The January index of 57 is above the midpoint of 50.
Derived from a monthly survey that NAHB has been conducting for about 20 years, the index gauges builder perceptions of single-family home sales and sales expectations for the next six 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.
“Housing markets across the country have cooled, as predicted, and builders are aware that some slowing in demand is inevitable following the record-breaking sales for the past three years,” said David Pressly, NAHB president and a builder and developer from Statesville, N.C.
“While the recent decline in mortgage rates helped buoy builders’ confidence, they are adjusting to the changes they are seeing and hearing in their sales offices,” Pressly said in a statement.
David Seiders, NAHB chief economist, added, “Single-family housing affordability has been eroded by the accumulation of large house-price increases in recent years, but some softening of long-term interest rates since the early-December survey helped to buoy builder attitudes. This has been bolstered by the fact that consumer confidence has rebounded nicely from post-Hurricane Katrina lows.”
Two of the HMI’s component indexes were unchanged for the month. The third component – the index gauging current sales – edged down two points to 62. The index gauging sales expectations for the next six months held at 65, and the index gauging traffic of prospective buyers remained at 40. All three components are down 15 points from their June 2005 highs.
Builder confidence was down across three regions of the country, with the West slipping from a high level on the confidence scale to one more on par with the South, the home builder association announced. In the West, the index fell from 75 in December to a still-impressive 65 in January, while in the South, the HMI slipped a point to 66. In the Northeast, the gauge slipped three points to 56, while the index in the Midwest increased from 34 to 36.
The National Association of Home Builders trade group that represents about 225,000 members involved in home-building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction.
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