By Ryan Jackson
Home builder confidence rose to the highest point in nearly five years in June as builder sentiment grew with an increase in walk-in traffic. The National Association of Home Builders Index reached 32, hitting its highest level since the housing downturn started in May of 2007.
The components measuring sales expectations in the next six months and traffic of prospective buyers held unchanged at 34 and 23, respectively. The NAHB has been conducting the monthly survey for 25 years to gauge the perception of current single family home sales and expectations of sales in the following six months.
The survey also asks builders to rate traffic of prospective home buyers as “high to very high,” “average” or “low to very low.” Scores from the survey are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
“This month’s modest uptick in builder confidence comes on the heels of a four-point gain in May and is reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates,” said Barry Rutenberg, chairman of the NAHB.
However, tight mortgage lending conditions and new appraisal standards, which often require appraisers to value a home at less than a contracted sale provides are hindering the housing market in many areas of the country from a full recovery.
Nearly one-third of U.S. homeowners are also underwater on their mortgages. “While the June HMI is in keeping with our forecast for gradually improving single family home sales this year, recent economic reports that have shown some weakening in the pace of recovery likely factored into the marginal gain,” said NAHB chief economist David Crowe.
Regionally, survey results were mixed in June, with two areas of the country posting gains and two posting declines. The Midwest registered a five point gain to 31 and the West registered a four point gain to 33. The Northeast made a two point drop to 29, and the South also a two point decline to 26.