U.S. Builder Confidence Continues to Improve in January
Jan 18, 2007
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U.S. builder confidence rose two points in January, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI increased from an upwardly revised 33 in December to 35 in January, its highest level since July of 2006.
“Builders are responding to increased buyer interest at the end of 2006 and beginning of 2007,” said NAHB President David Pressly. “This bodes well for the upcoming spring buying season.”
“The same factors that were evident at the end of 2006 continue to hold true in today’s housing market – improving affordability measures, strengthening consumer assessments of home buying conditions and an upswing in applications for mortgages to buy homes,” said NAHB Chief Economist David Seiders. “Builders are starting to see that the worst is behind them and that buying conditions have improved to the point that greater optimism is warranted.”
Seiders added that the recent stabilization of home buyer demand largely reflects reductions in mortgage interest rates since mid-year, lower energy prices following what had been record highs, and solid growth in employment and household income. Reductions in home prices and widespread sales incentives offered by builders also have helped resuscitate buyer demand.
Derived from a monthly survey that NAHB has been conducting for 20 years, the NAHB/Wells Fargo Housing Market Index (HMI) gauges builder perceptions of current single-family home sales and sales expectations for the next 6 months as either “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as either “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 sales conditions as good than poor.
Two out of three component indexes registered improvement in January. The index gauging current single-family home sales and the index gauging traffic of prospective buyers each gained three points, to 36 and 26 respectively, while the index gauging sales expectations for the next 6 months remained unchanged at 49.
Meanwhile, three out of four regions surveyed in the HMI posted gains in January. Two-point gains were registered in the Northeast, Midwest and South, to 39, 24 and 41, respectively. The HMI for the West remained unchanged from the previous month at 32.

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