Washington, DC, June 16--Indicating that the lowest mortgage rates in nearly half a century are providing solid motivation for home buyers, builder confidence in the market for new single-family homes rose strongly in June to pre-war levels, the National Association of Home Builders (NAHB) reported today. NAHB’s Housing Market Index (HMI), a key monthly measure of builder confidence, gained five points to 62 in June from an upwardly revised reading of 57 in May.
"Builders are now as confident in the new-homes market as they were prior to the buildup to the conflict with Iraq and before poor weather conditions weighed on the market in March," said NAHB President Kent Conine, a home and apartment builder from Dallas. "In fact, builder expectations for future home sales are now even more buoyant than early in the year."
"There is no question that today’s interest-rate picture is the best it has been in many decades, and house values have continued to move up at a solid pace. These factors have stimulated both home buying and mortgage refinancing by America’s home owners, providing double-barreled support to the nation’s economy," added NAHB Chief Economist David Seiders. "In many markets, the biggest concern builders have is that buyer demand is outstripping the supply of lots available for development."
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 over 50 indicates that more builders view sales conditions as good than poor.
Each of the component indexes recorded gains in June. The most substantial increases occurred in the index gauging current single-family home sales, which rose five points to 67, and the index gauging traffic of prospective buyers, which rose six points to 46. The index gauging sales expectations for the next six months rose a single point to a very healthy 70 reading - its highest level since November of 2002.
"All the fundamentals are in place for a very healthy new-home market, and builders are solidly optimistic about the remainder of this year," Seiders said. "Expectations have fully rebounded, and NAHB’s forecasts now anticipate that 2003 sales will exceed last year’s record-breaking total.”
