Home Builder Confidence Gets Better and Better

WASHINGTON, DC-For the fourth consecutive month, the National Association of Home Builders/Wells Fargo Housing Market Index improved, this time with a two-point gain. That brings the score for builder confidence for newly built, single-family homes to 37.  In July the index shot up six points and that leap, coupled with August’s gain, brings the index to its highest level since February of 2007.

This increase, says NAHB Chief Economist David Crowe, is “further evidence of the gradual strengthening that's occurring in many housing markets and providing a needed boost to local economies.” However, he continued in his prepared statement, “we are still at a very fragile stage of this process and builders continue to express frustration regarding the inventory of distressed properties, inaccurate appraisal values, and the difficulty of accessing credit for both building and buying homes."

Derived from a monthly survey, 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 "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores are used to calculate a seasonally adjusted index.

This month every HMI component posted gains; current sales conditions and traffic of prospective buyers each rose three points, to 39 and 31, respectively, while the component gauging sales expectations in the next six months rose one point to 44. All were at their highest levels in more than five years.

Lenders have taken note of the improving mood—at least Wells Fargo has. Separately, the institution announced on Wednesday that it has formed a Homebuilder Banking team to serve residential developer clients on the East Coast, Texas, and Midwest. The team, which is comprised of 14 bankers located across the country, will also serve as a centralized resource on the industry for Wells Fargo’s entire Commercial Real Estate business. “We’re starting to see some modest signs of increased demand in the homebuilding sector in many markets,” said Bird Anderson, who is heading the team, in a prepared statement. “We believe our customers will benefit by having a group of experienced and dedicated bankers devoted specifically to this industry.”