Builder Confidence At Two-Year High

Continuing low mortgage rates and improving consumer sentiment are driving demand for new homes and putting builders in good spirits for the holiday season, according to the National Association of Home Builders’ Housing Market Index for December, released December 16, 2002. The HMI, a monthly gauge of builder sentiment, rose one point from November’s revised reading to 65, its highest level since November 2000, when it also reached 65.

“ We are definitely ending 2002 on a positive note,” said Gary Garczynski, NAHB president and a builder/developer from Woodbridge, VA. “Builders could hardly be more pleased with the sound fundamentals of the market for new single-family homes, including an incredibly favorable financing climate, solid house-price gains and, most recently, reviving measures of overall consumer sentiment.”

The HMI is derived from a monthly survey of builders that NAHB has been conducting for nearly 20 years. Home builders are asked to rate current sales of single-family homes and sales expectations for the next six months as “good,” “fair” or “poor.” They are also asked to rate traffic of prospective buyers as either “high to very high,” “average” or “low to very low.” Scores for responses to each component are used to calculate a seasonally adjusted index, where any number higher than 50 indicates that more builders view sales conditions as good than poor.

For December 2002, the HMI’s component index gauging current sales of new single-family homes rose one point to 72, its strongest reading since February 2000, when it reached an exceptionally high 77. The component gauging expectations for the next six months declined a point to 69, while the index gauging traffic of prospective buyers was unchanged at 48.

“ New home sales for 2002 are turning out to be even higher than expected, despite the sluggish economic recovery and the threat of war with Iraq,” said NAHB Chief Economist David Seiders. “NAHB is now forecasting a record 969,000 new-home sales for the year as a whole, up 6.7 percent from 2001.”

Courtesy of EIFS Alliance