Builder Confidence Sees Uptick In August

Builder Confidence Sees Uptick In August

Posted 09/04/2014

Builder confidence in the market for newly-built, single-family homes rose two points in August, despite a dip in sales recorded the month prior, according to reports from the National Association of Home Builders (NAHB).

“We are somewhat surprised by this dip, considering builder confidence and new-home starts are on the rise,” said Kevin Kelly, chairman of the NAHB and a home builder and developer from Wilmington, Delaware. “However, builders are increasing their level of inventory in anticipation that sales will gradually improve during the rest of the year.

The U.S. Department of Housing and Urban Development and the U.S. Census Bureau reported single-family housing starts rose 8.3 percent nationwide to a seasonally adjusted annual rate of 656,000 units in July. Even so, consumer demand cooled slightly that same month, as new-home sales fell 2.4 percent to 412,000, down from 422,000 the month prior.

Builders across the country appeared to be unconcerned about the minor mid-summer drop in sales, however. In fact, the NAHB/Wells Fargo Housing Market Index (HMI) for August experienced its third consecutive month of gains, bringing the index to its highest level since January. Derived from a monthly survey of NAHB members, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales, sales expectations for the next six months and prospective-buyer traffic counts.

“Each of the three components of the HMI registered consecutive gains for the past three months, which is a positive sign that builder confidence appears to be firming following an uneven spring,” said NAHB Chief Economist David Crowe. “Factors contributing to this rise include sustained job growth, historically low mortgage rates and affordable home prices, which are helping to unleash pent-up demand.”

NAHB Chairman Kelly said while builders still face headwinds from tight credit conditions, labor shortages and low finished-lot inventory, they are encouraged by the increased number serious buyers entering the housing market due to improvements on the employment front.