Encouraged by continuing low mortgage rates and robust demand for new homes, single-family home builders are more confident this June than they’ve been all year, according to the latest National Association of Home Builders/ Wells Fargo Housing Market Index (HMI). The index rose one point to 71 in June, its highest level since a similar reading in December 2004.
“The favorable financing climate for new homes is proving too attractive for many buyers to pass up, so builders are staying very busy this summer,” said NAHB President Dave Wilson, a custom home builder from Ketchum, Idaho.
“In the past four weeks, the average rate on a 30-year mortgage declined 21 basis points, ending at 5.56 percent as of June 9,” noted NAHB Chief Economist David Seiders. “Combined with the very solid appreciation rates we’ve seen, and the widespread expectation that mortgage rates will begin creeping up soon, that’s a powerful incentive to make a move,” he agreed.
Derived from a monthly survey that NAHB has been conducting for almost 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and expectations for sales in the next six months as either “good,” “fair” or “poor.” Builders are also asked 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 sales conditions as good than poor.
June’s 71 HMI reading, up a single point from May, is the highest reading of the year to date. It reflects slight upward movement in all three component indexes, including a one-point gain in the current sales index, to 77; a two-point gain in the index gauging expectations for sales in the next six months, to 79; and a one-point gain in the index gauging traffic of prospective buyers, to 54.
The most optimistic builders are in the West, where an HMI reading of 88 far outpaces that of builders in all other regions. Moreover, the 88 reading reflected a solid four-point gain from last month. Southern builders were also a bit more confident this time around, posting a one-point gain in their regional confidence gauge to 76 in June. Builders in the Northeast maintained a healthy, 70-point reading on the confidence scale, while builders in the Midwest registered a two-point confidence boost, to 52.