Home Builder Confidence Increases

According to data from the National Association of Home Builders (NAHB), confidence for the near-term future of the housing market amongst the nations homebuilders approached an eight-year high for August. The NAHB credits strong buyer demand and a limited supply of new and existing homes as being the reason for the continued positive market outlook. They note that the rise in confidence comes in spite of higher mortgage interest rates.

The NAHB Housing Market index rose to 59 in August, and it is the fourth consecutive monthly gain for the index, as well as being the best showing since November 2005. The August reading was three points above July’s reading of 56. Market analysts polled by Reuters had expected the index to sag to 56 in August. Readings above 50 mean more builders view market conditions as favorable than poor.

The survey evaluates single-family home sales conditions along with sales expectations for the next six months as being “good,” “fair,” or “poor.” Likewise the survey also asks builders to rate traffic of prospective buyers as being “high to very high,” “average,” or “low to very low.” The scores are then calculated in a seasonally adjusted index where any number over 50 indicates that builders have a positive expectation for the market, and view conditions as “good” rather than “poor.”

The survey’s index for homebuilders’ view on current sales conditions rose to 62 from a revised 59, the industry group said. The gauge of expectations for single-family home sales for the next six months edged up slightly by 1 basis point to 68 after increasing by 15 basis points between May and July. The component on prospective buyer traffic held steady at 45.

NAHB Chairman Rick Judson said, “Builders are seeing more motivated buyers walk through their doors than they have in quite some time…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.”