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Builder confidence in the market for newly built, single-family homes rose six points for July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the largest one-month gain recorded by the index in nearly a decade, and brings the HMI to its highest point -- 35 -- since March 2007.
"Builder confidence increased by solid margins in every region of the country in July as views of current sales conditions, prospects for future sales and traffic of prospective buyers all improved," said Barry Rutenberg, NAHB’s chairman and a home builder from Gainesville, Fla. "This is greater evidence that the housing market has turned the corner as more buyers perceive the benefits of purchasing a newly built home while interest rates and prices are so favorable."
NAHB chief economist David Crowe noted that “[Housing] is returning to its more traditional role of leading the economy out of recession." Although the housing industry is still in a fragile state of recovery, he said, key indicators have shown upward movement over the past six months.
"This is particularly encouraging at a time when other parts of the economy have begun to show softness, and is all the more reason that the challenges constraining housing's recovery -- namely overly tight lending conditions, poor appraisals and the flow of distressed properties onto the market -- need to be resolved," Crowe said.
Derived from a monthly survey that NAHB has been conducting for the past 25 years, the NAHB/Wells Fargo Housing Market 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 from each component are then used to calculate a seasonally adjusted index where any number higher than 50 indicates that more builders view conditions as good than poor.
Every HMI component recorded gains in July. The components gauging current sales conditions and traffic of prospective buyers each rose six points, to 37 and 29, respectively, while the component gauging sales expectations for the next six months rose 11 points to 44.
Likewise, every region posted HMI gains in July. The Northeast registered an eight-point gain to 36, while the Midwest gained three points to 34, the South gained five points to 32, and the West gained 12 points to 44.