Builder confidence in the market for newly built single-family homes barely budged in July, edging down two points from an upwardly revised reading in June to a level that matches the strong index average for the year as a whole, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
"Builders have every reason to remain confident in the single-family marketplace," said NAHB President Dave Wilson, a custom home builder from Ketchum, Idaho. "While mortgage rates have risen slightly in recent weeks, financing conditions remain very favorable to families considering homeownership, and demand still outpaces the supply of new homes in many markets."
"July's HMI reading of 70 is right in line with the elevated index average for the year to date, and upbeat builder attitudes point toward continuation of strong sales and starts of single-family homes in the months ahead," said NAHB Chief Economist David Seiders. "Builders are, however, concerned about lot shortages and the high cost of land for development, especially in parts of the Northeast and West. Meanwhile, the relatively weak job market situation in the Midwest has had an impact on builder confidence in that part the country."
Derived from a monthly survey that NAHB has been conducting for approximately 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor."
Builders are also asked to rate traffic of prospective buyers as either "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.
July's HMI reading, at 70, is down two points from a slightly upwardly revised reading of 72 in June. It reflects moderate downward movement in both the index that gauges current single-family home sales -- which declined from a robust 77 to 75 this month -- and the index that gauges sales expectations for the next six months -- which declined from an even more robust 80 to a still-solid 77. Meanwhile, traffic of prospective buyers remained unchanged from the previous month's 55 reading.
Confidence gauges declined somewhat for builders across all four regions of the country, with Midwest builders posting the biggest decline, of six points, to a relatively weak 46 reading in July. Meanwhile, builder confidence in the West, Northeast and South was basically unshaken, with a one-point decline registered in the first region and two-point declines registered in the other two to readings of 88, 69 and 75, respectively.
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