New Home Builder Optimism Remains Low

August 16, 2011 (Brian Michael)

Confidence among the nation’s new single-family home builders remained at low levels in August according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) as economic uncertainty continues to discourage potential buyers from considering new home purchases.

The HMI is derived from a survey that NAHB has been conducting for over 20 years. The index gauges builder perceptions of current single family home sales and sales expectations for the next six months as “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.” Each component is then used to calculate a seasonally adjusted index where a score over 50 indicates builder’s view sales conditions as good.

The HMI in August remained unchanged from July at a low level of 15.

Two of the three components that make up the HMI increased modestly from the previous month. The component gauging sales expectations over the next six months, which rose 6 points last month, slipped two points to a level of 19 in August.

The component gauging current sales conditions increased from 15 last month to16 in August and the component gauging traffic of prospective buyers also rose one point from last month to13 in August.

Regionally, the Midwest dropped two points from last month slipping to10, the South remained unchanged at 17, and the West picked up one point moving up to 15. The Northeast gained four points, bringing its HMI score to 19 for the month.

"Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. He noted that 41 percent of respondents to a special questions section of the HMI indicated they had lost sales contracts due to buyers' inability to sell their current homes.”

Tags: NAHB, Wells Fargo, Housing Market Index, HMI, homebuilders, sales expectations, builder confidence, single-family homes, competition, distressed properties, appraisals

Source:
NAHB