July Builder Confidence Holds Firm

Sorohan, Mike msorohan@mba.org 

July 19, 2016

The National Association of Home Builders said builder confidence in the market for newly built, single-family homes fell by one point to 59 in July.

The NAHB/Wells Fargo Housing Market Index said all three components edged lower in July. The components measuring current sales expectations and buyer traffic each fell one point to 63 and 45, respectively. The index measuring sales expectations in the next six months posted a three-point decline to 66.

Regionally, three-month moving averages for regional HMI scores held steady. The Northeast, Midwest and South were unchanged at 39, 57 and 61, respectively, while the West edged one point higher to 69.

"For the past six months, builder confidence has remained in a relatively narrow positive range that is consistent with the ongoing gradual housing recovery that is underway," said NAHB Chairman Ed Brady. "However, we are still hearing reports from our members of scattered softness in some markets, due largely to regulatory constraints and shortages of lots and labor."

Mark Vitner, senior economist with Wells Fargo Securities, Charlotte, N.C., said despite July's dip, the index remains at a healthy level even with its six-month average. "The drop was mostly due to ongoing frustrations about lot availability and the development process," he said.

"The economic fundamentals are in place for continued slow, steady growth in the housing market," said NAHB Chief Economist Robert Dietz. "Job creation is solid, mortgage rates are at historic lows and household formations are rising. These factors should help to bring more buyers into the market as the year progresses."

The 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 for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

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