Builder confidence in the housing market for new construction, single-family homes has surged to 46 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for November, according to Builder.com. This means that close to half of home builders view sales conditions as positive. David Crowe, chief economist with NAHB, notes that while we want to ideally get past the 50-point marker, “substantial progress” has been made since November of 2011, when the HMI was at a dismal 19. In his view, tight lending, tough appraisals, and shortages of buildable lots have limited the housing recovery in some areas.
The survey conducted by NAHB measures two perceptions among builders.
- Are single-family home sales and sales expectations for the next 6 months good, fair, or poor?
- Is the traffic of prospective buyers high to very high, average, or low to very low?
These indicators are then used to calculate a seasonally adjusted index. A number over 50 suggests that the majority of builders perceive sales conditions as good rather than bad.
Builder confidence provides a litmus test for how the immediate future of housing might look, writes Carla Hill in a Realty Times article. In a robust market, confident builders will ascertain permits, because they believe that consumers will be ready and financially able to buy. This level of fortitude is growing at a cautious but steady pace in today’s recovering market.