Builder Confidence Slips Again
Builder confidence in the market for newly built single-family homes fell again in July, although it remained in solid territory amid strong housing demand, the National Association of Home Builders said yesterday.
The NAHB/Wells Fargo Housing Market Index fell by two points in July to 64, coming off a downwardly revised June index to its lowest level since November. All three HMI components registered losses in July but are still in solid territory. The components gauging current sales conditions fell two points to 70 while the index charting sales expectations in the next six months dropped two points to 73. Meanwhile, the component measuring buyer traffic slipped one point to 48.
Regionally, three-month moving averages saw the Northeast rise one point to 47. The West and Midwest each edged one point lower to 75 and 66, respectively. The South dropped three points to 67.
Earlier this week the Mortgage Bankers Association reported mortgage applications for new home purchases decreased by 4 percent in June from May but increased by 10 percent from a year ago. The average loan size of new homes increased from $324,844 in May to $327,833 in June.
“Our members are telling us they are growing increasingly concerned over rising material prices, particularly lumber,” said NAHB Chairman Granger MacDonald “This is hurting housing affordability even as consumer interest in the new-home market remains strong.”
Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said despite the two-month drop, the Index remains in elevated territory, as home builders continue to have “plenty of incentive” to construct new homes. “Healthy demand remains positive to the outlook,” he said.
The HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
“The HMI measure of current sales conditions has been at 70 or higher for eight straight months, indicating strong demand for new homes,” said NAHB Chief Economist Robert Dietz. “However, builders will need to manage some increasing supply-side costs to keep home prices competitive.”
