Builder Confidence Dips Again But Remains Solid

Builder confidence in the market for newly built single-family homes weakened slightly in June, the second consecutive monthly drop, the National Association of Home Builders reported yesterday.

The NAHB/Wells Fargo Housing Market Index fell by two points to 67 from May’s revised reading (69). All three HMI components posted losses in June. The components gauging current sales conditions fell two points to 73 while the index charting sales expectations in the next six months dropped two points to 76. Meanwhile, the component measuring buyer traffic also moved down two points to 49.

Regionally, three-month moving averages fell across the board. The Midwest and South each edged one point lower to 67 and 70, respectively. The Northeast and West both dropped two points to 46 and 76, respectively.

Despite the drop, economists said home builder sentiment remains healthy. Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., noted this is the highest June reading for the index since 2005

“The headline decrease can be attributed to the West region’s 9 point decline on the month to a still impressive 71 points,” Vitner said. “The West is the most supply constrained region, and this shortage of lots and workers is likely the driver behind the monthly drop, as opposed to a weakening in demand.”

“As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labor and buildable lots that is impeding stronger growth in the single-family sector,” said NAHB Chief Economist Robert Dietz.

The index 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.

Earlier this week, the Mortgage Bankers Association reported mortgage applications for new home purchases increased by 4 percent from April and by 15 percent from a year ago.

The MBA Builder Applications Survey said new single-family home sales came in at a seasonally adjusted annual rate of 605,000 units in May, an increase of 8.6 percent from the revised April pace of 557,000 units. On an unadjusted basis, MBA estimated 57,000 new home sales in May, an increase of 5.6 percent from the revised pace of 54,000 new home sales in April.