consecutive month the index has held this high since April of 2006! “Conditions in the housing market look much better now than at the beginning of 2012 and an increasing number of housing markets are showing signs of recovery, which should bode well for future home sales later this year,” Barry Rutenberg, chairman of the National Association of Home Builders and home builder from Gainesville, Florida, said in the article.

The NAHB creates the housing market index in conjunction with Wells Fargo; running now for 25 years, this monthly survey measures builder confidence in single-family home sales and their sales expectations for the following six months. These are rated as “good,” “fair”, or “poor”. The anticipated traffic is also measured, and builders are asked if they expect the prospective buyer traffic to be “high to very high”, “average”, or “low to very low”. Scores from each component are then calculated. This means that any number over 50 indicates that more builders view conditions as good rather than poor. With 47, we’re still below that threshold.

Why? Barry Rutenberg notes, “However, uncertainties stemming from last month’s fiscal cliff negotiations contributed to the pause in builder confidence and continuing discussions among policymakers related to spending cuts and the future of the mortgage interest deduction could put a damper on housing demand in the coming months.”

NAHB Chief Economist David Crowe shared a similarly mixed reaction: “Builders’ sentiment remains very close to the index’s tipping point of 50, where an equal number of builders view conditions as good and poor, and fundamentals indicate continued momentum in housing this year. However, persistently tight mortgage credit conditions, difficulties in obtaining accurate appraisals and the ongoing stalemate in Washington over critical economic concerns continue to impede the housing recovery.”

Sales conditions stayed unchanged at 51 for January, but sales expectations fell one point to 49. Traffic of prospective buyers did better, gaining one point to 37. The HMI average was up across all regions, which is a very positive sign. The Midwest gained two points to 50, the Northeast two to 36, the South gained three points to 49, and the West offered a very good four point increase to 51.

Though below 50, this is again part of the highest score since 2006, which is a really strong sign that the housing market is getting back to normal. Home sales are definitely picking up and home builders all over the nation are taking advantage of the improving market – and working around current problems, like offering energy efficient homes to lower the total cost of the home and therefore aid the mortgage application process. Have you seen the market improve in your area? How as a home builder are you adjusting to meet those new needs?