Housing Markets: Builder Confidence Steady in April

The National Association of Home Builders /Wells Fargo Housing Market Index (HMI) for April rose by one point to 47 against March's revised reading of 46. According to NAHB, a reading over 50 indicates that more builders are confident about housing market conditions than not. The HMI measures builder confidence in current and future market conditions for new single-family homes; home builders also rate buyer traffic in new homes. Builder responses to these three categories are tabulated to calculate the HMI confidence reading.

April's NAHB reading for current sales conditions was 51; builder outlook improved for sales conditions within the next six months and rose 4 points to 57. Buyer traffic was unchanged at 31, but warmer weather will likely boost buyer traffic in coming months.

Kevin Kelly, chairman of NAHB, said that builder confidence in market conditions is expected to improve as the spring home buying season gets under way and demand for homes increases.

NAHB also noted that stronger job markets are beneficial to housing markets; more would-be home buyers may become active buyers as their confidence about labor markets improves.

Housing Markets Impacted by Land, Labor Shortages

In the last few years, a shortage of available homes has contributed to slower growth in many regional housing markets. David Crowe, NAHB chief economist, cited tight credit for home buyers and a lack of ready lots and available labor for building as deterrents to a stronger recovery for housing markets.

Lawrence Yun, chief economist for the National Association of REALTORS®, recently said that limited inventories of available homes were holding back housing markets in many areas. Some real estate experts note that improving economic conditions, rising home prices and anticipated higher mortgage rates in 2014 are expected increase inventories of available homes.

NAHB Regional Builder Confidence Dips Over Three-Month Moving Average

All four NAHB regions showed lower builder confidence in the last three months:

  • West: NAHB reported a drop of nine points to a reading of 51.
  • Midwest: Builder dropped by four points to 49.
  • Northeast: This region dropped two points for a reading of 33.
  • South: Builder confidence was two points lower at 47.

Potential home buyers face obstacles including low inventories of homes, higher home prices and a lack of affordable homes for first-time buyers. On a positive note, mortgage rates remain relatively low and foreclosure rates have dropped by 19 percent year-over-year as of January, which should help boost inventories as homes in foreclosure are often unavailable due to lengthy legal proceedings before they can be sold.

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