The National Association of Home Builder's (NAHB)/Wells Faro Housing Market Index (HMI) again edged closer to positive territory this month, increasing one point to 41, the sixth consecutive increase and the strongest showing since June 2006. NAHB said the increase reflected growing confidence on the part of home builders in the market for newly built single family homes. The increase was apparent nationwide with three regions also reporting higher scores and the fourth remaining unchanged from September.
NAHB's index is derived from a monthly survey of its builder members in which they are asked to gauge the current market for new homes and estimate the market in six months as "good," "fair," or "poor." They are also asked to rate the traffic of prospective buyers as "high to very high," "average," or "low to very low." NAHB calculates scores for each component and a composite score. Any number over 50 indicates that more builders view sales conditions as good than poor.
Only the component measuring traffic of prospective buyers advanced this month but it bounced five points to 35, the highest point since June 2006. The other two components, current sales and prospects for the next six months, both of which had increased substantially in September, held steady in October at 42 and 51 respectively.
"Many builders are reporting increases in the number of serious buyers visiting their sales offices, and the overall confidence measure is much higher than it was at this time last year," noted NAHB Chairman Barry Rutenberg. "The concern is that, even though demand for new homes is rising, overly tight credit conditions are still constraining new building and new purchases at a time when that kind of economic activity and the job growth it generates are greatly needed."
Looking at three-month moving averages in the four regions, the HMI gained two points in the Midwest and West to 42 and 44, respectively, and three points in the South, to 39. A three-month moving average for the Northeast's HMI held unchanged at 29.
