Builder Confidence Shows Biggest Jump in Five Years

Builder confidence in the market for newly built, single-family homes this month rose five points — to 14 — the highest level since October 2008, according to the latest NAHB/Wells Fargo Housing Market Index (HMI), which was released on April 15.

The largest one-month increase since May of 2003 moved the HMI out of single-digit territory for the first time in six months. Every component of the HMI showed improvement, but sales expectations in the next six months recorded the biggest gain.

“If you’re a potential buyer who’s been sitting on the fence waiting for a sign that now is the time to act, this is it,” said NAHB Chairman Joe Robson. “Some of the most favorable buying conditions in a lifetime are now in place, and they are drawing more consumers back to the market.”

“This is a very encouraging sign that we are at or near the bottom of the current housing depression,” said NAHB Chief Economist David Crowe. “With the prime home buying season now underway, builders report that more buyers are responding to the pull of much-improved affordability measures, including low home prices, extremely favorable mortgage rates and the introduction of the $8,000 first-time home buyer tax credit.”

Crowe cautioned, however, that a key issue that still must be addressed is the ongoing credit crunch for builder acquisition, development and construction (AD&C) financing. “Restoring health to our nation’s economy will require a substantial housing recovery, and that recovery is contingent on breaking the logjam in AD&C lending that presents an ever-increasing obstacle for home builders,” he said.

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the HMI gauges builder perceptions of current single-family home sales, expectations of sales six months down the road and traffic of prospective buyers. Any number over 50 indicates that more builders view conditions as good than poor.

Each of the HMI component indexes recorded substantial gains in April. Builder sales expectations surged 10 points, to 25. Current sales conditions and buyer traffic each rose five points, to 13 and 14, respectively.

The HMI for April was up in every region of the country, climbing eight points to 16 in the Northeast, six points to 14 in the Midwest, five points to 17 in the South and four points to 9 in the West.